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Increasing financial pressure on retail tenants, and the negative impact that CVAs or other forms of financial restructuring may have on landlords' capital values, has led to several distressed property cases coming before the Courts in 2019. These include cases further clarifying the rights of landlords to claim rent and draw deposits in insolvency together with numerous potential CVA challenges (including in relation to Monsoon Accessorize, Regis, Steinhoff (on which Linklaters acted) and Debenhams).
The judgment in the Debenhams CVA challenge is the most notable of these and provides some helpful guidance that is likely to inform the approach to retail CVAs in 2020. The key points from the judgment to have on the radar are as follows:
Ultimately, if a landlord supports the CVA because it represents the best way to secure a tenant’s future, then this decision should not affect how tenant CVA proposals are considered. However, in an environment where there are growing concerns that tenants in distress are seeking to deploy such tools tactically, unnecessarily or too expansively then the guidance provided in this case is extremely valuable and should be kept close at hand.
UK Real Estate Horizon Scanning 2020
Explore further topics across our UK Real Estate Horizon Scanning 2020 publication.