Recent Decision Significantly Impacts Landlord Claims in Bankruptcy

When a commercial landlord’s lease is terminated during a tenant’s bankruptcy, the landlord may file a claim for damages in the proper amount based on a statutory formula.

In the recent Century 21 Stores bankruptcy cases, the bankruptcy court altered the way a landlord’s claim for these damages is calculated. The ruling determined that certain ambiguous statutory language applies to the time period of the remaining lease, rather than the dollar amount of remaining rent, in determining a landlord’s quantum of damages.

Although not binding on other courts, this ruling signals a change of the statutory interpretation that has been utilized in the SDNY and other jurisdictions, largely taking future rent increases out of the claim calculation.

Read more about how the SDNY Bankruptcy Court decision will affect landlord claims in bankruptcy in our Client Alert below.