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Pressing Issues for Landlords and Tenants In the Event of a WeWork Bankruptcy
WeWork Inc. alarmed commercial real estate landlords, lenders and investors when it released its Form 10-Q for the second financial quarter of 2023 and disclosed concerns about the financial viability of the business. While the 10-Q cites various methods by which WeWork aims to improve liquidity and profitability, the company acknowledges that any efforts are not guaranteed to succeed, forcing it to consider various "strategic alternatives," including obtaining relief under the U.S. Bankruptcy Code.
This article discusses in substance the most pressing issues for both landlords and tenants in the event of a WeWork bankruptcy filing under the U.S. Bankruptcy Code.
|Bankrupt Tenant Has Power to 'Reject' Unprofitable Leases and Assign Valuable Leases
Section 365 of the Bankruptcy Code provides a bankrupt tenant with one of the most powerful tools in the code — the power to keep (assume), assign or breach (reject) executory contracts and unexpired leases. The bankruptcy court defers to the debtor's business judgment as to the determination of which leases to assume, assign or reject, which means a debtor faces a relatively low burden of proving that its decision was made in the best interest of the bankruptcy estate.
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