Commercial Real Estate Leases in Bankruptcy
Summer 2010

With economic recovery slow to take hold, 2010 will likely see an uptick in the number of business bankruptcy filings. This is especially true for troubled retailers who limped into the all-important Christmas shopping season last year hoping to stave off a Chapter 11 filing. Commercial landlords, some of whom have already suffered vacancies through the bankruptcy filings of national retailers in 2008 and 2009 (e.g., Linens N’ Things, Circuit City and Hollywood Video), likely will receive more notices of bankruptcy filings by their tenants.

When a tenant files Chapter 11, a commercial landlord confronts a number of issues. First and foremost, the landlord is concerned about getting paid its rent. The landlord also faces uncertainty about whether the tenant will stay in the space or close its doors. If the tenant decides to vacate the space, the landlord will want to maximize its recovery on any claim it may have in the tenant’s bankruptcy.

Fortunately for commercial landlords, Congress has built into the Bankruptcy Code a number of protections for them. Knowing a landlord’s basic rights and remedies under the Bankruptcy Code is critical to both the landlord and its counsel when a notice of bankruptcy arrives in the mail.

Click here to view the complete article.

Related Industries