Bankruptcy News: COVID-19 Bankruptcy Relief 2021
Congress passed new, temporary bankruptcy relief measures late last year that impact certain commercial landlords and tenants. Among other things, the new legislation, which was signed into law on Dec. 27, 2020:
- extends commercial rent forbearance for certain small business tenants experiencing material financial hardship related to the COVID-19 pandemic,
- lengthens the time period for commercial tenants to assume or reject a commercial lease, and
- establishes protections for certain commercial deferred rental payment agreements.
Extended Commercial Rent Forbearance
Until Dec. 27, 2022, the new laws permit a commercial tenant experiencing "material financial hardship" due directly or indirectly to COVID-19 to forbear its obligations to pay rent until the earlier of:
- 60 days after the date of the order for relief under the Bankruptcy Code, a period that may be extended for an additional period of 60 days if the bankruptcy court determines that the commercial tenant is continuing to experience such material financial hardship, or
- the date that the lease is assumed or rejected. Of note, "Material Financial Hardship" is not defined.
This change will allow a tenant who successfully demonstrates to a bankruptcy court that it has experienced a "material financial hardship" due to COVID-19 to forbear its obligation to pay rent under its lease for a longer time than was initially permitted by the bankruptcy code.
Extended Period for Assumption or Rejection of Unexpired Commercial Lease
Until Dec. 27, 2022, the new law extends the initial time period for a commercial tenant to assume or reject a lease from 120 days to 210 days. The prior provisions that provide that the bankruptcy court may order further extensions of this time period have not been changed, with the effect that there is an increase of 90 days within which such a lease may be assumed or rejected.
The extension of time to assume or reject a lease will have the effect of giving commercial landlords and tenants more time to discuss whether the lease should be assumed or rejected. Of note, this extension applies to all debtors, not simply those that are experiencing financial hardship due to COVID-19.
For assistance with your bankruptcy, call the Bankruptcy Attorneys at Fazzio Law Offices, we're in your corner!
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