The Real Math: Landlord Claim Cap Under §502(b)(6)
Space: 5,000 SF retail/office
Base rent: $40/sf/yr = $200,000/yr = $16,667/mo
Remaining lease term at time of rejection: 8 years
Total future rent obligation (undiscounted): $1,600,000
Pre-petition rent arrears (3 months): $50,000
(but $10,000 was pre-petition taxes/insurance;
pure pre-petition rent arrear: $40,000)
STEP 1: CALCULATE §502(b)(6) CAP
The cap = greater of:
(A) 1 year's rent: $200,000
(B) 15% of remaining rent, capped at 3 years:
15% × $1,600,000 = $240,000
3-year cap: $600,000
§502(b)(6)(B) result = $240,000
GREATER OF (A) and (B): $240,000
STEP 2: ADD PRE-PETITION RENT ARREARS
Pre-petition base rent arrears: $40,000
(Pre-petition arrears NOT subject to §502(b)(6) cap;
allowed as separate general unsecured claim)
STEP 3: TOTAL ALLOWED LANDLORD CLAIM
Future rent cap (§502(b)(6)): $240,000
Pre-petition arrears: $40,000
Total allowed claim: $280,000
STEP 4: ACTUAL RECOVERY IN BANKRUPTCY
Assume general unsecured creditor distribution: 8 cents/$1
(typical in Chapter 11 with significant secured debt)
Actual cash recovery: $280,000 × 8% = $22,400
STEP 5: FULL ECONOMIC LOSS ANALYSIS
Total future rent landlord expected: $1,600,000
Total pre-petition arrears: $40,000
Total economic exposure: $1,640,000
Total allowed claim: $280,000
Claim as % of economic exposure: 17.1%
Actual cash recovery at 8 cents: $22,400
Recovery as % of economic exposure: 1.4%
Economic loss not recoverable in bankruptcy: $1,617,600
(98.6% of total economic exposure)
COMPARISON: POST-PETITION ADMINISTRATIVE RENT
Tenant must pay current rent post-petition as admin expense
If rejection occurs 90 days after petition filing:
Admin rent paid: $16,667 × 3 = $50,001
Admin expenses paid first from estate assets
(before general unsecured creditors get anything)
MITIGATION: RE-LEASING THE SPACE
Landlord regains possession upon rejection
Re-leasing timeline: 6–18 months (market dependent)
New tenant rent: $36/sf (2026 market, some concession)
Annual rent from new tenant: $180,000
vs. $200,000 from rejected lease: $20,000/yr shortfall
Landlord's real mitigation duty: must make reasonable
efforts to re-let; failure reduces allowed claim further
──────────────────────────────────────────────────────────
LANDLORD PROTECTION STRATEGIES:
1. Security deposit (typically 1–3 months rent): $16,667–$50,001
Landlord may draw upon security deposit BEFORE
bankruptcy filing if defaults exist; amount drawn
reduces landlord's allowed claim by amount received
2. Letter of credit: NOT subject to bankruptcy stay;
landlord can draw on LC immediately upon tenant default
(if LC issuer not affiliated with debtor)
3. Personal guaranty: survives rejection; allows pursuit of
guarantor outside bankruptcy (no §502(b)(6) cap applies
to guaranty claims against non-debtors)
Lease Assumption, Rejection, and Assignment in Bankruptcy: Comparison
| Factor | Assumption | Rejection | Assignment in Bankruptcy |
|---|---|---|---|
| What it means | Debtor-tenant accepts the lease as an ongoing obligation; the lease continues in full force post-assumption | Debtor-tenant treats the lease as a pre-petition breach; surrenders the space; eliminates future rent from estate obligations | Debtor-tenant first assumes the lease and then transfers it to a third-party assignee; generates cash or value for the estate |
| Legal effect on the lease | Lease continues; all terms binding; debtor or reorganized debtor is tenant; landlord receives cure of all pre-petition defaults | Deemed breach as of day before petition filing; landlord regains possession; landlord has a capped damages claim against estate | Assignee becomes tenant; debtor released from future obligations (but may have secondary liability depending on state law); landlord receives cure payment from estate |
| Requirements | Cure of all monetary defaults; cure or adequate assurance of cure of non-monetary defaults; adequate assurance of future performance; court approval | Bankruptcy court order (or deemed rejection after 120 days if debtor fails to act); no conditions — debtor can reject any lease, even if current on rent | All assumption requirements plus: adequate assurance that assignee will comply with all lease terms including use, exclusivity, radius restrictions (especially in shopping centers); court approval |
| Landlord's financial outcome | Best outcome: receives cure payment for pre-petition defaults; ongoing rent at full contractual rate; lease terms fully enforced against reorganized debtor | Worst outcome: allowed claim capped at greater of 1 year or 15%/3-year formula, plus pre-petition arrears; recovery depends on estate distribution rate (often cents on dollar) | Mixed: receives cure payment; loses original tenant (may prefer); gains new tenant whose financial strength and use may be better or worse; cannot unreasonably refuse assignment in non-shopping center leases |
| Landlord's ability to object | Can object to assumption on grounds of inadequate cure or inadequate assurance of future performance; cannot refuse assumption if adequate assurance is provided | Cannot prevent rejection; debtor's business judgment controls the decision to reject; landlord's only remedy is the capped damages claim | In non-retail: can object only to inadequate assurance; cannot refuse based on objectionable assignee identity alone. In shopping centers: can object based on tenant mix/balance disruption, use restriction violations, and inadequate assurance |
| Timeline | Must occur within 120 days of petition (extendable for cause up to 210 days; beyond 210 days requires landlord consent) | Can occur at any time; if debtor fails to assume within 120-day period, lease is deemed rejected automatically | Must first assume (within 120-day window); assignment can then occur at any time with court approval, subject to adequate assurance and shopping center compliance |
| Effect on guarantee | Personal guaranty continues in full; guarantor remains liable for post-assumption defaults as well as pre-petition guaranteed amounts | Guaranty survives rejection; guarantor is liable for all pre-petition arrears and for damages up to the full lease obligation (no §502(b)(6) cap applies to guarantors who are non-debtors) | Original guarantor may be released upon assignment; depends on lease language and guaranty terms; negotiate explicitly at time of original lease signing |
| Post-petition rent obligation | Debtor must pay full current rent as administrative expense from petition date through assumption; then continues as contractual obligation | Debtor must pay full current rent as administrative expense from petition date through rejection; no future rent after rejection | Debtor must pay full current rent from petition date through assumption-and-assignment; assignee pays rent from assignment forward |
Section 365: The Mechanics of Lease Assumption and Rejection
The Automatic Stay and Its Impact on Landlords
The moment a commercial tenant files a bankruptcy petition, the automatic stay (Bankruptcy Code §362) immediately halts all landlord enforcement actions. The landlord cannot: terminate the lease (even if default occurred before the filing); commence or continue eviction proceedings; draw on the security deposit without court approval; send default notices; or take any action to collect pre-petition rent outside of the bankruptcy proceeding. The automatic stay is one of the most powerful protections in bankruptcy law — and one of the most operationally disruptive events for commercial landlords. A landlord who is one day from obtaining a state court eviction judgment suddenly finds all proceedings frozen. A landlord who has been negotiating a lease termination with a financially distressed tenant may find those negotiations overtaken by a bankruptcy filing that resets all leverage dynamics.
Landlords are not without tools during the stay: Motion for relief from stay — a landlord can petition the bankruptcy court to lift the stay if the debtor has no equity in the lease and the lease is not necessary for reorganization; or if the debtor is failing to pay post-petition rent (which is an administrative expense the debtor must pay currently). Courts grant stay relief more readily when the debtor has no realistic reorganization plan or when the space is clearly not part of the reorganization strategy. Adequate protection — the landlord may seek "adequate protection" orders requiring the debtor to maintain insurance, make post-petition rent payments promptly, and preserve the condition of the leased premises during the bankruptcy proceeding.
The 120-Day Assumption Deadline
Under §365(d)(4), a debtor in a commercial real estate lease (non-residential real property) has 120 days from the petition filing date to either assume or reject the lease. This deadline is automatic and absolute absent a court extension: if the debtor does nothing, the lease is deemed rejected on the 120th day. Extensions are available: First extension — the court may extend the 120-day period for additional time upon a showing of cause, up to an additional 90 days (making 210 days total). Beyond 210 days — extensions beyond 210 days require the written consent of the landlord. The landlord has significant leverage beyond 210 days: it can condition consent on economic concessions (modified rent, lease term modifications, improved security). The 120-day deadline creates strategic tension for debtors: assuming a lease too early locks in an obligation that may prove burdensome if the reorganization fails; waiting too long may result in deemed rejection of a valuable lease that the debtor wanted to keep. Strategic debtors often assume valuable (below-market) leases quickly and reject burdensome (above-market) leases at the last possible moment.
Rejection is a Breach, Not a Termination
The distinction between breach and termination — while it may sound technical — has substantial practical consequences for landlords. Because rejection is deemed a breach under §365(g), the landlord retains a damages claim against the estate. If rejection were a termination, the landlord might have no damages claim at all — the lease would simply end with no contractual basis for prospective damages. The breach characterization preserves the landlord's right to claim future rent damages (subject to the §502(b)(6) cap). The timing of the deemed breach — treated as occurring the day before the bankruptcy petition — means the landlord's future rent claim is a pre-petition unsecured claim (not an administrative claim), subject to the cap and to distribution as a general unsecured creditor. This is a critical distinction: pre-petition claims get paid last, and often at cents on the dollar; post-petition administrative claims get paid first, from available estate assets. The landlord's post-petition administrative claim (for rent from petition through rejection date) is fully collectible from the estate; the landlord's future rent damages claim (the §502(b)(6) capped amount) is a pre-petition unsecured claim subject to diluted distribution.
The §502(b)(6) Landlord Claim Cap: Full Analysis
How the Cap Is Calculated
The cap under §502(b)(6) limits the landlord's allowed claim for "damages resulting from the termination of a lease of real property" to the greater of: (A) one year's rent; or (B) 15% of the remaining rent for the term of the lease (counting from the earlier of the petition date or the date the landlord regained possession), not to exceed three years' rent. The one-year and 15%/3-year formulas operate as a "greater of" test, not an "either/or" choice. For short remaining terms (6 years or less), the one-year figure is typically greater than 15% of remaining rent only when annual rent is higher and remaining term is shorter. For longer remaining terms (8+ years), the 15% formula often controls, subject to the 3-year ceiling. The cap applies to "rent," which courts have generally interpreted to include base rent and additional rent obligations (NNN expenses, CAM charges, percentage rent) but not necessarily all monetary obligations under the lease. Some courts have included all monetary lease obligations in the cap calculation; others have applied the cap only to base rent. This circuit-split creates uncertainty about whether CAM charges and other additional rent escalate or reduce the landlord's allowed claim in a given jurisdiction.
What the Cap Does Not Apply To
The §502(b)(6) cap applies to the landlord's future rent damages claim — what the landlord would have received in future rent but for the rejection. It does not apply to: Pre-petition rent arrears — unpaid rent that accrued before the bankruptcy petition is a separate general unsecured claim, allowable in full (subject to the general unsecured distribution rate). Security deposits — a security deposit held by the landlord outside the bankruptcy estate is the landlord's property; the landlord may apply it against pre-petition and post-rejection losses without court approval (subject to any limitation in the lease or state law). Letters of credit — a standby letter of credit is not property of the bankruptcy estate; the landlord may draw on the LC immediately upon a draw event (typically tenant default or lease rejection), regardless of the automatic stay. Guaranty claims — the landlord's claim against a non-debtor guarantor (individual principal, parent company) is not subject to the §502(b)(6) cap. The guarantor is liable for the full guaranty obligation, which may be the full remaining rent obligation or a defined multiple of rent, depending on the guaranty's terms. This is why landlords aggressively pursue personal guarantees and corporate guarantees from creditworthy entities — they survive bankruptcy and are not subject to the cap.
Shopping Center Special Rules
Why Shopping Centers Are Different
Congress recognized that shopping centers operate as integrated retail ecosystems where tenant mix, co-tenancy relationships, and exclusivity arrangements are fundamental to the economic proposition of the center. An anchor tenant's departure can trigger co-tenancy clauses allowing smaller tenants to reduce rent or exit; an inappropriate assignee can undermine the center's character and competitive positioning. To protect shopping center landlords from the disruptive effects of bankruptcy lease assignments that would be permitted under the general §365 rules, Congress enacted §365(b)(3) with special requirements for shopping center lease assumption and assignment.
The §365(b)(3) Requirements for Shopping Centers
In a shopping center, adequate assurance of future performance — required for lease assumption and assignment — must specifically include: (1) Source of rent assurance — assurance that the source of rent (the assignee's business revenues) is substantially the same as the debtor's source. This prevents assignment from a merchandise-based retailer to a service business with fundamentally different traffic and revenue dynamics. (2) Percentage rent continuity — if the original lease included percentage rent, the assignee must be likely to generate percentage rent comparable to what the debtor generated; assignments that would eliminate percentage rent income for the landlord may be objected to on this basis. (3) Tenant mix and balance — the assignment may not disrupt the tenant mix or balance of the shopping center. This is the broadest and most litigated provision: courts have held that an assignment disrupts tenant mix when the proposed assignee would directly compete with an existing co-tenant, sell merchandise inconsistent with the center's positioning, or change the character of the tenant space in ways that affect the center's appeal and complementary tenant relationships. (4) Use and exclusivity compliance — the assignee must comply with all lease use restrictions, prohibited use provisions, and exclusivity provisions. If the original lease prohibited selling electronics and the proposed assignee is an electronics retailer, the assignment is not compliant regardless of the assignee's financial strength. (5) Radius restrictions — compliance with any restrictions on operating competing stores within a defined radius of the shopping center.
Landlord Bankruptcy: Protecting Tenant Rights
Section 365(h) Tenant Protection
When the landlord files for bankruptcy — and the landlord's bankruptcy trustee rejects the commercial lease — the tenant's position is governed by §365(h). Unlike the general rule (where lease rejection ends the tenant's possessory rights), §365(h) gives commercial tenants a powerful election: the tenant may remain in possession of the premises for the balance of the lease term, continuing to pay rent, even after the landlord's trustee has rejected the lease. This right to remain in possession is one of the strongest protections commercial tenants have in bankruptcy. A tenant in a below-market lease — which is a valuable asset from the tenant's perspective — need not surrender that asset just because the landlord files bankruptcy and the trustee would prefer to re-let at market rates. The §365(h) election preserves the economic value of a favorable lease.
If the tenant elects to remain in possession under §365(h), the tenant may offset against its rent obligation any actual damages arising from the landlord's breach (the rejection) — for example, if the landlord stops providing contractually required services (HVAC, janitorial, security) after rejection, the tenant may reduce its rent by the cost of self-providing those services. The offset must be documented and is subject to dispute if the landlord's trustee challenges the tenant's calculations. If the tenant elects not to remain (treating the rejection as termination), the tenant may file a claim against the landlord's estate for damages from the premature termination — including the value of the lost favorable lease, relocation costs, and business disruption — but this claim is an unsecured pre-petition claim that will be paid at a fraction of face value in a typical bankruptcy distribution.
The §363 Sale Risk for Tenants in Landlord Bankruptcy
A more significant risk for tenants in a landlord bankruptcy is the §363 asset sale — where the bankruptcy trustee sells the building (with or without the leases) to a third party through a court-approved sale process. Under §363(f), a court may approve the sale of property "free and clear of any interest in such property" if certain conditions are met. The question of whether a tenant's leasehold interest is an "interest" that can be extinguished in a §363 sale has generated significant litigation. The consensus is that tenants with recorded leases or recorded memoranda of lease are protected — their interests cannot be eliminated in a §363 sale — while unrecorded tenant interests may be more vulnerable. The practical protection: record a memorandum of lease in the real property records immediately after signing. The cost is minimal ($25–$100 in recording fees); the protection is substantial.
6 Red Flags in Commercial Lease Bankruptcy Provisions
🛑 Red Flag 1: Security Deposit Held in a Commingled Account (Tenant's Perspective)
As a landlord, a security deposit commingled with operating funds — rather than held in a segregated account — may be treated as property of the landlord's bankruptcy estate if the landlord files bankruptcy. The tenant's interest in the security deposit (the right to have it returned at lease end) becomes an unsecured claim against the landlord's estate, subject to distribution at cents on the dollar. Negotiate for security deposits to be held in a segregated interest-bearing account, with the tenant as a beneficiary, to protect the deposit from landlord bankruptcy exposure. Some states require segregated security deposit accounts by statute; others allow commingling.
🛑 Red Flag 2: Personal Guaranty That Does Not Survive the Guarantor's Bankruptcy
A personal guaranty from an individual principal is one of a landlord's most important protections against tenant bankruptcy — because the guaranty claim is not subject to the §502(b)(6) cap. But if the guarantor also files for bankruptcy (not unusual when a business failure accompanies a personal financial failure), the guaranty claim against the guarantor becomes a pre-petition unsecured claim in the guarantor's bankruptcy, subject to discharge in Chapter 7 or a plan treatment in Chapter 13. Landlords should seek guarantees from multiple parties where possible; ensure guaranty agreements are carefully drafted to survive principal bankruptcy to the maximum extent permitted; and consider the financial profile of the proposed guarantor — a guaranty from someone with no assets is economically worthless.
🛑 Red Flag 3: Letter of Credit From a Bank Affiliated With the Tenant
A standby letter of credit is normally a landlord's best bankruptcy protection — it can be drawn immediately upon default, regardless of the automatic stay, because the LC is the bank's independent obligation, not the tenant's. However, if the LC-issuing bank is affiliated with or controlled by the tenant, or if the tenant collapses the bank's financial condition along with its own (unlikely but possible in complex corporate structures), the LC may be delayed or compromised. Use letters of credit from unaffiliated, creditworthy financial institutions. Confirm the LC terms include a draw right upon tenant bankruptcy filing itself (not just upon lease termination or default) to ensure the landlord can act immediately upon the automatic stay's attachment.
🛑 Red Flag 4: Lease That Is Silent on Post-Rejection Surrender Obligations
When a debtor rejects a commercial lease, the lease ends and the landlord is entitled to regain possession. But what condition must the space be surrendered in? If the lease's surrender provisions are silent or ambiguous, disputes about clean-up obligations, remaining personal property, hazardous materials, and restoration requirements can delay the landlord's ability to re-let the space and increase the landlord's carrying costs during the vacancy. A well-drafted surrender provision that specifies exact conditions (broom clean, all personal property removed, no hazardous materials, systems in good working order) gives the landlord a clearer claim against the estate — as a post-petition administrative expense — if the debtor fails to meet surrender standards.
🛑 Red Flag 5: Shopping Center Assignment Provisions That Don't Reference §365(b)(3)
A shopping center lease that has robust assignment restrictions in the commercial lease itself — but doesn't reference or specifically invoke the §365(b)(3) shopping center protections — may leave the landlord in the position of arguing that §365(b)(3)'s special requirements apply (which they do by statute for shopping centers regardless of lease language), while the debtor argues the lease-based assignment restrictions are pre-empted by bankruptcy law. Lease assignment provisions in shopping center leases should explicitly reference the §365(b)(3) requirements and confirm that the tenant's obligations in bankruptcy assignments include compliance with all §365(b)(3) conditions. This creates a contractual baseline that parallels the statutory requirements and reduces ambiguity in bankruptcy court proceedings.
🛑 Red Flag 6: Tenant's Lease Without a Memorandum of Lease Recorded
An unrecorded tenant lease is vulnerable in a landlord bankruptcy §363 sale — a third-party purchaser may take the property free and clear of the tenant's unrecorded interest in some jurisdictions. Recording a memorandum of lease (a short-form document noting the existence, parties, property description, and term of the lease) in the county real property records puts all third parties on constructive notice of the tenant's leasehold interest, protecting it from a §363 sale. The cost is trivial; the protection in a landlord bankruptcy or property sale scenario is significant. Every commercial tenant executing a lease of one year or more should record a memorandum of lease immediately after signing.
✅ 12-Item Commercial Lease Bankruptcy Preparedness Checklist
- Understand the §502(b)(6) cap before calculating tenant credit risk: Before signing a multi-year lease with a financially stressed tenant, calculate your maximum allowed claim under the cap. For a 5,000sf tenant at $40/sf with 8 years remaining, the cap calculation yields a maximum claim of $240,000 — a fraction of your $1.6M exposure. Underwrite the lease accordingly: require security deposits, letters of credit, and guarantees sized relative to your real bankruptcy exposure, not your contractual exposure.
- Require a letter of credit rather than a cash security deposit for higher-risk tenants: Letters of credit from unaffiliated banks are not property of the tenant's bankruptcy estate and can be drawn upon immediately upon a draw event (including tenant bankruptcy filing) without stay implications. A cash security deposit held in the landlord's operating account may be subject to a preference claim or stay complications; an LC held by an independent bank is the cleaner protection instrument.
- Size security deposits and LCs appropriately for the §502(b)(6) exposure window: A one-month security deposit covers trivially little of your bankruptcy exposure. A landlord with a 10-year lease at $50,000/month has $6M in exposure but a cap of approximately $1.2M. A 3-month deposit covers 2.5% of that cap. Structure security to cover at minimum 3–6 months of combined rent and NNN expenses — and escalate deposit requirements if the tenant's credit deteriorates during the lease term.
- Record a memorandum of lease immediately after signing: Both landlords and tenants benefit from recorded memoranda: the landlord establishes a clear record of the lease for property buyers and lenders; the tenant protects its leasehold interest in a landlord bankruptcy §363 sale. The recording cost is minimal; the protection in a distressed scenario is substantial. Make it a standard lease close process item, not an afterthought.
- Negotiate personal guarantees from individuals with demonstrated net worth: A guaranty from a principal with $5M in personal assets provides real protection; a guaranty from a principal who has personally borrowed to fund the business provides marginal additional protection. Request financial statements from proposed guarantors and assess their actual net worth relative to the guaranty obligation. Review and update guarantor financial disclosures annually for long-term leases.
- Monitor the 120-day assumption deadline in any tenant bankruptcy: If a tenant files bankruptcy, track the 120-day assumption deadline from the petition date. If the debtor is not actively assuming valuable leases early in the case, contact bankruptcy counsel to understand whether the debtor intends to reject. If rejection is likely, begin re-leasing efforts before the formal rejection — finding a replacement tenant before the rejection allows faster re-letting and reduces vacancy-period losses.
- As a landlord in a shopping center, assert §365(b)(3) rights in every assignment: In any bankruptcy assignment motion involving a shopping center lease, file an objection asserting all §365(b)(3) requirements: source of rent, tenant mix and balance, use restriction compliance, exclusivity provision compliance, and radius restriction compliance. Courts generally give shopping center landlords broad latitude to enforce §365(b)(3)'s requirements; an uncontested assignment motion may result in an order that doesn't adequately protect your center's tenant mix rights.
- As a tenant in a favorable lease, know your §365(h) election rights: If your landlord files bankruptcy, you have the right to remain in possession under §365(h) even if the landlord's trustee rejects the lease. Calculate the economic value of your below-market lease (current rent vs. market rent × remaining term) before electing. A 5-year remaining term at $10/sf below market on 3,000sf = $150,000 in economic value that you can preserve by electing to remain in possession — do not surrender this right without understanding its value.
- Ensure surrender provisions specify condition, timing, and party responsibility: A lease with clear surrender obligations (broom clean, all personal property removed, systems functional, no hazardous materials, all alterations restored unless landlord has approved their retention) gives the landlord a specific, enforceable standard for post-rejection possession recovery. Vague surrender provisions create disputes that delay re-letting and increase vacancy costs. Draft surrender provisions with the specificity of a construction work letter.
- Include a bankruptcy-specific default provision that preserves the landlord's LC draw right: Draft the LC draw conditions to include tenant bankruptcy filing as an independent draw event — separate from lease termination or monetary default. Some LC forms require a certificate that a "default" has occurred; if the LC is drawn post-petition without a formal termination (which the stay may prevent), the bank may question the draw. Ensure the LC and lease definitions are aligned so that the LC can be drawn upon petition filing without requiring a state-law termination that the stay prevents.
- Negotiate co-tenancy clauses carefully to protect your economic model against anchor tenant rejections: For retail tenants in shopping centers, co-tenancy clauses allow rent reduction or lease termination if anchor tenants close. These clauses protect tenants against the economic consequences of anchor tenant bankruptcy and rejection — but they should specify clear triggers (defined anchor tenant, defined occupancy threshold), defined remedies (percentage rent reduction, termination right after a holdover period), and a cure mechanism if the landlord replaces the anchor within a defined period. Vague co-tenancy clauses create disputes; specific clauses protect tenants and provide landlords with clear cure pathways.
- Consult bankruptcy counsel immediately upon a tenant's or landlord's financial distress signals: Commercial lease bankruptcy is a specialized area of law. The window between a tenant's first missed payment and a bankruptcy filing can be days or weeks. Actions taken in the 90 days before a bankruptcy filing may be subject to preference claims (which can require the landlord to return payments received). A landlord who aggressively pursues remedies in the pre-bankruptcy window — or who mishandles security deposit draws or eviction proceedings — may create exposure that a bankruptcy attorney could have avoided. Engage qualified bankruptcy counsel at the first sign of serious tenant financial distress.
Frequently Asked Questions
Understand Your Lease's Bankruptcy Exposure Before You Sign
LeaseAI analyzes commercial leases for bankruptcy-related provisions — security deposit adequacy, LC draw conditions, surrender obligations, assignment restrictions, and co-tenancy clause triggers — so both landlords and tenants understand their real exposure before the lease is executed.
Try LeaseAI Free →