When a commercial tenant files for bankruptcy, landlords encounter a complex set of legal and financial challenges. The bankruptcy process can affect everything from the payment of rent to the treatment of security deposits and letters of credit. Understanding these implications is essential for landlords seeking to protect their interests and maintain stability in their property portfolios.

Key issues for landlords include the payment of post-petition rent, the handling of “stub rent” that spans the bankruptcy filing date, and the process for curing defaults if a lease is assumed or assigned. Courts differ on how certain rent obligations are classified, which can impact a landlord’s ability to recover amounts owed. Additionally, lease rejection damages are subject to statutory caps, and the treatment of security deposits and letters of credit may require careful navigation of bankruptcy rules and state law.

By staying informed and taking strategic action, landlords can better manage the risks associated with tenant bankruptcy. Timely review of notices, understanding the nuances of administrative expenses, and engaging experienced bankruptcy counsel are critical steps. With the right approach, landlords can safeguard their interests and adapt to the evolving legal landscape surrounding commercial tenant bankruptcies. Read full article here.