DWF: JJB sets trend with Company Voluntary Arrangement

The deal struck by troubled sports retailer JJB with its landlords using a Company Voluntary Arrangement is likely to be widely copied, according to law firm DWF.

DWF says it is detecting a rising number of tenants which are looking to follow JJB's example but it warns that landlords asked to vote on a proposal should ensure they understand the implications for their business.

Anita Gupta, partner in DWF's real estate department, says the firm has advised a number of landlords and banks on various CVA proposals. She explained: "CVAs have been around for almost 25 years but have been used rarely as it is often difficult to get sufficient creditor support.

"However they may become more common as everyone gets used to operating within a changed economic environment. As a result of the JJB CVA, there is a real possibility that the CVA process will become a blueprint for many struggling retailers seeking to retain control of the business."

Gupta added: "Many landlords would rather have a tenant paying something rather than no tenant at all, particularly now they have to pay rates on vacant properties – although there is concern at the fact that CVAs can effectively change lease terms.

"It may be that landlords will come off better from a CVA than if the tenant goes into administration, as was arguably the case with JJB. However to make a balanced decision they need to fully understand their legal position and the effects on their investment values and banking covenants amongst other things."

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