Two landlords were recentlly successful in persuading the High Court that a Corporate Voluntary Arrangement (CVA), under which they stood to lose the benefit of a guarantee for their rent, was ‘unfairly prejudicial’ to them as defined by Section 6 of the Insolvency Act 1986.
Although the CVA was claimed to have offered the landlords 100 per cent of the sum they would have received had the insolvent company surrendered the leases, they produced evidence that the actual sum they stood to receive under the CVA was a mere third of that sum.
With the current degree of uncertainty in the commercial property market, a guarantee of rent is a valuable thing to have. The court ruled that it was unfair to require the landlords to give up their guarantees, even if there was a payment made in consideration for so doing.
The case, which follows a similar ruling in 2007, will be greeted with relief by landlords.