British Property Federation calls for end to CVA 'abuse'

Retail landlords are demanding that the government prevents retailers “abusing” Britain’s insolvency framework when it comes to using company voluntary arrangements (CVAs) to protect their struggling businesses.

A CVA can be used to reduce money owed in retail rents and to also reduce future rent payments through a creditors' meeting.

The process has already been used by a number of major retail chains during the pandemic as they faced lockdowns, with accompanying site closures also hurting land owners.

New Look and Caffè Nero have recently used CVAs to write off some rent debts built up during the pandemic.

The British Property Federation (BPF), whose members include the likes of British Land, Land Securities and Hammerson, has written to Lord Callanan, the corporate responsibility minister, calling for tighter rules on CVAs

Retail creditors have to give their consent to a CVA, but the BPF maintains that those less affected by CVAs receive a greater share of the vote than landlords.

According to the BPF, there were 33 CVAs where landlords took most of the pain last year - up from 11 the previous year.

Melanie Leech, chief executive of the BPF, said: “While the crisis has brought genuine hardship to businesses up and down the country, it has also been cynically used as an excuse by wealthy individuals and private equity backers to shift on to property owners the cost of years of failings and under-investment.”

In the letter to Lord Callanan, Leech went on: “As well as being fundamentally inequitable, such CVAs are damaging to the high street, hurting pensioners and savers [through pension funds investing in property companies] and undermining the UK’s reputation among international investors.”

The BPF has urged the government to ensure that the CVA voting procedure is “fairer” to those that are owed the most and that all CVAs are “independently scrutinised”, and with only temporary changes to rental contracts being made possible through a CVA while retail business turnaround strategies are carried out.

A government moratorium on evictions of businesses that fail to pay rent during the pandemic is currently due to end on 31 March - the present legal end to England's third lockdown currently taking place.

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