Landlords could call for changes in legislation surrounding CVAs to stem the tide of rent haircuts and reductions, Drapers has learned.
CVAs have gained prominence in 2018 with a number of fashion retailers choosing the option to reduce headline costs and close stores, among them House of Fraser, New Look and Select.
Retail landlords across the UK are now considering lobbying for change on how CVAs are structured to protect rents and stop the “unfair” practice of retailers demanding rent cuts from profitable stores.
One industry expert, speaking on condition of anonymity said: “We could see an acceleration in CVAs as agents work out that landlords are gearing up to challenge them in the near future.
“The practice is seen as unfair, not just to landlords but in particular to other retailers. Why should one retailer pay full rent when another has a discount?”
Another property source added: “I think there is a natural concern. Regardless of whether a landlord has one shop or 20 shops with a retailer, they want to protect their investment. It’s not palatable for landlords - an element of choice has been taken away from them.”
One retail agent said the market climate and continuing shift towards online meant more retailers were looking at CVAs.
“Every mid-market fashion retailer is having a torrid time; the market is polarised between Primark and high-end brands. Nearly every fashion retailer is sitting with too much property at the wrong price – and it amazes me is that people are surprised that CVAs are happening.”
Director of real estate policy at the British Property Federation, Ian Fletcher, said CVAs left landlords “compromised” as retailers could “rip up contracts freely entered into”.
One property agent said: “[Landlords] are feeling a little bruised. It is something which may lead them to consider how to change CVA rules. We are not too far away from a scenario where landlords could challenge the status quo with regards to CVAs which has been done before.”