Practical insights from powerhouse attorney, author and speaker Bradley Bailyn.
For some businesses, leasing a building in the right location can be the primary factor in becoming profitable. But for others, a bad lease can pull an otherwise successful business into financial ruin. This is especially true in New York, where skyrocketing real estate prices are driving rent up across the city. These stifling leases have been enough of an issue to shutter successful businesses and landmark restaurantsin recent years.
But what if I told you a bad commercial lease doesn’t have to be the end of your business?
What if I told you that under chapter 11 bankruptcy protections, you can get out of the commercial lease that is choking the life from your business?
The truth is, it is possible through the bankruptcy process to renegotiate your commercial lease or get out from under it entirely. If that sounds like something that might benefit your business, I would love to discuss your options with you. A chat with a New York Chapter 11 lease discharge lawyer may be exactly what you need.
Assumption vs. Rejection
When you file for bankruptcy, you will have one fundamental decision to make regarding any commercial leases: do you assume the lease or reject the lease?
The decision is a fairly simple one. If you assume your lease, you are agreeing to re-commit to the lease as is. That will involve including in your bankruptcy plan both your future rent as well as a back payments to cure your current default.
Rejecting the lease has the opposite effect. If you reject your lease during the bankruptcy, it is effectively cancelled. You will be able to move out of the space and make new arrangements without worrying about paying penalties for breaching the contract or for months of rent accruing while you aren’t even in the space. Even your back rent is added as another unsecured creditor and often settled for pennies on the dollar.
The decision of assumption vs. rejection is yours. If you feel it is critical to stay in the same space, assuming the lease and making it work may work. If your lease feels more like an anchor around the neck of your business, it’s probably time to reject it and look elsewhere.
But when you work with an experienced New York small business attorney like myself, you have more options than just these two options.
Getting the Most out of Bankruptcy
In your case, you may realize that what’s best for your company is some kind of compromise between the extremes of assuming every part of a lease or rejecting it entirely. The good news is that for many landlords, that is also the case.
After all, your landlord has bills to pay. They may prefer to keep a tenant they know and trust as opposed to seeking a new renter. That’s where I come in. In many cases, it is possible to negotiate with your landlord to alter some of the terms of the lease like the monthly rent or the due date in order to make things work for both parties.
If you think a lease discharge might work for your business, contact the Bailyn Law Firm today to discuss your options.