Tillis Introduces Bill to Provide Landlord-Tenant Bankruptcy Relief in Response to the Coronavirus Pandemic

Press Release

Today, Senator Thom Tillis (R-NC) introduced legislation to provide bankruptcy relief for landlords and tenants, by making changes to the existing bankruptcy law, in response to the coronavirus pandemic.

"With many companies, small businesses, and landlords facing significant uncertainty, we must do everything we can to support their continued survival," said Senator Tillis. "The pandemic has made it difficult for businesses to meet their necessary obligations, including paying rent on time, which in turn creates difficult financial scenarios for both tenants and landlords. Under the existing law, both landlords and tenants have little flexibility when addressing any sort of relief. My legislation will make necessary changes to the old law, allowing more time, flexibility, and compromise for landlords and tenants."

"ICSC commends Sen. Tillis in offering balanced and timely legislation 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; reinforces what many landlords have done since spring; and encourages deferred deals going forward."

Specifically, the bill will make the following changes:

Give small businesses more time to pay their rent
Currently, existing law allows the bankruptcy court to grant a company a 60-day delay for cause to pay rent.
Tillis' bill allows the bankruptcy court to grant a debtor two subsequent 60-day delays (120 total) to pay rent if the company has experienced and is continuing to experience a material financial hardship as a result of COVID-19.
Give all businesses more time to decide what to do with their leases
Currently, existing law allows a company up to 210 days to determine whether to keep or get rid of certain leases for real property.
Tillis' bill allows a company up to 300 days to determine whether to keep or get rid of certain leases for real property.
In this uncertain environment, it is difficult for companies like retailers to determine what their future footprint should be. Allowing companies more time will give them greater visibility into the future will help them make more efficient decisions on their leases.
Importantly, while the businesses are deciding what to do they will still be obligated to continue to pay their rent, absent court order granting relief.
Moreover, landlords have the ability to ask the court to allow them to foreclose on the property if they are not receiving adequate protection during this time period.
Incentivize landlords and vendors to enter into flexible payment terms with businesses
Under existing law, landlords and vendors who enter into flexible payment terms with businesses could be forced to return future payments because the terms were not "in the ordinary course."
Tillis' bill protects future payments from being clawed back from landlords and vendors, but only to the extent such payments do not include any fees, penalties, or interest in an amount greater than the amount of fees, penalties, or interest the business would have owed had it not entered into the flexible payment terms.

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