Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
Commercial real estate leases are governed by special rules in bankruptcy. If a lease's term has not yet expired, it is known as an "unexpired lease". Although the landlord can reject a lease and no longer perform any of its duties as landlord, the landlord cannot use bankruptcy to evict a tenant that prefers to stay in possession of the premises. In Section 365(h)(1) of the Bankruptcy Code, a tenant may elect to remain in the premises for the remaining term of the lease, plus any renewal or extension of the term that may be provided in the lease if enforceable under applicable state law. If the tenant elects, the tenant must continue to pay the rent required under the lease but can offset against that rent any damages caused by the landlord's nonperformance.
However, you said she is trying to keep the building that means she is trying to "reaffirm" her obligation. If she does reaffirm and keep the building, your lease will remain intact.
If she is unable to retain the building, the bank does have the right to terminate the lease. However, it is highly unlikely they would do so. Unleased commercial property is a waste, and the bank will most likley want you to stay and keep paying.
Bankruptcy can have a significant impact on commercial real estate leases. For this reason, it is important to get prompt legal advice on your particular lease, especially if the bankruptcy proceeding has started, to protect your rights. Further, the tenants should be listed as a creditor on the Landlord's bankruptcy petition. Also, check your lease carefully there may be some language regarding the event of bankruptcy and any remedies.
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