“The fact that House of Fraser is able to proceed with such a fiercely opposed CVA underlines that this legislation is completely broken and needs urgent review.
“Landlords alone – many of which are pension funds and Local Authorities – are being made to pay for the mistakes of the business owners, and the Government’s failure to reform the business rates system. The impact will be felt up and down the UK in town centres and on high streets.
So said Mark Williams, president of Revo, following the decision to let the CVA push ahead for department store chain House of Fraser.
“This apparent ease with which some retailers are exiting leases entered into in good faith not only deters companies from investing in our town centres, it fundamentally undermines the UK legal system where contract is sacrosanct,” he said.
“Action must be taken now, and we have written to the Housing, Communities and Local Government Select Committee urging them to scrutinise the misuse of CVAs, holding retailers and their advisors to account by calling them to give evidence in front of this Committee’s MPs.”
The statement came after creditors backed department store chain House of Fraser's plans to close more than half its stores.
High street landlords were unhappy with the plan as they will have to shoulder the burden of financial losses, but they were outvoted. The retailer will now go ahead and shut 31 of its 59 shops nationwide, and also impose huge rent cuts on 10 others that it intends to keep.
Up to 6,000 jobs are set to go as a result of the store closures.
The vote was seen as a make-or-break moment for the 169-year-old business. If the rescue plan had failed, administration was likely. In all, 2,000 House of Fraser jobs are set to go, along with 4,000 brand and concession roles.
The stores scheduled for closure, which include its flagship London Oxford Street store, will stay open until early 2019, House of Fraser has said.
In May, House of Fraser's Chinese owners, Nanjing Cenbest, reached a conditional agreement to sell a 51% stake to the Chinese owner of Hamley's, C.banner. The sale was conditional on the restructuring plan being approved.
"Following the restructuring, House of Fraser will have a more sustainable cost base and a platform for future growth to deliver an improved customer proposition," the company said in a statement.
RPA Perspective House of Fraser is using company voluntary arrangements (CVAs), a form of insolvency proceedings, to overhaul its business.
Landlords argue that CVAs are being abused as a quick way to cut rents and want the government to launch an urgent review into them.
In order to be enacted, CVAs have to be approved by 75% of unsecured creditors, but landlords' voting power is reduced because of the way in which insolvency rules are applied.
House of Fraser chief executive Alex Williamson said: "The CVA proposals have been approved by our creditors and we are grateful for their ongoing support and belief in the future of House of Fraser.
"This was clearly a difficult decision to take but is, ultimately, the only one to secure our future. Our focus is on supporting all of our affected colleagues and we are exploring every opportunity available to them, working alongside the Retail Trust and the wider retail community."
Mark Fry of Begbies Traynor and Charlotte Coates of JLL, who had been advising a group of the affected landlords, said: "It is disappointing that the CVA has been agreed without proper engagement with the landlords, many of whom manage the pensions and investments of the man in the street, despite them having so much at stake through the process.
"However, with landlords' voting power reduced by an arbitrary 75% of the value of their already discounted claims, the odds were always stacked against them. The landlords now have a 28-day window to consider whether to make a legal challenge against the process and will be looking at their options closely."
