Retail


A landlord’s and tenant’s guide to commercial rent arrears recovery (CRAR)

in Creditor Actions Property and Real Estate Retail

For the better part of 250 years, landlords enjoyed the right to claim ‘distress’ for unpaid rent – meaning that they could seize (distrain) and sell their tenants’ goods to recoup the loss of earnings.The Rent Act 1977 stripped this right from residential landlords1, but commercial landlords continued to be able to exercise distraint until April 2014, when distress laws were replaced with the commercial rent arrears recovery (CRAR) process2, 3. So what exactly is CRAR? Like most archaic UK legislation, distress law was unnecessarily complicated and, many felt, rather unfair. The CRAR rules that supersede them are intended to be simpler and more balanced, with a greater focus on tenants’ rights than their predecessors.CRAR still allows a landlord to collect overdue rent without the need for a court order; however, it applies only to commercial tenancies, and the tenancy must be subject to a written lease. It can only be used to recover rent and any interest and/or VAT payable under the terms of the lease. Landlords: enacting the CRAR procedure Before claiming unpaid rent from a commercial tenant, you must remember the following:The arrears must be at least seven days’ worth or more at the time the notice is served and at the time of enforcement You do not have the right to seize your tenant’s goods yourself; they can only be seized by a certified enforcement agentOnce you have found an authorised enforcement agent, you will need to fill out a Warrant of Control form to enable them to begin enforcement action. The enforcement agent will then take over the process, issuing a seven day notice to your tenant in the first instance.If the rent remains unpaid at the time of enforcement, the agent will enter the property and take control of certain goods located thereon to be sold at public auction. Tenants: your rights under CRAR Firstly, you must remember that a notice of enforcement binds goods to remain on the property, meaning you cannot sell or remove them. You can, however, delay enforcement by applying to court for a delay of execution or a set aside.It is possible to enter a controlled goods agreement in order to repay what you owe over time. Under such an agreement, the goods will remain on the premises, but your landlord’s enforcement agent will be able to remove them if you default on your agreed repayments.If goods are taken, the enforcement agent must provide you with an inventory of everything seized as specified by section 33 of the Taking Control of Goods Regulations 2013.If your lease has expired, your landlord can only use the CRAR process if:the lease ended within the last six months; the lease did not end by forfeiture; the rent was owed by you at the time the lease ended; you still possess some of the goods formerly located on the premises; you occupy the goods under a commercial lease; and your old landlords was, at the time the lease ended, entitled to immediate reversionBeing unable to pay debts, such as commercial rent, when they become due is a warning sign of insolvency. If this described your company’s situation, it is highly recommended that you seek insolvency or turnaround advice from a professional firm.References1. Rent Act 1977, s 147(1)2. Tribunals, Courts and Enforcement Act 2007, s 713. The Taking Control of Goods Regulations 2013, SI 2013/1894

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A landlord’s and tenant’s guide to commercial rent arrears recovery (CRAR)

Administration for major UK wedding dress retailer, David’s Bridal

in A guide for redundant employees in administration or insolvency situations News Retail What Does Going Into Administration Mean?

Just hours after its US owner filed for bankruptcy and David's Bridal UK has filed an intention to go into administration. Andy Pear and Milan Vuceljic of Moorfields Advisory have been put on standby to be  appointed as the administrators working on the case.Across the UK, David's Bridal has 100 employees across its four stores in Watford, London, Brimingham and Glasgow.The retailer, founded in America in 1950, has operated in the UK since 2013, specialising in wedding and occasion dresses and accessories - a name known for many to-be-brides!In a statement, David’s Bridal said: “David’s Bridal stores remain open, and the company intends to continue operating in the ordinary course, including by fulfilling all customer orders without disruption or delay.'' It said it “intends to continue exploring a sale of all or some of its assets”.This is not the first time the retailer has faced difficulty. In 2018 it had filed for bankruptcy. According to CEO of the American parent company, meaningful strides had been taken in recent years to meet customers needs and transform accordingly.“Our business continues to be challenged by the post-Covid environment and uncertain economic conditions, leading us to take this step to identify a buyer who can continue to operate our business going forward. We are determined to stay focused on our future, because we believe we have an important role in ensuring that every bride, no matter her budget, can have her perfect dress.”When analysing the recent history of the UK counterpart, it had warned of a “material uncertainty” about its ability to continue in its 2021 accounts, which were signed off by the board last December. This was because the US parent company had done a deal in November 2022 to create additional liquidity that was dependent on “continuing compliance” with the loan terms.The UK business’s most recent published accounts, for 2021, showed a £170,000 loss on revenues of £4.3m. It last recorded an annual profit in 2018.

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Administration for major UK wedding dress retailer, David’s Bridal

Landlords Settle Case Against New Look’s CVA Before Court of Appeal

in News Property and Real Estate Retail What is a CVA (Company Voluntary Arrangement)?

3 March 2022New Look's landlords have just announced that they have settled with the company on the day before a crucial hearing at the Court of Appeal.17 May 2021New Look Landlords have been granted leave to appeal to the Supreme Court over their treatment in the CVA.Yet again the High Court has upheld the power of the CVA mechanism as a way of ensuring that a company can survive if the majority of its creditors (by value) agree to allow it time to get back on its feet.  Landlords feel that it is unfair but if it is not to be the creditors who else?  A panel of "experts"?  A quango?  The Government?Landlords complained that the switch to turnover rent “fundamentally rewrites” leasing agreements.  Unfortunately, when a company becomes insolvent and, in the case of administration, all contracts are "rewritten".There is a shift in the balance of power between landlords and tenants given the loss of footfall on the High Street and the rise of online shopping recently.  However, if everyone rushes back to the shops, post pandemic, maybe the landlords will be able to take a share on the increased turnover?17 March 2021It has been reported that New Look has entered a High Court battle with two of its landlords; British Land and Land Securities, over its proposed restructuring plans.In total, there were four landlords who challenged the CVA which involved switching stores to turnover based rents.The argument is that switching to turnover rents ‘’fundamentally rewrites’’ leasing agreements and deems the payments of arrears as ‘’unfair’’.10th November 2020New Look announce completion of its refinancing scheme which included a debt-for-equity swap to reduce debt from £500m to £100m and a £40m cash injection.The refinancing scheme was first mentioned in August, at the same time as its (now approved) CVA was first announced.CEO, Nigel Oddy said: “I would like to thank our banks, bondholders, landlords and creditors for their support during our financial recapitalisation process and CVA. Completion of the transaction today means we now have significantly enhanced financial strength and flexibility, and a sustainable platform for future trading and investment. Looking ahead, notwithstanding the challenging market conditions, we are focused on delivering our strategy to enhance our position as a leading convenient broad appeal fashion destination''.2nd November 2020It has been reported that 2 landlords, British Land and Land Securities have challenged New Look's CVA casting doubt on the company's ability to survive.  The new lockdown will hit New Look hard as they only have a small proportion of their sales online (20%). Challenges against CVAs have not been successful in the past.5th September 2020In an unexpected outcome - New Look's creditors have approved its CVA proposals when put to a vote today. Creditors approved with a 75% majority vote in favour.The CVA features no store closures and saves all 11,000+ jobs. It looks to move more than 400 of its UK stores to turnover-based rental models, have an enhanced landlord break clause, and a three-year rent holiday on its 68 remaining stores.14th September 2020British Land, a landlord of New Look, owning 19 of its stores, plans to oppose its CVA proposal laid down to vote on tomorrow. Landsec, of whom own 10 stores also are believed to oppose as are Hammerson.The possibility that New Look's biggest landlords will vote against the plan, does not appear good for the retailer. Its chance of survival is thrown further into red.What will the outcome be tomorrow?6th September 2020It is not looking promising for New Look since around ten of its landlords have been reported to of rejected its CVA proposals, to be voted on by creditors in the next 9 days. Can the table still turn? Or is liquidation coming even more unavoidable now?26th August 2020New Look has announced it has reached an agreement with its financial creditors. This involves investing £40m in new capital and ''significantly de-leveraging'' its balance sheet. The group expect this to be complete on or before 31 October 2020.The company has also announced that it is launching a CVA, so asking landlords to accept new turnover-based leases across its portfolio.The fashion retailer also said it is launching a debt-for-equity swap on its current debts, looking to lower those from £550m to £100m.The British Property Federation have criticised the CVA proposal due to ''inaccuracies''.Drapers report more.10 August 2020According to This is Money, New Look is reported to be considering a company voluntary arrangment (CVA) since it looks to switch to turnover-based rents.Advisors from Deloitte are expected to be appointed as soon as this week.If a CVA is used, this would not be the first time for the company. The retailer used one in 2018 when landlords voted in its favour as it was used to improve the operational performance of the company.01 July 2020It is reported that New Look has given an ultimatum to landlords; trying to reach an agreement to move to turnover-based rents for its 500-strong store estate.Consultancy firm, CBRE, have been hired to help with the process. If discussions with landlords are not successful, likelihood of the retailer falling into a pre-pack administration is high.If a pre-pack is used, this would be the second financial restructuring it has undergone in less than two years, after its debt-for-equity swap with stakeholders in January 2019. At this last restructuring, New Look moved onto monthly rents for most of its portfolio and asked for rent holidays for some of its stores.Talks with landlords have been happening for most of the month though concern rises that some will block the proposal.A pre-pack has been discussed and is ‘’the last thing it wants.’’A spokesperson said, ‘’We are committed to seeking a consensual agreement with landlords to move to turnover rents, and work in partnership with them as we continue to navigate these increbily challenging and uncertain times together.’’The retailer employs 12,000 people across its UK and Ireland business.New Look are not the first to look at a move to turnover rents amid the covid-19 pandemic. Frasers Group are the latest to be looking at doing so. Other retailers have appointed administrators as a result of the pandemic: Debenhams, Laura Ashley, Cath Kidston. Some have also refused to pay March quarterly rents.

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Landlords Settle Case Against New Look’s CVA Before Court of Appeal
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If Your Retail Business Is Struggling A CVA Could Save It

in Retail What is a CVA (Company Voluntary Arrangement)?

In the last couple of years, many high street names have failed as sales have not recovered post-pandemic. It seems that when times get tough, undercapitalized companies suffer most. Having to meet bank covenants, pay business rates, and make rent payments on loss-making stores is an impossible juggling act to achieve. The Solution: Restructuring with a CVA Without resorting to shareholders for capital or new debt facilities, many retailers are entering protective insolvency or trying to restructure to survive. This is where a Company Voluntary Arrangement (CVA) can be an incredibly powerful tool. A CVA allows a retail group to restructure and cut loss-making activity.A CVA can help you:Remove Lease Obligations Negotiate with Landlords Restructure Your CompanyWe can assist with exiting non-performing properties and shopping centers, which stops rent payments and prevents landlords from taking recovery action.Our Approach to Restructuring Your Business At RMT, we help our clients with deal structure, turnaround management, and building proposals and financial forecasts. We help drive the deal with creditors and assist the board through the crisis. Our approach is cost-effective and powerful with minimal cashflow consequences.Our Experience: Retailer CVA Case Studies We have helped many retailers restructure using a CVA, and our clients can vouch for our work.  “Keith – what you achieved for our company was excellent. Without your help in reorganizing the company’s store mix and debt, I know that we would have gone into liquidation.”— A mid-sized fashion chain managing directorNext Steps: Talk to Our Experts If you are a retailer with serious financial problems, talk to us now about how we can help. Our experts can advise on how to restructure and cut loss-making activity.Call Iain Campbell or Keith Steven for more details: 0800 9700539

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If Your Retail Business Is Struggling A CVA Could Save It

The Rise and Fall of Debenhams: A Timeline of Its Final Days

in News Retail

The collapse of Debenhams, a 242-year-old high-street institution, was a seismic event in the UK retail sector. After a decade of financial struggles, the department store chain's administration and subsequent liquidation marked the end of an era. Here is a timeline of key events, from its final attempts at survival to its brand's ultimate online-only revival by Boohoo.   1. The Onset of Trouble: The Search for a Buyer (August - September 2020)   As the UK grappled with the COVID-19 pandemic, Debenhams' owners, who had already put the company into administration, appointed investment bank Lazard to oversee a sale process. The struggling retailer set a bid deadline for September, hoping to secure a buyer and a future for its 124 remaining stores and thousands of employees. Amid this search, a surprising contender emerged: Mukesh Ambani, India's richest man. However, his interest in acquiring the business was short-lived, and he withdrew his bid in October.   2. Failed Rescue Attempts and the Final Stand (October - December 2020)   In a last-ditch effort, Mike Ashley's Frasers Group re-entered the bidding, but their offer was not enough. The final blow came on December 1st, when talks with sportswear giant JD Sports collapsed. The failure of this deal, which was reportedly "spooked" by the collapse of its biggest concession holder, Arcadia Group, sealed the fate of the department store chain. With no buyer in sight, Debenhams confirmed it would begin winding down its operations, putting around 12,000 jobs at risk.   3. The Digital Afterlife: Boohoo Takes Over (January - May 2021)   In a turn of events that signaled the end of its physical presence on the high street, online retailer Boohoo purchased the Debenhams brand for £55 million in January 2021. The deal, which included the brand name and customer lists but not the physical stores, confirmed that Debenhams would be relaunched as an online-only business. The decision to buy Debenhams' online assets for a fraction of its former value showed a new business model for traditional brands. The administrators confirmed that the remaining 118 stores would reopen briefly after lockdown restrictions eased for one final "fire sale" to clear stock. The closures were staggered, with all physical stores shutting their doors for good by mid-May 2021.   Lessons from the Debenhams Collapse   The fall of Debenhams was a clear example of a retail giant unable to adapt to changing consumer habits, which were accelerated by the pandemic. The brand's shift to an online-only model under Boohoo highlights a new reality for retail: legacy brands can still hold value, but their survival depends on embracing a capital-light, digital-first strategy. For other businesses, the story of Debenhams underscores the importance of a clear long-term strategy and the ability to pivot in the face of market disruption.

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The Rise and Fall of Debenhams: A Timeline of Its Final Days

Hayford & Rhodes is sold to McQueens Flowers

in News Retail

KSA Group is pleased to announce that one of the oldest luxury florists in London, Hayford & Rhodes, has been sold to McQueens Flowers.Established in 1924 in London, Hayford & Rhodes began their story as William Hayford, a heritage luxury florist, whom were the first in the City to deliver flowers on a wide scale and became the florist of choice for high profile clients including Winston Churchill, The Mayor of London and The Queen Mother. Now they are an award-winning florist, delivering bespoke designs to diverse client groups, suiting all types of occasion. They live by and stand out from the competition by striving to achieve its mission to never replicate the same design twice.Unfortunately, the recent pandemic forced a temporary cessation of a large proportion of the business and resulted in the need for the company to be restructured. Wayne Harrison and Eric Walls of KSA Group were appointed as administrators on 27th August 2020 with the business being sold to McQueens Flowers Ltd, saving 8 jobs.McQueens Flowers Ltd have been in the florist industry since 1991, gaining a reputation for creating colourful, creative floral designs, perfectly matched to every occasion and setting. It has provided the flowers for the prestigious Vanity Fair Oscars After party for the last 25 years, among being involved in many other stunning high-profile events.  Not only does it have a flower shop offering same-day delivery in London, but it also has creative studios, workshops and flower schools in London, New York and Seoul and serves customers worldwide, including UAE, Hong Kong and Australia.

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Hayford & Rhodes is sold to McQueens Flowers

Can I Get Out Of A Personal Guarantee on Commercial Leases?

in Directors Personal Guarantee – What Happens In Insolvency or Liquidation? Property and Real Estate Retail

Do I have to personally guarantee the lease for commercial property? When a limited liability company takes on a property the landlord will often ask for a third party to guarantee the obligations under the lease which, in the most part, is to pay the rent and service charge.  This is to reduce the risk to the landlord should the company become insolvent.  Most landlords will ask for this guarantee if the company is relatively new, with little trading history, or in a high risk industry.  Many restaurants and hospitality businesses are asked for these guarantees.  It is usually the directors of the company that are asked to personally guarantee the lease.  As a director this means that you are personally liable for the rent if the company can't pay and the landlord can pursue through the courts and could even make you bankrupt. If I can't pay the rent can the landlord make me personally liable under the lease? Simply, If you give a guarantee then yes.  Whether it is commercially sensible for the landlord to pursue you is a different matter.  If you have no assets or the amount is relatively small that you owe then it might not be worth the costs.  A landlord would need to issue a bankruptcy petition and in the end it might be better to concentrate on reletting the property with a tenant that can pay the rent.  Obviously the landlord is only likely to call on the personal guarantee once the company has vacated the property.One important thing to realise is that if more than one person has been named as a guarantor then these people are what is called jointly and severally liable.  What this means is that one person and/or all are liable.  So it might be practicable that the landlord goes after the richest guarantor rather than pursuing each one individually especially if the others guarantors have little money! Can I get out of the personal guarantee I have given to the landlord? If your business has had a strong trading history and paid rent on time over a number of years then at lease renewal it would be a good idea to try and negotiate that the new lease does not need a guarantor.  However, this will all be part of the negotiation and any landlord will be reluctant to give this additional security up.  It might be that you can negotiate limits to the guarantee, such as it can only be claimed on in the first 2 years of the lease (incidently most business failures happen in the first 2 years) or that the guarantee does not include the family home. How can I avoid the guarantee being called upon? If the company is in a strong financial position then the guarantee isn't a problem.  If the company starts showing warning signs of insolvency it is crucial that the directors act.  It is all too common that directors are over optimistic or blind to the signs.  This can seriously increase personal liability problems.So, the basic advice is GET ADVICE if you are worried your company could be getting into difficulty and you have a personally guaranteed the lease.

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Can I Get Out Of A Personal Guarantee on Commercial Leases?

Harveys Furniture Goes Into Administration

in A guide for redundant employees in administration or insolvency situations News Retail

Harveys Furniture has gone into administration as it fails to find a buyer.240 jobs have been immediately lost whilst 1,300 others are at risk.  Harveys’ sister chain, Bensons for Beds was also put into administration, though it was bought out in a pre-pack administration by its private equity owner, Alteri Investors..Administrators from PwC are looking for a buyer, which includes the purchase of its 20 stores and three manufacturing sites.For now, its stores continue to trade but those in the industry believe a buyer is unlikely to be found.Zelf Hussain, joint administrator at PwC said: ‘’the group had been facing increasingly challenging trading conditions in recent months, in particular Harveys furniture business. This has resulted in cashflow pressures, exacerbated by the effects of coronavirus on the supply chain and customer sales. It has not been possible to secure further investment to continue to trade the group in its current form.”

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Harveys Furniture Goes Into Administration

Intu warns it could go bust unless it can raise additional finance

in News Retail

01 May 2020In attempt to fix its balance sheet, Intu, the struggling shopping centre has appointed David Hargrave as chief restructuring officer and non-executive director.Hargrave is experienced in the transaction businesses of the Big 4 accounting firms. He has worked in leading processes of change or business restructure. He was a partner at EY and PwC.Intu stated it received 40 per cent of its rent due for the first quarter of the year. Discussions are being held with tenants to collect the other 60 per cent; Advanced discussions being held with tenants to represent a further 28 per cent of the amount due. The property giant is in the process of confirming revised payment plans with its occupiers. Currently it is offering tenants monthly rents to the year end.Despite this, ''robust action'' is a threat for those ''large, well-capitalised'' brands that have not paid rent.27 March 2020Update; Intu have only managed to collect 30% of their rents this quarter day compared to 77% this time last year.  Surely they cannot survive in their current form.Intu, one of the largest shopping centre owners in the country, has warned that it is likely to go bust unless it can raise more finance.  This is not really that surprising as Intu, which owns Lakeside, Trafford Centre, and the Metro Centre was already in a difficult place due to falling rents in its shopping centres and the need to write down the value of its assets by £2bn . The company has a large debt of some £5bn that needs to be refinanced and recently announced losses of £2bn.  In January, the firm approached its shareholders to ask for more money amid the downturn in the retail sector.Last week Intu said it was at risk of breaching debt covenants after it was forced to abandon the fundraising attempt. It said "extreme market conditions" deterred investors from giving fresh cash. To try and offset this they have been trying to sell their shopping centres. But really, who will buy them now?Intu owns the following centres:Braehead, Glasgow Broadmarsh, Nottingham Chapelfield, Norwich Derby Eldon Square, Newcastle Lakeside, Essex Merry Hill, West Midlands Metrocentre, Gateshead Milton Keynes Potteries, Stoke-on-Trent Trafford Centre, Manchester Uxbridge Victoria Centre, Nottingham WatfordCentres run as joint ventures:Manchester, Arndale St David's, Cardiff The Mall, Cribbs CausewayIntu has been particularly badly hit by the high profile failures of the Debenhams, House of Fraser, BHS and New Look to name a few.The demise of the High Street, and now possibly the Shopping Mall, is a big worry for local councils and landlords that are losing out on rents and business rates.  The virus is likely to impact footfall across the whole country.  No doubt that there will be calls to tax the internet delivery giants as they are now disproportianally benefitting from the situation!

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Intu warns it could go bust unless it can raise additional finance