The British Property Federation has condemned fashion retailer Next for demanding a “CVA clause” when renegotiating leases, meaning its rent would fall by a similar amount if a neighbouring tenant achieves a rent reduction through a company voluntary agreement.
Next has started demanding the clause because it said landlords were effectively “subsidising those retailers who achieve CVAs to the detriment of others who aren’t seeking CVAs.”
The retailer added: “A ‘CVA clause’ levels the playing field, and keeps it level going forward, should the circumstances of surrounding retailers change over time.”
Landlords’ tolerance for dealing with CVAs has been waning, as an increasing number of retailers use the controversial rescue procedure to close stores and achieve discounted rents from landlords.
Ian Fletcher, the BPF’s director of real estate policy, said: “Next’s request illustrates how far the CVA process is at risk of being misunderstood or misused. It’s nonsense to suggest that a process designed to try and keep a sinking ship afloat should be applied to healthy businesses.
“Also, where does this end? A CVA often allows a business to cut what it pays in business rates or renegotiate the terms agreed by its banks. Will Next also seek these concessions?
“Ultimately, requests [like the one by] Next undermine the CVA process, which was set up to ensure businesses facing insolvency have a chance of survival and do not disappear from our high streets.”
Next declined to comment on the BPF’s statement.
Main image: Dinendra Haria/Rex/Shutterstock
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