When a business runs into financial difficulties and proposes a Company Voluntary Arrangement (“CVA”), landlords, insolvency practitioners and local authorities can disagree about who should pick up the bill for business rates on empty leasehold premises – the landlord, or the company in CVA?

The Non-Domestic Rating (Unoccupied) (England) Regulations 2008 (“Regulations”) sets out exemptions for companies that are in liquidation or administration, but the Regulations do not include companies that enter a CVA.

Where the company continues to trade from a leasehold premises following approval of a CVA, it remains in occupation and is therefore liable to pay the rates. However, CVAs are often used by companies that trade from multiple premises whereby, as part of the CVA, the company will seek to “exit” those premises that are non-profitable leaving the leasehold property empty.

It is usual, in those types of cases, for a CVA to categorise leasehold premises according to whether and how the company will continue to use them, splitting landlord claims into different categories and compromising claims differently.  For premises that are loss making, the company will usually deal with those leasehold premises by compromising the rent (sometimes to nil), offering the landlord the ability to accept a surrender of the lease.

A recent High Court decision[1] has now provided important clarity on the question: Does a CVA stop the tenant company from being the “owner” for the purposes of business rates on an empty property? The Court’s answer was a clear “no”, with important practical implications.

Background

Robinson Webster (Holdings) Ltd (“RWHL”), the retailer behind the Jigsaw brand held a 10-year lease of a retail unit on Bow Lane in the City of London. The store had closed during the Covid‑19 pandemic and remained empty.

In 2020, RWHL proposed a CVA to restructure its store portfolio. The CVA categorised leases from A–D. Category D stores—including the Bow Lane shop—were those the company would “exit” almost immediately, with rent arrears compromised at around 8% of their value. 

The City of London Corporation (“CoL”), as the billing authority, initially sought rates from the landlords (CBRE), but following CBRE arguing that the CVA could not determine proprietary rights, it had not accepted a surrender and that the lease continued to subsist, CoL withdrew its summons for payment against CBRE and instead demanded payment from RWHL. RWHL disputed liability and the matter ended up before the court to determine the position.

RWHL argued that the CVA had effectively removed its entitlement to possession, making the landlord the “owner” for rating purposes.  The district judge agreed, but CoL appealed.

Appeal

Essentially the High Court had to decide, on appeal, who is the “owner” of an empty property as under section 45 of the Local Government Finance Act 1988 (LGFA) liability for business rates on unoccupied premises sits with the “owner”.

The owner is defined in section 65(1) of the LGFA as: “the person entitled to the possession” of the property.  This typically means the freeholder, unless there is a lease, in which case the tenant is the person entitled to immediate possession.

The Supreme Court has however held in the case of Rossendale[2] that the term “owner” can be interpreted purposively where the party with a right to possession has no real or practical ability to exercise that right and the right was granted for no other purpose than to avoid liability for rates.

The district judge had approached the case on the basis that CBRE was the person with the ability to occupy the premises itself or confer occupation on someone else (after accepting surrender) and the purposive approach in Rossendale allowed the Court to consider the “owner” to be the party with the “real and practical ability” to re‑let the premises. RWHL had neither the ability to occupy nor confer the right to occupy on someone else both legally (because of the terms of the CVA) and practically (because it did not have the keys).

On appeal the High Court decided the judge was wrong on this point confirming the narrow application of the Rossendale test to those cases where there was intention to avoid paying rates.

Ultimately the High Court decided that RWHL was the “owner” of the property and therefore liable for unoccupied business rates.  This was on the basis that CVAs were not included in the exemptions in the Regulations, and parliament must have intended that companies subject to a CVA should not fall  within those exemptions.

Considerations for Practitioners

RWHL’s position relied on the terms of the CVA that provided that RWHL would “exit” the premises and “relinquish any right of occupation”.   It had also handed the keys back to CBRE.

Although each CVA will be tailored to the financial position of a specific company, it is not uncommon to see similar terms in CVAs when dealing with the landlord creditors of properties which the company no longer wishes to trade from.  For example:

  • the company shall exit the premises (although see para 79 of the judgment where the judge comments that the word “exit” was ambiguous – something to note for those drafting CVAs)
  • all of the company’s rights, obligations and liabilities under the lease come to an end
  • all of the rights and obligations of the landlord come to an end; and
  • the company will execute any documents necessary to effect a surrender or termination (if required by the landlord)

In cases where the CVA company does not need the leasehold property moving forward, landlords are generally given the option of accepting the return of the lease and the premises.  Where there is a willing tenant waiting in the wings, this can be a good option.  However, as a lease surrender must be consensual and a lease can only be terminated in line with its terms, the landlord cannot be forced to accept the lease and premises back.  Ultimately, the decision as to what to do, rests with the landlord, albeit that payment of rent may have ceased pursuant to the terms of the CVA.

On the facts of this case, CBRE held the keys to the premises, but they had made clear that they had not and did not accept a surrender.  This is useful to note outside of CVAs where, for example, administrators hand back the keys to premises and the landlord takes them. Some officeholders assume that this is sufficient to bring the lease to an end by surrender, but it may not be unless the landlord is in fact agreeing to a surrender of the lease.

Further, the judge in the High Court found that it did not make a difference that CBRE were marketing the property and that they could take back possession at any time by agreeing a surrender or terminating the lease in accordance with the rights in the CVA.  It remained the case that they had not done so to date. 

Although RWHL in effect could do very little with the property – and that the landlord was arguably in the driving seat deciding how to deal with it – liability for the business rates rested with RWHL.

Compromising Rates

Although the decision focuses on the fact that RWHL was liable as owner for the rates liability in respect of the empty property, what it doesn’t mention is the fact that it is possible for rates liabilities to be compromised as part of the CVA for the existing rates period (noting that rates accrue on an annual basis).  We saw this, for example, back in 2019 when Paperchase compromised its rates liabilities under the terms of its CVA and that has also been achieved in subsequent restructuring plans.

Where there is a significant property portfolio and therefore significant rates liabilities, it is a useful reminder that there is precedent for existing rates liabilities to be compromised – avoiding a surprise later down the line if the local authority seeks to recover rates due in respect of a property which the company no longer uses/requires.

On the other side of the fence, the decision helpfully confirms for local authorities how to approach who will pick up the business rates bill when a company enters a CVA.

[1] The Mayor and Commonalty and Citizens of the City of London v Robinson Webster (Holdings) Limited [2026] EWHC 151 (Admin)

[2] Rossendale BC v Hurstwood Properties (A) Limited [2021] UKSC 16