A ‘Guaranteed’ Future?

Landlords breathe sigh of relief as Court declares guarantee stripping unfair Landlords will be relieved by a High Court judgment handed down at the beginning of May in the much anticipated Powerhouse case. The Court ruled that a parent company guarantee could not simply be side-stepped by the entering into of a company voluntary arrangement (CVA). Had the decision gone the other way, the effect on the value of investment property, and in particular for landlords holding parent company guarantees for their tenants, would have been catastrophic.

Powerhouse's demise and effect on landlords

This case arose out of the collapse of Powerhouse, the electrical retailer. Powerhouse got into financial difficulties and in early 2006 the directors proposed a CVA. Under the terms of the CVA the institutional landlords would only get 8 or 12 months rent (depending on the lease term) on the closing stores at the rate of 28p in the pound. Also, Powerhouse was then to be released from further