NEW YORK–(BUSINESS WIRE)–Today, Sen. Thom Tillis (R-NC) introduced legislation [S. 4479] that would make meaningful temporary changes to bankruptcy laws, related to commercial real estate, allowing for the facilitation of commercial tenant rent deferrals and providing additional flexibility for small business tenants that file Chapter 11 bankruptcy.
Under current law, rent deferral agreements waiving some or all of the current rent to be repaid in the future can be undone if the commercial tenant later files for bankruptcy. This risk discourages such agreements from happening. Specifically, Bankruptcy Code Section 547 deems the installment payments as “preferences” and commercial landlords can be forced by the court to forfeit such payments. The Tillis bill would prevent this from happening, providing much needed certainty to business landlords, as well as tenants.
Additionally, the Tillis bill would allow additional time (an extra 90 days) for commercial tenants in bankruptcy to decide whether to continue with current leases. And for certain small businesses, the bill would give tenants the ability to spread the payment of some post-bankruptcy rent over a longer period. The extra time would provide liquidity to small businesses, preserving jobs and businesses.
“ICSC commends the leadership of Sen. Tillis in offering balanced and timely legislation that makes temporary changes to the U.S. Bankruptcy Code in light of the COVID-19 impact on both commercial landlords and tenants. The legislation will help businesses struggling with bankruptcy to weather the storm,” ICSC President and CEO, Tom McGee said. “The bill provides significant relief to small business debtors and landlords. It also reinforces what many landlords have done since spring, as well as encourage deferred deals going forward. We applaud the Senator’s much-needed assistance as businesses continue to face challenging headwinds.”
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