Do landlords do get a good deal in CVAs? It would seem they do (if you don't read the small print…)

A few weeks ago we blogged that we were expecting RSM's research report, which was commissioned by the Insolvency Service, into the impact of CVAs on the landlords. The specific question in the research paper was: "are landlords equitably treated, compared to other creditors in large business CVAs?".

The report answered that question in the affirmative, concluding that – in terms of the CVAs that they reviewed - landlords were 'broadly' treated fairly.

This report though is a bit like a CVA – you really do need to focus on its terms to understand the true position.

The report which focused on CVAs introduced by companies in the retail, accommodation and food and beverage sectors (ultimately) had a relatively small data set. The 'long list' of 747 CVAs was – through a filtering exercise –whittled down to 82 CVAs, which were in scope.

In fact, the report only looked at some very specific matters. In terms of the economic consequences of CVAs, the research focused on the effect on landlords in respect of compromised future rent. If you are a landlord who has ever found themselves in a CAT C or D Schedule of a CVA, compromised future rent is but one blow landed by the CVA. Others can include historic arrears being written off; dilapidation and service charges being waived and as well the recent trend of any rent being moved to turnover rent. If we only look at compromised future rent, it really does not give a full understanding of how a CVA is affecting landlords, as it fails to take into account the total economic impact of the CVA.

However, what the research did show is that landlords' rights were compromised in 93% of cases. That is then compared with the next most compromised group of stakeholders, who were intercompany creditors at 51%. Comparing landlords and intercompany creditors is like comparing apples and oranges. Often intercompany debt is being waived to secure the buy in of the secured lenders, therefore the measure of the impact is unclear.

What the report does conclude, and which is welcome, is that more research and analysis should be conducted into the effects of CVAs. The RSM report is certainly a good springboard for any further research.

With the cost-of-living crisis taking grip many landlords of tenants who operate in the retail, accommodation and food and beverage sectors will be bracing themselves for more CVAs. Irrespective of what the report's finding are – if you are a landlord on the receiving end of CVA, it could tend to seem quite unfair.


Lucy McCann


Matt Farrell