Landlords of Tenants that Filed for Bankruptcy

| Jun 24, 2020 | Business & Commercial Bankruptcy, Chapter 11 |

The Coronavirus Pandemic has not only had detrimental impact on retail stores and restaurants, but it has had a huge impact on the Landlords that rented space to those struggling businesses. If a tenant files for a Chapter 11 Bankruptcy, what are the Landlord’s rights? That depends in part on what the tenant wants to do and the current circumstances. Sometimes the tenant wants to assume the lease and continue. If that is the case, the lease must be current or brought current in a commercially reasonable period of time. The tenant could also reject the lease. If they do that, the landlord needs to file correct proof of claims to protect its interests. For the use of the premises after the bankruptcy was filed, an administrative proof of claim can be filed which has a high priority when compared to other creditors. In addition. a claim can be filed for breach. However, there are limits. The claim for breach can be for a maximum of one year’s rent or 15% of remaining balance on lease, whichever is greater. A landlord could also use the threat of rejecting the lease as leverage in trying to renegotiate the lease. There are other factors that can also come into play