City firm Bryan Cave Leighton Paisner is understood to be in discussions about whether a controversial process under which High Street stores are able to enter into agreements to pay off their debts unfairly impacts creditors – specifically landlords.
Company voluntary arrangments (CVAs) came under new scrutiny this month with the announcement by retail giant House of Fraser that it is to seek approval for a CVA under which it will cull more than 30 stores.
A CVA is a formal process enabling a compromise between a company and creditors under which landlords can lose out. Some agreements outline changes to rent, either reducing payments altogether or adjusting due dates from quarterly to monthly.
BCLP declined to comment on whether it planned direct action against House of Fraser but said it has been ‘reaching out to both landlords and tenants’ to understand more about their concerns. As well as its discussions, BCLP is also conducting a client survey on CVAs, and will host a workshop with stakeholders and industry bodies for further input.
Barry Gross, commercial real estate partner at the firm, said the current system risks ’destroying great strides made in landlord and tenant relationships’ in the past decade. ‘The current state of play with CVAs risks destroying all that goodwill with a return to the polarised approach. I think key players from across the real estate sector need to work together to find solutions to navigate the challenges facing the sector,’ he said.
Gross said there had yet to be a case in court surrounding how far a CVA can go. He added that the current spate of ‘aggressive CVA’s’ leaves landlords ‘stuck between rock and hard place.’
‘Administration could see them left with nothing but an aggressive CVA could see them significantly lose out too,’ he said, adding that landlords now faced a ’perfect storm of contributing factors,’ he said.