The use of formal restructuring procedures to reduce lease liabilities is nothing new. For many years, retailers and hospitality businesses relied on Company Voluntary Arrangements (“CVAs”) to reduce rents, compromise arrears and exit underperforming sites. Since the introduction of Part 26A of the Companies Act 2006, attention has focussed on how Restructuring Plans (“RPs”) can be used to achieve similar outcomes as part of a wider operational and financial restructuring.
The landmark decision in Re Virgin Active Holdings Ltd, Virgin Active Ltd and Virgin Active Health Clubs Ltd [2021] EWHC 1246 (Ch) (“Virgin Active“) demonstrated that a restructuring plan could be used to compromise multiple classes of landlords and, crucially, that dissenting landlord classes could be bound through cross-class cram down. Five years later, the recent case of Re TG Jones High Street Limited [2026] EWHC 2079 (Ch) (“TG Jones”) provides an opportunity to consider how landlord treatment under RPs has evolved and how that compares with the position previously established under landlord CVAs.
Evolution of the Landlord RP
In order to understand the significance of the TG Jones RP, it is useful to revisit the decision in Virgin Active.
Virgin Active was the first RP to compromise multiple classes of landlords and the first major test of cross-class cram down in the landlord context. Whilst there was substantial landlord opposition, the plans were ultimately sanctioned. The court was satisfied that the statutory requirements for cross-class cram down had been met, including that the dissenting classes would be no worse off than in the relevant alternative. The implications for landlords were immediately apparent.
While CVAs had already demonstrated that significant modifications to lease liabilities could be imposed on landlords, RPs showed that, even where affected landlords formed a separate class and that class voted against the plan, the court could still sanction a restructuring notwithstanding the dissent of that class. This represented a significant development in the restructuring landscape because it demonstrated that the creation of a separate landlord class did not necessarily give landlords the ability to prevent a restructuring from proceeding.
Five years on, TG Jones demonstrates a more mature use of Part 26A.
The restructuringconcerned the rebranded high street retail business formerly operated by WH Smith following its acquisition by Modella Capital in 2025. The restructuring involved two companies within the group and sought not only to reduce property costs but also to support a wider operational turnaround through the restructuring of lease liabilities and other creditor claims.
The case was not about whether dissenting landlords would be better off under the plan than in the relevant alternative. The court considered how restructuring benefits were being allocated, the treatment of different creditor groups and the significance of shareholder funding. In that respect, TG Jones suggests that whilst cross-class cram down remains a powerful tool, the court’s scrutiny extends beyond a narrow application of the statutory tests and into the broader economics of the restructuring. The practical effect of that scrutiny can be seen in the way landlords were treated under the plans and in the amendments negotiated before sanction.
How landlords were treated in TG Jones
At the centre of the restructuring was TG Jones’ leasehold estate. Rather than treating landlords uniformly, the plans categorised stores according to profitability and strategic importance, with different levels of compromise applying to different categories of lease. Some leases were left unaffected, whilst others were subjected to varying degrees of rent reduction and lease modification.
Rent concessions: The original proposals included significant rent concessions. For some underperforming stores, the RPs contemplated a 75% reduction in rent during the first year, with certain categories receiving no rent during the concession period. As in many previous retail restructurings, landlords were effectively being asked to contribute directly to the turnaround of the business through reductions in occupancy costs.
Negotiated improvements: However, the RPs ultimately sanctioned differed from those initially proposed. A group of landlords led by British Land plc opposed the original plans and engaged in negotiations with TG Jones between the convening and sanction hearings. Those discussions resulted in substantive amendments being made to the plans.
Amongst other things, part of the first-year rent concession for certain landlords was converted into deferred rent capable of repayment, subject to the terms of the plans. Those deferred amounts were also granted the benefit of security. The revised RPs additionally introduced an upside-sharing mechanism under which compromised creditors would receive a share of future performance if specified EBITDA thresholds were exceeded.
Following these amendments, British Land plc withdrew its opposition.
Notwithstanding those changes, a number of creditor classes failed to approve the plans and the court ultimately exercised its cross-class cram down powers to sanction the RPs.
Would the outcome have been different in a CVA?
An obvious question is whether landlords would have been in a stronger position had the same restructuring been pursued through a CVA.
The starting point is that many of the features landlords encounter in RPs are not new. Long before the introduction of Part 26A, CVAs were being used to compromise lease liabilities, categorise stores according to profitability and impose different treatment on different landlords in support of a wider business turnaround. The high-profile challenges brought by landlords in cases such as Discovery (Northampton) Ltd and others v Debenhams Retail Ltd and others[2019] EWHC 2441 (Ch) (“Debenhams”) and subsequently in Lazari Properties 2 Ltd and others v New Look Retailers Ltd and others [2021] EWHC 1209 (Ch) (“New Look”) also demonstrate that organised landlord opposition, negotiations and amendments to restructuring proposals did not begin with restructuring plans.
In Debenhams, the High Court confirmed that substantial modifications to lease liabilities could be achieved through a CVA. The position developed further in New Look, where the court rejected challenges based on unfair prejudice and accepted that different creditor groups, including different categories of landlord, could receive different treatment where there was a proper commercial justification. Many of the themes seen in TG Jones, including the categorisation of stores and differential treatment of landlords, would therefore have been familiar to those involved in the earlier landlord CVAs.
The more significant distinction between CVAs and restructuring plans therefore lies not in the ability to compromise lease liabilities, but in the dynamics of creditor leverage.
Under a CVA, landlords’ votes are counted as part of the overall creditor vote and, if a sufficient proportion of creditors oppose the proposal, statutory approval may not be achieved. Under an RP, however, a dissenting class may still be bound through cross-class cram down. That reality fundamentally changes the negotiating landscape. Landlords can no longer assume that collective opposition alone will prevent a restructuring from proceeding.
Nevertheless, TG Jones demonstrates that credible objections concerning valuation, creditor treatment and the allocation of restructuring benefits can still have significant influence on the final outcome.
Lessons from TG Jones and the direction of travel
The repeated compromise of landlord claims across both CVAs and RPs inevitably raises the question of whether landlords have become a primary source of restructuring value.
There are obvious commercial reasons why lease liabilities attract attention. Large retail and hospitality businesses often operate extensive property portfolios with significant variation in profitability across individual sites. Lease liabilities can therefore be targeted and restructured on a site-by-site basis in a way that many other operating costs cannot.
A notable aspect of TG Jones was the differing treatment afforded to creditor groups. Certain suppliers received materially better outcomes than some other creditor groups, reflecting their perceived importance to the continuation of the business. The court accepted that there could be a rational commercial basis for differentiating between creditor groups where their contributions to the survival of the business differed. Similar themes can also be seen in the earlier CVA cases.
This may become an increasingly important theme in future cases. Where shareholders seek to retain ownership whilst landlords surrender contractual value, attention is likely to focus on what shareholders are contributing in return. TG Jones suggests that meaningful new-money support may be an important element in justifying that outcome.
Conclusion
Looking ahead, restructuring plans are likely to remain an attractive tool for businesses seeking to address property liabilities alongside wider operational and financial restructuring issues.
The key lesson may therefore be that the nature of landlord leverage has changed rather than disappeared. Future challenges are likely to focus less on whether landlords can block a restructuring and more on the justification for differential treatment, the distribution of restructuring benefits between stakeholders and the extent to which shareholders are contributing to the restructuring in return for retaining value.