When a tenant with several sites gets into financial trouble, a company voluntary arrangement (CVA) is often its first move. For landlords, a CVA can mean lower rent, closed units and a short window to respond. This guide explains how CVAs work for Scottish landlords, what a typical proposal does to leases, and the options for voting, negotiating and challenging.
In brief
- A CVA is a binding deal between a company and its unsecured creditors, supervised by an insolvency practitioner. Landlords are usually among the largest creditors.
- It is approved if at least 75% by value of the creditors who vote support it, unless more than half of the unconnected creditors voting are against it.
- Once approved it binds every unsecured creditor entitled to vote, including landlords who voted against it or did not vote at all.
- Many retail and hospitality CVAs sort sites into categories, cutting or converting rent on weaker sites and giving landlords a right to end the lease.
- A landlord can challenge an approved CVA in court for unfair prejudice or material irregularity, but normally only within 28 days.
What is a CVA?
A CVA is a procedure under Part I of the Insolvency Act 1986 that lets a company agree a compromise with its creditors while the directors stay in control. In Scotland, the detailed procedure is in the Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018. An insolvency practitioner acts as nominee while the proposal is put to creditors, and as supervisor once it is approved.
Creditors decide on the proposal, usually through a virtual meeting or electronic vote. The company’s members also vote, but if the two results differ, the creditors’ decision generally prevails. Secured and preferential creditors cannot have their rights altered without their consent, which is why CVAs focus on unsecured debts, and in particular on rent.
What a CVA can do to your lease
A CVA cannot change the lease document itself, but it can change what the landlord is entitled to recover from the tenant company while the arrangement lasts. Common terms include:
| Category | Typical treatment | What it means for the landlord |
|---|---|---|
| Category A | Profitable sites. Rent continues as normal. | Little change, although arrears may still be compromised. |
| Category B and C | Rent reduced by a set percentage for the CVA period. | Lower income for a fixed period, often with a right to end the lease. |
| Turnover rent sites | Base rent replaced with a percentage of the store’s turnover. | Income depends on trading, so ask for reporting and audit rights. |
| Closure sites | Rent cut to nil or a nominal figure while the tenant exits. | Expect a short notice period and a unit to re-let. |
Proposals may also compromise rent arrears, alter service charge and dilapidations liabilities, and try to restrict the landlord’s remedies, including irritancy. Some attempt to release or limit guarantees, which needs particularly careful review.
Reading the proposal
The proposal and the nominee’s report set out why the CVA is needed, what each creditor group will receive and what creditors would receive instead in administration or liquidation. Focus on these questions:
- Which category is your property in, and why?
- How much rent will you receive and for how long? Is there a return to full rent at the end?
- Do you have a right to terminate the lease, how long do you have to exercise it, and what happens to rent in the meantime?
- Are guarantees, rent deposits or other security affected?
- How are other creditors treated? Are suppliers, lenders or connected parties paid in full while landlords take a cut?
- What is the estimated outcome if the CVA fails? Is the comparison realistic?
Voting
Every landlord bound by a CVA should vote. To be counted, you will need to submit a claim with your vote by the deadline set out in the notice.
Arrears are straightforward to value, but future rent is not. Claims for future rent are unascertained, and the rules allow them to be given a nominal value for voting unless the convener or chair agrees a higher estimate. Submit a clear, reasoned estimate of your future rent claim, with supporting evidence, to maximise your vote.
Landlords often work together. A group holding more than 25% of the votes by value can block a CVA, which gives real leverage in negotiations before the vote.
Challenging a CVA
Under section 6 of the Insolvency Act 1986, a creditor can apply to the court to challenge an approved CVA on two grounds:
- Unfair prejudice. The CVA treats you unfairly compared with other creditors, or leaves you worse off than you would be in a liquidation or administration, without good reason.
- Material irregularity. Something went wrong with the process, such as votes being wrongly valued or admitted.
An application must generally be made within 28 days of the date on which the result was reported to the court. In Scotland, it is made to the Court of Session or the relevant sheriff court. English case law, including the challenges to the Debenhams and New Look CVAs, has shown that treating landlords differently from other creditors is not automatically unfair, but landlords must not be left worse off than in the alternative insolvency without a fair justification. Scottish courts are likely to find that reasoning persuasive.
Our insolvency and landlord and tenant disputes solicitors can advise quickly on whether a challenge is realistic.
Other options for landlords
- Negotiate. Many CVAs are changed before the vote in response to landlord feedback, especially where landlords act together.
- Use your break right. If the CVA gives you a right to end the lease, decide quickly whether re-letting the unit is better than accepting reduced rent. Check the deadline carefully.
- Look to guarantees and deposits. Unless validly released, a guarantor or rent deposit may still cover the shortfall.
- Watch the tenant. CVAs sometimes fail. If the company later enters administration or liquidation, the CVA usually ends and your position changes again.
CVAs, restructuring plans and administration
| Procedure | Approval | Effect on landlords |
|---|---|---|
| CVA | 75% of creditors by value voting, subject to the unconnected creditor test. | Binds all unsecured creditors. Challenge within 28 days. |
| Restructuring plan | Court sanction under Part 26A of the Companies Act 2006, with creditors voting in classes. | The court can impose the plan on a dissenting class (cross-class cram down) if conditions are met. |
| Administration | No creditor vote needed to appoint. | Statutory moratorium stops irritancy and court action without consent or court permission. Rent during the administration may be paid as an expense. |
A company can also seek a standalone moratorium under Part A1 of the Insolvency Act 1986, introduced by the Corporate Insolvency and Governance Act 2020, while it works on a rescue plan. During a moratorium, rent falling due must generally still be paid.
What to do when a proposal arrives
- Diarise the dates. Note the voting deadline and, if approved, the 28 day challenge window.
- Check your lease and security. Guarantees, rent deposits, break rights and arrears.
- Work out your position. Compare the proposal with the likely outcome in administration and with re-letting the unit.
- Submit your claim and vote. Include a reasoned estimate of your future rent claim.
- Talk to other landlords. A coordinated response is often the most effective way to improve terms.
- Take advice early. A challenge or negotiation needs to start well before the deadlines.
Frequently asked questions
Am I bound by a CVA if I voted against it?
Yes. Once approved, a CVA binds every unsecured creditor who was entitled to vote, whether they voted for it, against it or not at all, subject to any successful court challenge.
Can I irritate the lease while a CVA is running?
It depends on the terms of the CVA. Many restrict landlord remedies for debts that have been compromised, while preserving the right to act if the tenant fails to pay the reduced rent. Take advice before serving any notice.
Does a CVA release a guarantor?
Not automatically. Some proposals try to, and the effect depends on the wording of the CVA and the guarantee. Check this carefully and raise objections before the vote.
What happens if the CVA fails?
If the company breaches the CVA, the supervisor may end it and the company often moves into administration or liquidation. Your claim will then be dealt with in that process, so keep records of what you were owed and what you received.
Received a CVA proposal from a tenant?
Our commercial property and insolvency solicitors help landlords across Scotland assess proposals, vote effectively and challenge unfair terms within the deadlines. Call 0141 471 9166 or book a free consultation.
Related services and guides
This guide reflects the law in Scotland as at October 2026. It is general information rather than legal advice, so please speak to us about a specific CVA proposal.