Landlords’ CVA challenge fails, save for the ability to forfeit

Some affected landlords applied to the court seeking to set aside the CVA, arguing, amongst other things, that the right to forfeiture was a proprietary right that could not be altered by the CVA and the landlords were treated less favourably than other creditors without any proper justification.

The judge held that the right to forfeiture was a property right that could not be amended by a CVA and, as such, the attempt in the CVA to replace the right to forfeiture arising immediately by reason of the tenant’s CVA in the leases with a one-off right to forfeiture only on 60 days’ notice had to be struck out. The judge however rejected the other arguments raised by the landlords.

Whilst the Court broadly upheld the “retail” CVA mechanism of treating landlord creditors differently from other creditors, it struck down provisions in the CVA curtailing the landlord’s right to forfeiture and it will be interesting to see how this decision affects the drafting of future CVA proposals and landlords’ reaction to them.

Discovery (Northampton) Limited and Others v Debenhams Retail Limited and Others [2019] EWHC 2441 (Ch)