Don’t Lose Your Shirt

Recently there have been a series of high profile retailer bankruptcies – Radio Shack, Haggen Stores and Quicksilver. These cases shine a light on a very difficult problem for commercial property owners. This problem is exacerbated for single-tenant net-leased investments that rely exclusively on the income from one tenant and have become a virtual safe-haven for many investors, especially 1031 exchanges. So what is an owner to do when his formerly blue chip tenant files for Chapter 11?


To be sure there are no easy answers, but it helps to have a basic understandings of available rights and remedies. Bankruptcy provides dome protection for property owners, but overall these protections fall short of the actual remedies generally available under the lease. In the end litigation, and it is a forum for debtors to work out a recovery plan. And to add to the misery for owners, the bankruptcy provisions common to most leases are unenforceable.