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What if my landlord faces bankruptcy?

As a business owner operating with a lease in a commercial property, there are many things that you must contend with that are beyond your control. These may be trends in shopping, the relative popularity of your location and competitors in your area, among others. Of course, when it comes to relationships that may have the greatest affect on your business's success or failure, one looms large above the rest — your relationship to your landlord. Even when the functional relationship with your landlord is tenable, troubles that the landlord faces can have a way of rolling downhill. If your landlord is facing bankruptcy, you must stay vigilant to ensure that your business is not caught in the conflict.

A landlord's impending bankruptcy is essentially a good news/bad news proposition for the tenant. First, let's examine the good news. Under bankruptcy law, there may be an opportunity for a tenant to address any lingering issues with a lease. When a landlord elects to assume your lease due to a bankruptcy, any outstanding breaches of a contract must be dealt with. If your landlord is going to continue being your landlord, he or she is legally obligated to address any breaches to your lease before a court will allow it. This can be a good opportunity to have any problems in your lease addressed, provided you remain vigilant and engage in the process with the courts.

More dangerous, however, is the possibility that a landlord may sell the property. While a new landlord is not automatically the end of a lease, it does threaten a smooth transition. If a new landlord takes over the property, your lease may, in some cases, become invalid. For tenants facing this prospect, it is crucial to object to a sale before the court. If you do not file an objection, the court may interpret a lack of action as implied consent to the termination of your lease.

This brief overview of the complex issue of commercial landlord bankruptcy does little to truly get to the bottom of the matter. If you are facing this scenario, an experienced attorney can help you take all the necessary steps to protect your rights.

Source: findlaw, "Landlord Bankruptcy: What Happens to Commercial Leases?," Caleb Groos, accessed Jan. 20, 2017

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