On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate on Thursday, August 2, 2018.

For most commercial landlords, a tenant’s bankruptcy hardly comes as a huge surprise. More than likely, the rent payments have been getting later and later — or they’ve gone missing a few times. It isn’t uncommon for tenants in financial trouble to stop communicating — usually because they’re trying to figure a way out of the situation or are unsure of their next step.

So, what happens when you finally get the notice that a commercial tenant has filed for bankruptcy protection?

When the automatic stay is in place

An automatic stay goes into effect as soon as the bankruptcy is filed. You can’t collect back rent, enforce a judgment or put a lien on their business equipment during that time. You also cannot immediately apply the security deposit to the unpaid rent without the bankruptcy trustee’s permission.

When you have already terminated the lease

You can be subject to sanctions and fines if you violate the terms of the automatic stay, but that doesn’t necessarily mean you are without rights. If you terminated the lease due to nonpayment prior to the bankruptcy, you can ask the trustee in the case to lift the stay so you can proceed with an eviction.

When the tenant has skipped out

If the property was vacated before the lease was terminated, you can usually gain access to the property quickly. Be careful, however, about how you treat anything the tenant left behind. Material goods, equipment and the like may all be subject to liens and part of the bankruptcy estate. It’s always necessary to get the trustee’s permission to dispose of anything — even something that has no obvious value.

When the tenant wants to continue

Your tenant can usually continue the remainder of the lease only if he or she can satisfy the unpaid rent and provide you with a reasonable assurance that you’ll continue to be paid. You may be able to require an additional security deposit or a guarantee of credit from the tenant’s backers as part of that reasonable assurance.

Because bankruptcies are so complex, it’s wisest to seek legal advice regarding a commercial tenant who goes bankrupt. There are often remedies available to help your situation — but it takes some experience to know when and how to press your case.

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