The insolvent former BHS chain has been given less than three months to assign its lease of a store in a Bristol shopping centre.
A judge granted the company relief from forfeiture, but only until 28 June, on condition that it makes an assignment to a new tenant by that date, most likely Sports Direct.
An immediate ruling that the lease had been forfeited would have enabled possession to return to the landlord of the Mall at Cribbs Causeway, Bristol, which would then have been able to strike its own fresh deal with a new tenant.
However, Judge Ralton in Bristol County Court granted SHB Realisations – the insolvent company formerly known as BHS – relief from forfeiture, which gives it time to attempt to assign the lease and enable a debtor to secure some value from it. He gave it until 28 June to find a new tenant.
In 1998, BHS took a 125-year lease of a “sub-anchor” unit at the centre, for a peppercorn rent but with a premium of £7.05m plus VAT paid. The lease included a “keep open” covenant requiring BHS to open its shop to the public seven days a week during stipulated opening hours.
The BHS store closed permanently on 28 August 2016 and the chain entered liquidation in December that year. As a result, since the closure, BHS (now SHB) has been in admitted breach of the “keep open” covenant.
The judge said that “unsurprisingly, given the premium paid for the lease”, there have been ongoing attempts to sell the leasehold interest, which have not succeeded to date. And he added that it was accepted by all parties that there is “no prospect of there being any equity in the lease” after repayment of a loan from GB Europe Management Service, secured by a legal charge over the lease.
As a result, he said that GB is the “driving force” in this litigation.
He said that SHB and GB sought six more months to find an assignee, claiming potential interest in acquiring the lease from Sports Direct and Primark.
However, the judge found that “only Sports Direct is a potential assignee”, that the market for the lease is weak, and is unlikely to get any stronger, adding “there can be no doubt that the value of the lease has depreciated considerably, given the new retail world and its terms”.
He said that SHB was in “deliberate but not wilful breach of covenant”, that the landlord suffers “ongoing damage” and its other tenants “some damage by being in a Mall where the fourth largest store has been and continues to be boarded up”.
But he said that the lease is an asset which was once of considerable value, SHB “should not be deprived of the opportunity to reduce its debts” and GB is a secured creditor and it should not be deprived of its security.
He added: “There is a market still for the lease and a real rather than fanciful prospect of finding an assignee. The lease has a value of over £1m.”
As a result, he ruled that there should be conditional relief from forfeiture, with the primary condition being that an assignment of the lease must be completed by 5pm on 28 June 2019 (to any assignee, not limited to Sports Direct).
To send feedback, e-mail jess.harrold@egi.co.uk or tweet @estatesgazette
