Bankruptcy of a commercial tenant

Many catering businesses or businesses in the event industry are still suffering financial losses due to the Corona pandemic. As a result, many businesses are experiencing financial difficulties, which can result in bankruptcy at worst. The consequences of these bankruptcies not only affect the businesses, but also regularly have precarious consequences for their landlords.

The tenancy agreement is not terminated by law as a result of the tenant’s bankruptcy and in fact continues to exist while the tenant has evidentially become insolvent. It is uncertain were future or still outstanding rent payments will come from. The law provides the landlord with various options. It is advisable for the landlord to first make an inventory of his outstanding claims against the tenant. In doing so, it is important to distinguish whether the rent claims arose before or after the opening of bankruptcy proceedings.

Rent claims that arise after the opening of bankruptcy proceedings are not considered bankruptcy claims, but claims against the insolvent personally. If the bankrupt is a legal entity, which is regularly dissolved after the bankruptcy proceedings, these claims are usually lost without settlement.

Rent claims that are due before the opening of bankruptcy proceedings constitute bankruptcy claims. In the event of bankruptcy, the landlord must submit his claims to the bankruptcy office in writing within the time limit set by the bankruptcy office and with reference to any security and retention rights. These claims are third-class bankruptcy claims. As a result, the landlord’s claims will be settled from the bankruptcy proceeds only in very last priority. Experience shows that the coverage of third-class claims is between low and zero.

It is obvious that the landlord does not have a privileged position during the bankruptcy proceedings. However, he has various possibilities to react to the bankruptcy of the tenant.

If the landlord wants to terminate the contract, he can do so according to Art. 257d CO (default of payment). A prerequisite for this, however, is that the tenant is actually in default of payment. In this case, the landlord must set the tenant a payment deadline of at least 30 days. If the tenant does not meet this deadline, the landlord may terminate the lease with a notice period of another 30 days to the end of the month.

The landlord also has the option of demanding security for future rent payments. To do so, he must set the bankruptcy administration and the tenant a deadline that is reasonable under the circumstances. If no security is provided within this period, the landlord may terminate the lease without notice.

If the landlord decides to insist on the lease, he can enter his claims as receivables. However, this is only possible until the next possible termination date or, in the case of fixed-term contracts, until the end of the fixed-term contract period.

In the case of leases of commercial premises, Swiss tenancy law provides for a right of retention. This is granted to the landlord for the expired annual interest as well as the current half-yearly interest, on the movable property located in the leased premises and forming part of their furnishings or use.

The landlord is advised to discuss such scenarios already during the contract negotiations. If the tenant is in arrears, the landlord should not wait unnecessarily, but proceed according to the rules of default and assert his right of retention. If bankruptcy proceedings are opened, the landlord must submit his claims arising from the tenancy to the bankruptcy office in due time and refer to the right of retention.