Over the last year we seem to have heard of the demise of a leading high street retailer on an almost daily basis. This, inevitably, has an impact on both landlord and tenant clients, and provides new and varied challenges for our property litigation team.
In recent months a whole host of high street giants have entered into or have contemplated company voluntary arrangements (CVAs) in order to renegotiate their debts and attempt to avoid administration or liquidation. Whether that goal is achieved remains to be seen.
New Look's creditors voted in favour of a CVA that will see the closure of 60 stores with the loss of 980 jobs. Toys 'R' Us will close all of its 100 UK stores, with 3,000 jobs expected to be lost. Electronics giant Maplin has confirmed its entry into administration, and the list goes on with household names such as Carpetright, Moss Bros, Mothercare and Claire's Accessories all set to be restructured.
The restaurant industry has suffered a similar fate: Jamie's Italian has entered into a CVA that will see nearly two-thirds of landlords either receiving reduced rents or left with vacant units; Strada has closed 11 of its branches; and Byron will close nearly a third of its restaurants and is paying a reduced rent on five others.
This sea change among the big players on the high street, coupled with the financial problems faced by smaller retailers and businesses across the UK, has resulted in a rise in real estate disputes between struggling tenants and their landlords. Most recently, in the case of Re SHB Realisations Ltd (formerly BHS Ltd) (In Liquidation), the liquidators of BHS attempted to argue that the terms of the CVA requiring payment of full rent as an administration expense if the CVA was terminated early was a penalty and therefore unenforceable. While the liquidators' challenge failed, this case clearly demonstrates an appetite to fight these issues in court. It also reinforces the care that landlords must take when considering CVA proposals .
With Brexit looming and market uncertainty set to continue, the 2017/2018 tales of woe on the high street may be just the tip of the iceberg.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
