Property Owners’ Rights When Tenants File for Bankruptcy by Christopher Sanz, JD, LLM

Posted on September 09, 2021

Many commercial property owners have had to deal with tenants filing for bankruptcy protection during the COVID-19 pandemic. Despite the challenges of these circumstances, property owners must understand their specific rights and remedies for relief under the law and meet all of the timely court deadline requirements.

Landlords should not view tenant bankruptcies as the end of their lease agreement. Rather, when a tenant files a bankruptcy petition, an “automatic stay” is immediately put into place, which, among other things, requires the tenant to continue paying rent and other obligations under the lease agreement. The tenant has 120 days to decide whether to 1) assume the lease, meet the requirement to pay all delinquent and current lease obligations, and provide the landlord with assurances future rental payments; or 2) reject the lease, vacate the property and allow the landlord to file a claim against the bankruptcy estate. Interestingly, landlords’ rights are strongest when tenants remain in a property.

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