Walter| Haverfield Expands its Litigation and Real Estate Teams

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Committed to its mission of offering personalized service to our growing number of clients, Walter | Haverfield has hired Nicholas Buzzy to its Litigation team and Gail Bisesi to its Real Estate team.

Buzzy is a dedicated, dynamic attorney with experience in wide-ranging complex litigation. The Northeast Ohio native has successfully defended multiple cases at trial, valued at more than six figures. That includes personal injury as well as business interruption cases.

“I’m passionate about my work as a litigator and proud of the success I’ve had thus far in defending big cases,” said Buzzy. “I now have the opportunity to continue to do what I love on an even bigger scale with a strong, hard-working team, and I’m very thankful for that.”

Buzzy has also defended a variety of corporations in products liability cases as well as individuals on a variety of disputes. Buzzy most recently worked at the Cleveland-based law firm of Gallagher Sharp as a litigation attorney. Prior to that, he served as an assistant prosecuting attorney for Summit County, Ohio.

Bisesi brings more than two decades of real estate experience to Walter | Haverfield. She joins the firm as a paralegal and previously worked at law firms, in banks and with developers in the Northeast Ohio region.

“I was looking for a firm that has a strong real estate practice group, and that’s why I sought out Walter | Haverfield,” said Bisesi, who is also a Northeast Ohio native and enjoys working at the Cleveland Film Festival each year.

“Our goal is to find highly skilled and qualified individuals to serve our clients in ways that align with our strong values and high standards,” said Ralph Cascarilla, managing partner of Walter | Haverfield. “Nick and Gail will be able to deliver that superior service, and I’m happy to have them on board.”

Since 1932, Walter | Haverfield attorneys have served as strategic counselors to private businesses, public entities and high net-worth individuals, providing creative and customized solutions that deliver outstanding results at an exceptional value. Our track record has allowed us to sustain year-after-year growth. Walter | Haverfield has more than doubled in the past decade to become one of Cleveland’s top ten law firms. Today, our team of nearly 80 attorneys is focused primarily in the areas of corporate transactions, real estate, intellectual property, labor and employment, tax and wealth management, liquor control law, litigation, public law and education.

 

Tenants in Bankruptcy: A Commercial Landlord’s Introduction

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Patrick HrubyEvery commercial landlord should be familiar with the phrase “retail apocalypse.” It’s a phrase that refers to the recent epidemic of retail store closings, many of which were the result of those companies filing for bankruptcy. Unfortunately for landlords, store closures and other vacancies are trends that do not appear to be slowing. And it’s important that landlords are aware of their rights in bankruptcy and the potential traps involved. Here’s what commercial landlords need to remember as they navigate this dynamic landscape:

The Automatic Stay

Once a tenant files for bankruptcy, an automatic stay or injunction is invoked to protect that tenant from new or continued collection activities. It also prevents landlords from initiating an eviction, changing the locks or even demanding payment of past-due rent. A landlord’s violation of an automatic stay may allow the tenant to recover actual damages, including attorneys’ fees and, in some cases, punitive damages.

A landlord can file a motion with the bankruptcy court to seek relief from the automatic stay if certain conditions are met. Landlords should be aware that automatic stay is applicable even if the terms of the lease state that the lease is terminated upon the filing of a bankruptcy case.

Lease Assumption and Rejection

Under Section 365 of the Bankruptcy Code, a tenant has the option to assume or reject the remainder of the lease. If the tenant does not assume the lease prior to 120 days after the petition date or the date confirming a plan of reorganization, then the lease is considered rejected. The tenant then must immediately surrender the property to the landlord. That period may be extended by 90 days upon motion.

Often, the tenant will reject the lease for economic reasons. In such cases, the landlord becomes an unsecured creditor with a claim for damages for unpaid rent based upon the statutory formula in § 365. However, as a result of being a general unsecured creditor, a landlord will likely receive less than the actual amount of the rejection damages claim.

Also, the rejection of a lease does not remove a tenant from the leased premises. The landlord may need to incur additional expenses in removing the tenant through an eviction action in state court.

Fortunately, even if the tenant rejects a lease, it is liable to the landlord for rental payments that became due after the petition was filed and before the tenant rejected the lease. These and other monetary lease obligations are paid as administrative expenses, which allows the landlord to recover those amounts on a priority basis.

From the landlord’s perspective, it is clearly preferable that the tenant assumes the lease. Not only do the premises remain occupied, but the tenant must also provide assurance that they will be able to address any defaults and meet the terms of the lease. The tenant may also assign the lease, or sublet, to another tenant. This occurs when the lease has value, but the tenant does not want to continue to operate in that location. Because the Bankruptcy Code provides that anti-assignment clauses in leases are generally not enforceable in cases of bankruptcy, the tenant has a lot of leeway in determining whether to assign a lease to another party. If they choose to assign the lease, the tenant must reconcile any past debts and ensure the new tenant will be able to meet the terms of the lease.

If the lease involves premises within a shopping center, the landlord generally has more protections against assignment. In order to assign a lease in a shopping center, the tenant must demonstrate that the new tenant can fulfill the obligations of the lease, any percentage of rent due will not decline substantially, the original terms of the lease still apply, and the assumption or assignment of the lease will not disrupt any tenant mix in the shopping center.

Proof of Claim

If a landlord is owed damages by a tenant, it must file a proof of claim by a claims bar date. The landlord may not know the amount of damages to claim by this date if the tenant has not yet decided to assume or reject the lease. As a result, landlords are provided a certain amount of time to assert damages if the tenant rejects the lease. It is important that a landlord be aware of these dates and file a proof of claim in a timely fashion.

As rumors that large retailers and smaller companies are on the brink of bankruptcy continue to swirl, it is clear that the “retail apocalypse” is not ending soon. Commercial landlords would therefore be well served to gain a thorough understanding of their rights and restrictions when dealing with a tenant in bankruptcy. Doing so will allow them to recover the money they are rightfully owed and avoid having legal action taken against them.

Patrick Hruby is an attorney in Walter | Haverfield’s Corporate Transactions group. His practice also extends into the Litigation Services group. He can be reached at phruby@walterhav.com or at 216-619-7878.