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Bankruptcy Landlord Tenant Law Litigation Regulation

COVID Shutdown Orders v. Statutory Rent Obligations

Even though payment of post-petition rent under a nonresidential lease (prior to rejection) has historically been an absolute requirement, bankruptcy courts, as courts of equity, have the ability during these extraordinary times to take a more flexible approach.

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Beginning in late March with In re Modell’s Sporting Goods, Inc., No. 20-14179 (Bankr. D.N.J.), some bankruptcy courts in retail Chapter 11 cases have been allowing debtors to suspend post-petition rent payments to their landlords, in contravention of the long-accepted practice, based on Bankruptcy Code Section 365(d)(3), that such payments must continue to be made as they come due in the ordinary course of business.

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