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Company Voluntary Arrangement (CVA) - FAQs for landlords

What is a CVA?
  • It is an arrangement between the company and its creditors to compromise debts owed on agreed terms with the creditors.
  • For landlords, this route offers a mechanism to allow a tenant company (with creditor consent) to restructure its rent obligations without the need to negotiate with each individual landlord. As such, CVAs can reduce overheads significantly and quickly.
What is the process?
  • Once an insolvency practitioner recommends this route for dealing with the company’s financial difficulties, he/she will usually work with the company on proposals to put to its creditors and, if the arrangement is approved, be appointed as its supervisor of the CVA.” etc.
  • Notice to consider the CVA proposals will be sent to all known creditors, including a creditor landlord. Once a CVA is approved (see below), the landlord is bound by the terms of the CVA regardless of whether it voted or whether it was notified of the procedure.
What are the main considerations for landlords when reviewing the CVA proposal?
  1. What does the CVA say about other rights and obligations under the lease?
  2. What does the CVA say about the position in respect of future rent?
  3. What effect will the CVA have on guarantees?
How is the CVA passed and what happens if I want to object?

For the CVA to be approved, it requires consent of 75% of creditors (by value) voting at any meeting.

Should a landlord wish to challenge the CVA, it will have 28 days to do so from the date it is approved, but only on specific grounds.

What happens if the CVA is passed?

Once passed, the CVA binds all creditors pursuant to its terms.

The company is still run by its directors.

What about unpaid rent and termination of the lease?

The options available to landlords to recover the property or unpaid rent will depend upon the terms of the CVA. See Corporate Insolvency – implications on forfeiture/CRAR and on Rental Liability.

Practical advice for landlords:
  • Act quickly – review the CVA proposal as soon as possible upon receipt and make a note of key dates to submit claims and vote. The CVA will usually group properties into different categories (often profitable/marginal/unprofitable stores), with different terms proposed for each of the categories. Landlords with multiple properties affected will need to understand the overall impact of the CVA so they can vote accordingly.
  • Maximise the value of any claim for the purposes of voting. A landlord’s claim will usually comprise (i) a claim for arrears of rent (if any) and (ii) a claim for future rent which has not yet fallen due and (iii) dilapidations. Landlords should check carefully how their claim has been calculated as the calculation of (ii) can be particularly complex.
  • Consider taking action against the tenant to recover possession of premises before the CVA is approved – if there is a right to forfeit.
  • Understand the consequences if the CVA is terminated or the company subsequently enters administration. It is not uncommon for the CVA to be approved by creditors and the company to subsequently enter administration and landlords may find themselves bound by the reduced rents agreed under the terms of the CVA for the purposes of filing claims in the administration.
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