CVAs and changing leasehold obligations.

Increasingly, high street businesses and hospitality venues are looking for ways to save money in the hope of outlasting the pandemic. For these businesses, a company voluntary arrangement (“CVA”) offers a tried-and-tested means of negotiating some of the most burdensome obligations – such as those owed under a lease.

Indeed, CVAs can offer both parties considerable contractual and (for tenants) financial flexibility. Notwithstanding the uncertainty that CVAs can cause employees and suppliers, they can be an effective tool that enables distressed retailers to restructure and safeguard jobs.

Although landlords suffer short-term losses, a significant number are agreeing to a short-term reduction in their tenants’ rental liability, modifying payment dates or even introduce “turnover-based” rents (see Dune’s recent CVA proposal). The hope is to ultimately derive longer-term benefit from their tenants’ recovery and future success.