Jonathan Shenson, Partner in the Bankruptcy, Reorganization & Capital Recovery and Corporate Groups, shared his insights with Bisnow regarding NeueHouse's ongoing Chapter 7 bankruptcy proceedings.
Excerpts:
Landlords seeking damages for back rent have some hurdles to clear before they can recoup their losses, said Jonathan Shenson, a partner at Greenberg Glusker in the bankruptcy group.
If a lease is written with rental rates at or above market rent, what commonly happens is a bankruptcy trustee will reject that lease, which happened in the case of the lease NeueHouse signed with Kilroy, shortly after the company filed for bankruptcy. That move effectively stops the clock on additional rent accruing and puts in place certain caps on how much a landlord can get back. The formula basically caps shorter-term lease damages at one year's worth of rent and longer-term leases at a maximum of three years' worth of rent, or 15% of what would be owed for the remaining lease term, Shenson said.
"Whether there's money to pay those claims is, more often than not, a function of how much money is in the bankruptcy estate," Shenson said.
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