A landlord holding a lease to a struggling retail or hospitality tenant has traditionally had a reasonably clear set of expectations: the tenant pays what the lease says, or the lease ends, or the parties negotiate a change both sides accept. The restructuring plan procedure under Part 26A of the Companies Act 2006 disrupts that expectation in a specific and legally significant way — it allows a company in financial difficulty to propose changes to its liabilities, including its lease obligations, and to have those changes imposed on dissenting classes of creditors, landlords among them, if the statutory conditions are met and a court considers sanction appropriate. This is not a mechanism unique to leases, nor a notice a tenant can simply serve to pay less rent. But the 2026 Poundstretcher and TG Jones decisions have exposed the distance that can open between the income written into a lease and the amount a property owner can realistically protect when an occupier’s business is failing.
Part 26A is UK company legislation, while the underlying property rights and insolvency consequences relevant to a lease may differ between England and Wales, Scotland and Northern Ireland. The decisions discussed here were given by the High Court in England and Wales and need to be read with that distinction in mind.
What Part 26A permits
A restructuring plan allows an eligible company facing financial difficulty to propose a compromise with creditors or members divided into classes according to their rights and the way the arrangement affects them. Each class votes separately, and approval ordinarily requires at least 75% in value of those present and voting in that class, not 75% of every creditor the company owes money to. The distinctive power is the court’s ability, under Part 26A of the Companies Act 2006, to sanction a plan despite opposition from one or more classes. At least one approving class must have a payment or genuine economic interest in the relevant alternative, no member of a dissenting class may be worse off than under that alternative, and the court must still decide whether exercising its discretion is fair. These are not mechanical conditions that automatically make an acceptable plan out of any proposal meeting a numerical threshold.
The ‘relevant alternative’ is what the court considers most likely to happen without sanction, commonly administration or liquidation, although not inevitably either. For a landlord, this changes the comparison dramatically. The original lease might reserve five more years of rent, but if the likely outcome without restructuring is administration, store closure and an unsecured claim worth only a fraction of the contractual balance, the full rent is not the measure of what would actually be recovered. The comparison also involves the landlord’s likely possession date, the rent achievable from another occupier, void costs, incentives and the value of any enforceable security. A property with strong reletting prospects may stand in a different economic position from another property let to the same retailer, even before the company’s proposed classification of the two stores is considered.
There is a legal limit that is commercially significant. Compromising a tenant’s payment obligations is not the same as compelling a landlord to surrender its proprietary interest: a restructuring plan cannot simply force a surrender of the lease without the landlord’s agreement. The TG Jones judgment explains why a plan can reduce future rent to nil while giving the landlord rights to recover possession instead. Whether exercising a break is sensible is another question. A landlord may be entitled to take back the premises yet choose to retain a reduced-paying occupier rather than inherit an immediate void, rates exposure and reletting expenditure. The right to end the arrangement therefore has commercial value even where the landlord decides not to use it.
What the recent cases show
In Re Poundstretcher Limited, sanctioned on 12 June 2026, the retailer’s leases were categorised according to the contribution different shops were expected to make to the business. The more viable Class A locations were largely preserved, subject in some cases to a change from quarterly to monthly rent payments. Class B leases were subjected to reductions of 25%, 50% or 75% for a period of up to three years, depending on store classification, while rent for the least viable Class C premises was reduced to nil. Contractual service charges and insurance remained payable under the specified arrangements. Six creditor classes voted against the plan, yet the court sanctioned it. The reductions were not a standard discount applied to all landlords: they reflected the company’s model of which stores could support the cost of occupation.
That model is precisely where a property professional has something useful to test. Store-level EBITDA may show that a retailer cannot afford its existing rent, but it is not an independent valuation of what the landlord’s building is worth or what someone else would pay for it. A location may be strategically important to a retailer and still over-rented; another may be unprofitable for that particular brand but capable of attracting an alternative tenant at a satisfactory rent. The investor’s task is to understand both calculations, because the company’s view of a store’s sustainable contribution may influence its proposed rent concession while the landlord’s realistic reletting prospects influence the economic attraction of terminating the lease. Accepting the retailer’s classification without examining the property market risks allowing its operating model to become the only valuation that counts.
One of the most revealing Poundstretcher objections concerned notice periods rather than the percentage rent reductions. The company’s original 30-day termination notice could have left certain landlords receiving compromised rent after the period when an administrator would probably have finished trading from the premises and handed them back. Following evidence from opposing landlords, the proposed notice was shortened to 28 days for the relevant Class B landlords and 14 days for Class C landlords, with protection for an additional Class C occupation period where the company exercised its extension option. Those amendments brought the landlord’s potential recovery of possession more closely into line with the assumed administration alternative. For a landlord, a fortnight of additional control over an empty property may look minor beside a large rent cut, but it can determine when marketing, fit-out, a new letting or the transfer of occupancy costs can begin. The court’s approval should not be mistaken for wholesale acceptance of the company’s initial terms.
The second case, Re TG Jones High Street Limited and TG Jones Retail Holdings Limited, concerned the former WH Smith high-street business. The two interconnected plans were sanctioned on 1 July 2026, with fuller reasons published on 5 August. Some of the group’s strongest stores were excluded from compromise, while other sites were categorised according to profitability and rent sustainability. Landlords of affected stores faced significant concessions, including an initial 75% reduction in cash rent across specified classes, with different treatment thereafter. The headline distinction from Poundstretcher was not simply the size of the cuts but the negotiated reshaping of what landlords might recover later and what the shareholder could retain.
British Land landlords challenged the terms and negotiated changes that affected other eligible creditors as well. An amount of first-year rent that would otherwise have been extinguished was instead deferred and supported by security. The often-cited £9.1 million was the maximum deferred amount if none of the eligible landlords exercised termination rights, not cash paid to landlords in July 2026. It was due after the concession period, within 60 days of the filing of the relevant 2029 accounts, subject to the plan’s provisions and dependent on the group’s later ability to refinance or fund payment. The advisers’ account of the agreed arrangements also identifies third-ranking security for the deferred rent. That makes the deferred claim materially different from an immediate rental receipt or an unconditional promise backed by a first-ranking charge.
The settlement increased the eligible creditors’ contingent share of cumulative recovery EBITDA to 50% above a £40 million threshold, preserved certain dilapidations claims where the relevant leases continued, and removed related-party brand-licence payments that would otherwise have produced about £4.1 million for an entity connected with the shareholder. British Land adopted a largely neutral position, though other classes remained opposed. Those changes are commercially meaningful without being equivalent to full recovery. A profit share has value only if the turnaround achieves the necessary earnings, and deferred rent remains exposed to payment timing, security ranking and future financing. What TG Jones demonstrates is that opposing landlords may improve the structure of a compulsory compromise without being able to prevent the compromise itself.
Why guarantee and covenant status affects the outcome
A landlord holding a parent-company guarantee, rent deposit, letter of credit or other support may have a stronger claim under the relevant alternative than an otherwise similar landlord without it. But the presence of a guarantee in the lease file does not establish its realisable value. In Poundstretcher, landlords with parent guarantees argued that the plan’s modification of those rights deprived them of valuable protection; the dispute required examination of what the guarantor could actually pay, not simply the nominal amount of the guarantee. A guarantor whose finances depend on the same struggling retail group is not commercially equivalent to an independently capitalised institution that can meet the obligation regardless of the tenant’s failure. The guarantee wording, available assets, ranking of claims and risk of competing demands all matter to the recovery calculation.
This becomes an investment question well before a plan is proposed. A building acquired at a yield reflecting a lengthy unexpired lease and a recognised retail covenant may have been financed on the expectation of continued contractual income. Yet several properties let to the same retailer can be exposed to one corporate restructuring, despite appearing diversified by address, while an apparently strong covenant may offer little independent protection when both tenant and guarantor rely on the same operating cash flow. Property buyers and lenders need to understand the difference between the contractual rent schedule, the market rent available if the tenant leaves, and the likely income or security recovery in a credible distress scenario. Those are three different numbers, and a long unexpired lease does not make them converge.
Nor should the option to take back the property be valued as a simple escape from compromised rent. A landlord who terminates may recover the right to re-let but also inherit empty-property costs, dilapidations disputes and capital expenditure required to attract a replacement. A landlord who remains may retain service-charge contributions and some income but accept a period of lower cash receipts and exposure to a second failure. The relative value of those choices depends on the unit’s marketability, not solely the debtor company’s projections. This is why evidence of achievable rent, incentives and probable void duration can carry more weight in negotiations than an assertion that the original lease should be honoured in full.
Equity retention and the fairness question
The distribution of losses becomes more contentious where the company’s existing owners retain their equity while creditors are required to surrender claims. It is tempting to frame that as an automatic injustice, but the court’s task is more complicated. It must consider what the ownership interest is actually worth, what new funding is being contributed, what creditor recoveries would be available without the plan and whether the proposed benefits of the turnaround are shared fairly. The fact that a landlord gives up contractual rent does not, by itself, prove that an equity holder receives the equivalent value; an impaired claim may be worth very little in the insolvency alternative even though it remains a genuine sacrifice for the creditor making it.
TG Jones brought that conflict into the open. Modella retained its equity, while the court examined the shareholder’s funding contribution, the removal of related-party fees, limits on distributions and the benefit creditors might receive from future earnings. The judgment records £25 million of funding commitments and the release of around £6.4 million of secured claims that were otherwise expected to be recoverable. It also considered the relatively limited valuation attributed to the post-restructuring equity interest. The court ultimately sanctioned the plans, but not without concern over whether creditors were being required to finance value for the owner. Independent legal analysis of the decision identifies a further important qualification: the judge leaned against equating rent deferral with the provision of fresh capital, without deciding that general question conclusively. It would be misleading to treat every pound of rent deferred as if the landlord had invested a pound of new money on ordinary market terms.
For property investors, the practical significance lies in separating the face value of what has been compromised from its realistic recovery value, then testing what the landlord receives in return. A secured claim due in several years is not equivalent to rent in the bank; an EBITDA-sharing arrangement is neither guaranteed income nor necessarily a proportionate reward for every landlord’s concession. The fairness assessment belongs to the court, but the commercial value of the proposed package still has to be understood by the owner who will hold that asset after sanction.
How landlords engage with a proposed plan in practice
A landlord’s options are wider than voting for or against a plan at the class meeting. The company’s proposed class structure, the assumptions behind its relevant alternative and the valuation of affected rights shape the negotiations before the final sanction hearing. A class may be organised around lease treatment and site profitability rather than simply the legal form of the lease, an approach that has become familiar in retail plans but which the TG Jones judgment recognised as unusual when compared with the conventional classification of creditors by their existing rights. A landlord whose unit has unusual security, different reletting prospects or particular termination rights has reason to examine whether those differences have been properly reflected rather than assuming that every property in the same commercial category has the same economic exposure.
Challenging the company’s figures also requires evidence capable of surviving scrutiny. Local rental transactions, likely reletting periods, tenant incentives, the real value of guarantees, rates exposure and the ability to recover possession may all be relevant to the no-worse-off comparison. For individual property owners, commissioning that work alone can be disproportionate, especially where the retailer’s valuation model covers a large national estate. Coordinated legal and valuation representation can spread the cost of examining common assumptions, while landlords with materially different positions may need to preserve their own arguments. Poundstretcher’s amended notice periods and TG Jones’ revised rent, security and profit-sharing provisions show that an objection grounded in the economics of the alternative can achieve more than a bare insistence on existing contractual rights.
Timing is part of that commercial judgement. Class issues can arise at the convening hearing, with the full fairness and statutory conditions considered at sanction; a landlord who first questions the treatment of its lease when the latter hearing begins may have lost opportunities to influence the evidence and the terms. Tanfield Chambers’ September 2026 discussion of restructuring plans for commercial landlords likewise emphasises early engagement and the importance of understanding how the process affects landlord classes. Legal challenges can be costly, and their value should be assessed against the sums genuinely at risk, but passivity can be costly too if the company’s view of the property’s alternative income becomes the only one before the court.
What this means for landlords managing restructuring risk
None of this means a tenant can routinely or lightly use Part 26A to pay less rent. The company must meet the financial-difficulty threshold, propose a genuine arrangement to address it, take the plan through the statutory and court process and satisfy the conditions for sanction, including the additional scrutiny that applies when dissenting classes are to be bound. Poundstretcher and TG Jones demonstrate that the court can approve major compromises, but they also show the importance of the detailed comparison with insolvency and of meaningful examination of who contributes to, and benefits from, the rescue.
For an investor holding a commercial property let to a major multi-site occupier, the more enduring lesson is about what constitutes secure income. Contractual duration matters, and guarantees can matter, but neither eliminates the risk that a future restructuring changes the amount or timing of rent paid. The strength of the investment also depends on the alternative occupiers available, the costs of recovering possession and the realisable value of any third-party support. A landlord may decide to keep a tenant paying substantially less because the alternative is worse, or decide that the break right is worth more than an uncertain promise of future recovery. The important thing is to understand that choice from the evidence, rather than from the apparent certainty of the original lease. The 2026 judgments do not make commercial leases meaningless; they show how much of their financial value depends on what remains recoverable when the business behind them can no longer perform as agreed.
This article provides general information and analysis about UK corporate restructuring and commercial property, not legal, insolvency, investment, valuation or financial advice. Outcomes depend on the governing law, the tenant’s financial circumstances, the landlord’s rights, the terms of any proposed plan and the court’s findings. Landlords, lenders and investors should obtain specialist advice before acting on a restructuring proposal or assessing the effect on a commercial lease.
