The Automatic Stay, Commercial Leases, and Restaurant Bankruptcy

What do you need to know about the automatic stay if you are a restaurant owner considering bankruptcy? For many restaurant owners in the Tampa Bay area who file for Chapter 11 bankruptcy, there are a number of questions about how your landlord’s actions for past rent may change as a result of bankruptcy protection.

We can help you to gain a better understanding of how the automatic stay may help you to keep your restaurant going if you decide to seek bankruptcy protection.

What is the Difference Between a Restaurant Lease and a Commercial Lease?

To better understand the relationship between commercial leases and restaurant bankruptcy, it is first essential to learn more about the similarities and distinctions between general commercial leases and restaurant leases. Then, after gaining a better understanding of what many restaurant leases look like (and what kinds of terms exist within them), it is important to understand how the automatic stay provision of the bankruptcy code can allow you to remain within your restaurant space by filing for Chapter 11 bankruptcy.

According to an article from the American Bar Association, restaurant leases look a lot like many commercial leases, but “there are a surprising number of provisions of the lease which must necessarily be adapted in a good restaurant lease.” In general, if you are a restaurant owner in Tampa and currently have a lease for the space in which you run your restaurant, your lease likely has been tailored to your specific business in any or all of the following areas:

• Exclusivity clauses, which are in general promises that the business owner makes to the landlord concerning who will run the business or what types of products will be sold in that space;

• Use clauses, which restrict the ways in which you will use the space you are renting (and can refer to issues, for example, concerning competition or liability); and

• Continuous operation clauses, which can govern the days and hours that the restaurant owner is open for business.

Other aspects of restaurant contracts likely will need to be tailored to the particular type of business, given that restaurant operations generally are different from those of other types of businesses. But in general, the article makes clear that restaurant owners are business owners, and their leases are one kind of commercial leases. As such, if you are currently running a restaurant in Tampa (in other words, if you are a commercial tenant) and you have thought about filing for bankruptcy, you may be eligible for protection through the automatic stay. What is an automatic stay? To better understand how it works, we need to take a closer look at the U.S. Bankruptcy Code.

The Automatic Stay Can Protect Restaurant Tenants Who File for Bankruptcy

Under Section 362 of the U.S. Bankruptcy Code, tenant debtors—including many restaurant owners in the Tampa area—who file for Chapter 11 bankruptcy can be protection through the automatic stay provision. As the law makes clear under Section 362(a), when a restaurant owner who has a commercial lease files for bankruptcy protection, the petition for bankruptcy functions as an “automatic stay” on the landlord’s actions, through a lawsuit or otherwise, for:

• Seeking past rent;
• Evicting the tenant;
• Terminating the tenant’s lease; and/or
• Creating or enforcing a lien against the tenant’s property.

In other words, if you are renting your restaurant space but have been unable to make recent rent payments, filing for bankruptcy can help to prevent you from losing your business space. Your landlord may not force you to leave the space or obtain unpaid rent once you file for bankruptcy petition.

It is important to remember that bankruptcy law is extremely complicated, and you should always discuss your situation with an experienced Tampa bankruptcy attorney. A Tampa Bay restaurant owner who is thinking about filing for Chapter 11 bankruptcy will need to have an experienced advocates on his or her side to ensure that the process goes as smoothly as possible. Contact Samantha L. Dammer to learn more about how we can assist you.