A federal bankruptcy court in Massachusetts just issued a decision that could meaningfully shift the balance of power between landlords and tenants in bankruptcy. In In re Herritt, the court ruled that for purposes of Section 502(b)(6) of the Bankruptcy Code — which caps landlord claims after lease termination — “termination” and “surrender” can be interpreted more broadly than state law permits. In practical terms, the court said a lease can be considered terminated even if state-law formalities haven’t been completed, and surrender of the premises doesn’t require a rigid legal process.Section 502(b)(6) limits how much a landlord can claim after a tenant defaults. Instead of being able to demand full unpaid rent, the landlord’s claim is capped to the greater of one year’s rent or 15 percent of the remaining lease term...
...Landlords, especially in sectors like retail and commercial real
estate, where lease agreements are central to value, need to revisit
their risk models and legal strategies. They may need to more carefully
spell out termination and surrender conditions in lease contracts,
negotiate stronger protections, or plan for lower recoveries in
bankruptcy. In a world where “surrender” can be interpreted based on
conduct rather than formal legal definitions, every clause matters—and
so do the facts.
RSK: Commerialmercial landlords and Brokers the last paragraph is crucial.
Share this article on your social outlets
Our Sponsors
- - Volume: 26 - WEEK: 9 Date: 2/24/2026 3:19:52 PM -