Does a tenant who exits premises following approval of a CVA remain liable for empty business rates?
This issue was addressed recently in respect of the former Bow Street store of Jigsaw, which closed in 2020.
This property fell with the scope of category D premises in a CVA proposed by Robinson Webster (Holdings) Ltd (RWHL) which was subsequently approved. Under this CVA, category D premises were leased stores which RWHL would “exit” with effect from 3 September 2020, the date on which the CVA came into effect. The tenant delivered the keys back to the landlord who expressly stated it was not accepting a surrender by receiving them. The landlord then marketed the property.
The Bow Street store was unoccupied until 2024 and disputes then arose over who was liable to pay rates after the City of London sought a liability order from the tenant for unpaid rates totalling £220,364.58. Under s. 45 Local Government Finance Act 1998, liabilities for these fell to the owner, defined as “the person entitled to the possession of it”. RWHL claimed they were not the owner, as they had exited under the terms of the CVA.
The court disagreed. As an arrangement between creditors, a CVA does not and cannot interfere with a proprietary interest. In this case, whilst the CVA provided that the company would exit the lease and the company’s “rights…shall end”, the use of the term “exit” was ambiguous, and it was common ground there had been no surrender of the lease. The CVA also provided the company was deemed to have offered to relinquish any right of occupation and would execute any document to effect a surrender, but none was ever executed. Also, unlike bankruptcy, administration or liquidation, each of which had express statutory exemptions relevant to rates on empty properties, there was no such exemption where the tenant was subject to a CVA.
The decision is a reminder to landlords and practitioners alike to consider carefully the potential for rates liabilities on empty properties. In this case, the landlord (correctly) took the position liability fell on the tenant and chose not to accept the offer of a surrender in circumstances where there was limited prospect of reletting the site. The liability for ongoing business rates was not compromised by the terms of this CVA and so the full liability rested with the company, even though in reality, it had no benefit at all from the property during that period.
The Mayor and Commonalty and Citizens of the City of London v Robinson Webster (Holdings) Ltd [2026] EWHC 151 (Admin)
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