Landlords fear CVA process is being “misused” and needs to be investigated

The British Property Federation (BPF) has called on the government to conduct an urgent view into Company Voluntary Arrangements (CVA) after claiming that the process is now being “misused”.

A raft of high street restaurant chains have turned to CVAs this year in a bid to safeguard their businesses and reduce costs by exiting unprofitable sites. The practice has also been widely used in the retail sector as shops have struggled with overheads and rent increases.

While the BPF does not accuse any companies by name, it believes those that are misusing CVAs risk undermining the UK’s global reputation and deterring much-needed investment into town and city centres.

“We support the proper use of CVAs in order to help businesses in genuine distress and are keen that CVAs continue to achieve these objectives. There is, however, increasing frustration about the practice of some recent CVAs,” the BPF said.

It said the main issues include a lack of transparency, unfair discrimination between different creditors and a lack of regulation to ensure CVAs are used appropriately and to drive good practice.

The BPF is urging the government to conduct an “independent urgent review” into the issue and said that in the meantime it is advocating a series of steps to restore confidence.

This includes referring CVAs affecting more than five outlets to an independent third party for review and requesting that the insolvency profession and the BPF work together to codify what is good practice in terms of voting rights and voting structures for CVAs.

Melanie Leech, chief executive of the British Property Federation, said: “The CVA process is intended to be part of a comprehensive business recovery plan. Property owners, looking after savers and pensioners’ money, will support businesses who demonstrate this commitment but must protect those pensioners against unfair action that penalises their interests. Urgent action is required and we are calling on government to undertake a review, so that we can restore the CVA process to its original purpose.”

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