Contributed By Allen Matkins Leck Gamble Mallory & Natsis LLP
Federal bankruptcy law prioritizes creditors, and could leave the landlord as an unsecured creditor. The court can compel the assignment of the lease through the bankruptcy court, which may circumvent many otherwise applicable landlord controls over an assignment. Any cash security deposit will likely be remitted to the bankrupt estate.
Under state law, Civil Code section 1951.2, a landlord is entitled to all of the consideration for the remaining term, less the amount that the tenant can reasonably establish the landlord would be able to offset, depending on the market, by re-leasing the property.
Bankruptcy claims are capped at 12 months of rent, or 15% of the total consideration remaining. While that establishes a maximum claim, the landlord remains an unsecured creditor. Further, the lease will be subject to an assignment if there is a new tenant entity, and contractual obligations may not apply.