How I Help: Commercial Leases and Bankruptcy

One of my clients owns and manages a small suburban strip mall. One of its tenants recently filed for bankruptcy when its lease still had 4 years left.

When I originally drafted the strip mall’s standard lease, I made sure that it had all the typical tenant default provisions, but those provisions are unenforceable once bankruptcy is filed, and my client can no longer try to collect unpaid rent or try to evict this tenant without first getting approval from the bankruptcy court.

As a business lawyer, I am both practical and realistic. Even the best contract can go only so far. To protect against an insolvent tenant, the landlord would be best served by getting a third party payment source such as a letter of credit or guaranty.

If you are a commercial property manager, how long does it takes you to approve a new tenant? A standard credit review is just the first step.