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Navigating a Commercial Tenant's Bankruptcy: Effects of Lease Rejection, Caps on Damage Claims, Landlord Obligations

Examining WeWorks Bankruptcy and Tenants Using the Bankruptcy Process to Exit Leases That are No Longer Profitable

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Tuesday, April 16, 2024

Recorded event now available

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This CLE webinar will discuss the potential growing trend of tenants using the bankruptcy process to exit leases that no longer contribute to their profitability. The panel will review recent bankruptcy cases (WeWork and Rite Aid) and examine key issues for landlords when a tenant files bankruptcy, including the consequences of a tenant's lease rejection, assumption or assignment, the statutory cap on landlord damage claims, priority of a landlord's claims, and continued obligations of the landlord pending assumption or rejection of the lease.


Recently, two significant distressed companies with thousands of commercial leases, Rite Aid and WeWork, each filed for Chapter 11 bankruptcy and have rejected a substantial portion of their lease portfolios. Given the current distressed commercial real estate market, there is a potential trend of tenants using the bankruptcy process to exit leases that do not contribute to their profitability. Counsel for landlords need to understand the key issues and considerations to help their clients navigate their options and obligations with regard to a tenant's bankruptcy and an unexpired lease.

The debtor, in the exercise of its business judgment, is given the power to assume (and then possibly assign) or reject unexpired commercial real estate leases, regardless of whether the governing leases include provisions that otherwise prohibit assignment or which would allow termination as a result of a Chapter 11 filing.

A landlord whose tenant rejects an unexpired lease in bankruptcy is left to assert a rejection damages claim. However, landlord damages claims are limited by a statutory cap, and in the absence of a security deposit, letter of credit, or other collateral securing the tenant's obligations, the landlord's damages claim is considered an unsecured claim, which likely means the claim will get wiped out.

Despite a tenant's bankruptcy filing, a landlord is obligated to continue performing under the lease until the debtor decides whether to assume or reject the lease, and the debtor must make its decision within 120 days of the bankruptcy filing (subject to a potential 90-day extension).

Listen as our authoritative panel discusses the key issues and considerations for landlords when a tenant files for bankruptcy and provides tips on what actions landlords can (and cannot) take during any formal proceeding to protect their interests.



  1. Immediate consequences for landlords if a tenant files for bankruptcy
  2. Review of significant recent bankruptcy filings involving commercial leases: WeWork and Rite Aid
  3. Tenant's power to reject, assume, or assign an unexpired commercial lease
  4. Obligations of the landlord pending lease assumption or rejection
  5. Stub rent
  6. Letters of credit and security deposits
  7. Priority of a landlord's damages claim
  8. Landlord's statutory damages cap: computation approaches
    1. Rent approach vs. time approach
    2. Types of claims subject to the statutory damages caps
  9. Key takeaways


The panel will address these and other key issues:

  • What are the immediate effects on a landlord when a tenant files for bankruptcy?
  • What are the obligations of the landlord pending a tenant’s assumption or rejection of a lease?
  • What is the statutory cap on landlord damage claims for a rejected lease and how are these damages calculated?
  • Can landlords draw upon letters of credit or retain a tenant's security deposit to offset the landlord's damages?


Clark, Katherine
Katharine Clark

Thompson Coburn

Ms. Clark represents clients before bankruptcy courts, federal and state trial courts, arbitration panels and appellate...  |  Read More

Ma, Steve
Steve Ma

Special Bankruptcy Counsel
Proskauer Rose

Mr. Ma’s practice focuses on the representation of debtors, creditors, statutory and ad hoc committees, and...  |  Read More

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