Are retail tenants such as Arcadia using CVAs as a legal lever to get out of old long-term, inflexible retail leases that are a drain on profits?
Arcadia’s CVA rescue deal was approved by landlords accepting rent cuts of up to 40% across Arcadia’s shops.
Traditionally older retail leases are longer than leases granted today. In 2002 the average term for a retail lease was 14.8 years falling to 9.4 years in 2018.
To compound the inflexibility of older leases, only 8.8% of leases granted in 2002 incorporated break clauses, rising to 30.2% in 2018.
Leases with no legal mechanism to alter terms can be detrimental to both landlords and tenants in the event of a change of circumstances, resulting in the potential turbulent position of insolvency situations, empty properties and escalated legal costs.
If you are a landlord or tenant looking to review your existing leases or negotiate a new lease incorporating a degree of flexibility for both parties, please contact our Commercial Property team.