Understanding Tenant Rights During Landlord Bankruptcy
When a landlord files for Chapter 11 bankruptcy, commercial tenants may be concerned about the future of their lease and their rights in the bankruptcy process. The Bankruptcy Code gives debtor landlords significant powers, such as the ability to reject, assume, or assign leases. However, tenants are also afforded special protections to help maintain stability and predictability. Knowing these rights is essential for tenants who want to protect their business operations and the value of their lease.

Key Protections Under the Bankruptcy Code
Tenants should pay close attention to the timing of a landlord’s decision to assume or reject a lease. Under Section 365(a), a debtor landlord may choose to assume, assign, or reject leases of nonresidential real property, but deadlines and procedures vary depending on the type of bankruptcy case. Section 365(h) provides tenants with important remedies if a lease is rejected, including the right to remain in possession for the remainder of the lease term. If a tenant stays, they retain rights to use, assign, and sublet the property, but may need to cover costs for services the landlord previously provided.

Practical Steps for Tenants
Tenants should actively monitor the bankruptcy case and be prepared to take action if their rights are at risk. If a landlord proposes to assign the lease, tenants should ensure cure and adequate assurance obligations are met. Because bankruptcy proceedings can be complex, tenants are encouraged to work with qualified bankruptcy counsel to track case developments, object to adverse motions, and negotiate protections that preserve their statutory rights. Staying engaged throughout the process helps tenants safeguard their interests and minimize business disruption. Read full article here.