Commercial Landlord Rights in Subchapter V: A Section 365 Primer
Melissa Youngman, PA and Winter Park Estate Plans & ReOrgs represent businesses in Chapter 11 and Subchapter V cases before the United States Bankruptcy Court for the Middle District of Florida, including the Orlando, Jacksonville, Tampa, and Fort Myers divisions, with a primary practice footprint in Orange, Seminole, Osceola, Volusia, Lake, and Brevard counties.
Most discussion of executory contracts in Subchapter V is written from the debtor's perspective: which leases to keep, which to shed, and how the decision affects the plan. The landlord sits on the other side of that issue, and the Bankruptcy Code gives a commercial landlord a specific, statutory set of protections that an ordinary trade creditor does not get. A shopping center owner in an Orlando retail corridor and a debtor tenant in that same center are, in a real sense, reading two different rulebooks inside the same case.
This post explains those protections from the landlord's side: what a debtor must do to keep the space, what happens if it walks away instead, and why Subchapter V compresses decisions a traditional Chapter 11 landlord might otherwise have months to negotiate.
What Section 365 Actually Gives a Commercial Landlord
Section 365 treats a lease of nonresidential real property as a single, all-or-nothing obligation. The debtor-in-possession may assume it, assign it, or reject it, but cannot rewrite it or keep only the favorable terms. That structure is itself a protection for the landlord. A debtor cannot use the case to renegotiate rent, square footage, or use restrictions.
The landlord's specific rights depend on which path the debtor takes. Assumption triggers the cure and adequate assurance requirements of § 365(b). Rejection triggers the damages cap of § 502(b)(6). Both paths run on deadlines under § 365(d) that move faster in Subchapter V than in an ordinary Chapter 11.
Curing Default and Adequate Assurance: The § 365(b)(1) Baseline
If a lease is in default when the debtor wants to assume it, § 365(b)(1) requires three things before the court will approve assumption: cure the default, or give adequate assurance it will be cured promptly; compensate the landlord for actual pecuniary loss caused by the default, such as late fees or collection costs; and provide adequate assurance of future performance, meaning the landlord gets some evidentiary basis for believing rent will be paid going forward, not just a promise.
Outside the shopping center context, the Code does not define adequate assurance of future performance with a checklist. Courts look at the debtor's post-petition financial condition, its business plan, and whether the proposed use is consistent with what the lease permits. A landlord who wants a stronger record than "the debtor says it will pay" can raise that at the assumption hearing, and frequently does.
Shopping Centers Get a Higher Standard: § 365(b)(3)
Congress singled out shopping center leases for extra protection, on the theory that such a landlord is not just collecting rent from one tenant but managing an ecosystem of co-tenancies and use restrictions that keep the whole property functioning. Section 365(b)(3) supplements the general adequate assurance standard with four specific showings before a debtor may assume or assign a shopping center lease: that the source of rent is adequate, and on assignment, that the assignee's finances will be comparable to the debtor's own; that any percentage rent will not decline substantially; that assumption or assignment will not breach a radius, location, use, or exclusivity provision in that lease or related agreements governing the center; and that tenant mix or balance will not be disrupted.
The Code does not define "shopping center" itself, leaving courts to work out the boundary case by case. What typically matters: multiple retail tenants under a common lease or reciprocal easement structure, shared parking and common areas, an anchor tenant that draws traffic to smaller tenants around it, and lease provisions addressing tenant mix or radius restrictions. A free-standing outparcel building leased to one retailer, common along Central Florida corridors, usually falls outside the definition even next to a larger center. A multi-tenant strip plaza with a grocery anchor and satellite bays usually falls inside it.
For a debtor tenant in a multi-tenant plaza in Orange or Seminole County, this distinction is not academic. If § 365(b)(3) applies, the assumption hearing becomes more document-intensive, and the landlord has statutory grounds to object beyond a general assurance argument.
If the Lease Is Rejected Instead: The § 502(b)(6) Damages Cap
A debtor that decides the space no longer fits the reorganized business will reject rather than assume. Rejection is treated as a breach occurring immediately before the petition date, and the landlord's claim becomes general unsecured rather than administrative. That claim is not open-ended. Section 502(b)(6) caps it at the greater of one year's rent reserved under the lease, or fifteen percent of the remaining term's rent, not to exceed three years, plus any unpaid rent already due as of the earlier of the petition date or repossession.
A different Central Florida illustration than the one used in our post on executory contracts generally: a landlord in a Lake Mary office park has a tenant with six years remaining on a lease at $12,500 per month. Total remaining rent is $900,000; fifteen percent of that is $135,000; one year's rent is $150,000. Because the one-year figure is higher, the capped claim is $150,000, not the full $900,000 the lease would otherwise have generated. The cap protects the debtor's other unsecured creditors from one landlord's claim consuming a disproportionate share of the distribution, and it gives the landlord a predictable, calculable recovery rather than years of litigation over lost future rent.
Timing Pressure: § 365(d)(3) and § 365(d)(4) Meet the 90-Day Plan Clock
Two additional deadlines protect a commercial landlord while the decision is pending. Under § 365(d)(3), the debtor must timely perform all post-petition lease obligations, meaning rent continues to accrue and must be paid on existing terms while the debtor decides. A landlord not receiving current rent has grounds to seek relief from the automatic stay or to compel an immediate decision.
Under § 365(d)(4), a nonresidential real property lease is deemed rejected automatically if the debtor does not assume it within 120 days of the order for relief, subject to one court-ordered extension that cannot push the total period past 210 days. In a traditional Chapter 11, that window often arrives well before the plan process is underway, giving both sides room to negotiate. In Subchapter V, the plan itself is due within 90 days under § 1189(b), so a debtor with an undecided shopping center lease faces both deadlines within weeks of each other, pressuring landlords and debtors alike to resolve the lease question early rather than let it ride into confirmation.
Central Florida Commercial Corridors: Where This Plays Out
Retail plazas along the major commercial corridors in Winter Park, Maitland, Orlando, Lake Mary, and Oviedo, and tourist-facing retail centers near Kissimmee, routinely operate as multi-tenant properties with the common ownership and co-tenancy structure that triggers § 365(b)(3). A landlord leasing space to a business that later files Subchapter V should expect the case to move quickly toward an assumption or rejection decision, and should document percentage rent history, tenant mix, and any radius or exclusivity provisions early, since those are the facts a shopping center adequate assurance objection turns on.
Melissa Youngman, PA represents businesses in Chapter 11 and Subchapter V cases throughout the Middle District of Florida. For a broader look at how assumption and rejection decisions work across a debtor's full contract and lease portfolio, see our guide on executory contracts and leases in Subchapter V.
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