Coronavirus Has Changed Retail Bankruptcy and Left Landlords in the Lurch
April 22, 2020
Once a retailer files for bankruptcy, it still has to pay “administrative expenses,” which include rent going forward, even though it is not obligated to pay rent for the time prior to the filing.
And while a vendor can choose to not ship goods if a debtor doesn’t pay up, it is harder for landlords to kick out a tenant, especially if there is no one else available to fill a space, said bankruptcy attorney Pat Collins, a partner at Farrell Fritz.
“These ‘mothball’ orders are allowing companies to even limit their new expenses for a period of time,” he said. “But there are still expenses that a company needs to make even at this low level of activity.”
The requests for rent relief from bankrupt retailers — while perhaps understandable given the unprecedented scale of the pandemic — could have a ripple effect on landlords, many of which are already negotiating with tenants who are struggling to stay in their spaces without having filed for bankruptcy.
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