The British Property Federation (BPA) has called on the government to conduct a review into company voluntary arrangements (CVAs) which “unfairly discriminate” against landlords.
Landlords have hit back against the insolvency process, which allows struggling retailers to shut underperforming stores and seek rent reductions on large portions of their estate, essentially reneging on lease agreements with landlords.
The practice has become increasingly common this year, with New Look, Carpetright, Mothercare and Poundworld all announcing CVAs.
However, the pushback from landlords comes at a crucial time for House of Fraser, which has just revealed details on its proposed CVA that will see it just over half of its stores and reduce rent by 25 per cent on the rest.
Though landlords generally approve CVAs, providing them a better alternative than outright administration and empty properties, House of Fraser could mark the first instance where property owners oppose proceedings.
Reports emerged last month of tense meetings between the retailer and its landlords, who slammed the department store chain for proposing rent reductions due to its financial distress the same day it revealed a significant cash injection from C.banner, the Chinese parent company of Hamleys.
“Landlords get a raw deal in any CVA – they are going to be one of the biggest creditors,” BPF chief executive Melanie Leech said.
“They are always going to be hard hit. The issue is whether they are fairly taking a share of the pain… The CVA is not just a tool in the armoury of cost-cutting.”
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