Last week, New Look was set to face a challenge by landlords, including British Land, Land Securities and the Trafford Centre, in a High Court battle that could have significant implications for the future of the high street.

The fashion retailer, which has 12,000 employees, has been challenged by four landlords over its company voluntary arrangement (“CVA”), a restructuring agreed last year that switched New Look’s shops to turnover-linked rent. Under its terms, property owners must accept no rent for three years on 68 out of its 500 stores and as little as 2 per cent of turnover on 402 others, which landlords argue “fundamentally rewrites” leasing agreements. Landlords also said the switch to payment in arrears is “unfair”.

Landlords have said that a “bare minimum market rent” should be paid, but would not be under the terms of the restructuring and that effectively the CVA jurisdiction should not apply, The Times reported.

This comes at a time when we have seen commentary in the press that some retailers are using COVID 19 as an excuse to re-negotiate their leases through the CVA process. It may have provided some with an opportunity to address their businesses’ longstanding issues amidst criticism that bricks and mortar retailers have been slow to react to the way that retail has been changing and bound to further evolve post lockdown.  The impact of this case on the high street and use of CVAs could be profound.

We have regard to the judgment of Norris J in Discovery (Northampton) Ltd v Debenhams Retail Ltd [2019] EWHC 2303 (Ch). In that case Norris J said that he thought it was fair for the rent payable to be reduced, provided it was not reduced to a figure below “market rent”. Will this challenge seek to push that back?

With speculation that rent reviews are set to fall for the first time in over 30 years, we await the outcome of the High Court decision with keen interest.

If you would like to discuss this topic, please contact any member of the Restructuring & Insolvency team or Shams Rahman from the Property Litigation team.

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