Philadelphia Skyline

Sometimes a Restaurant is Like a Hot Potato

April 29, 2018

Sometimes a restaurant is like a hot potato (or a hot dish of Aloo Gobi), passing from one tenant to the next, until someone is left holding the burning spud.

We recently had a case like that where arrears started building in 2015. Then the restaurant was assigned to a new group (Tenant 2, for our purposes), and then it was assigned again (Tenant 3), and then again (to Current Tenant). Current Tenant fell deeper into arrears. Indian food. Which pains me, because that’s my favorite.

Current Tenant agreed to a payment plan in a Stipulation of Settlement, which provided for the issuance of a judgment of possession and warrant of eviction. These two enforcement devices - the judgment of possession and warrant of eviction - act kind of like a guillotine, with a continued failure to comply resulting in the ax falling and ending the tenancy without the need for a trial. Upon a default, there is no need to go back to court and a marshal comes to evict the tenant.

Slight twist – Tenant 3, who had conveyed his interest to Current Tenant, filed bankruptcy. The filing was within six months of the assignment to Current Tenant. That meant, so long as a bankruptcy stay was in effect for the individual Tenant 3 (while his bankruptcy case was processed), the bankruptcy court maintained jurisdiction not only over his assets, but any assets that had been recently transferred! How crazy is that? Current Tenant was not in bankruptcy. The last tenant, Tenant 3, was. Yet owner, our client, had to request the permission of the bankruptcy court to proceed with the eviction against Current Tenant.

Thankfully, once we made an application to the bankruptcy court to lift the automatic stay, the stay was lifted so the owner could proceed with eviction. Thank you to my husband and law partner, Jay B.Itkowitz, who handles the bankruptcy aspects of my landlord and tenant practice. Good work, Jay.

As a result of the bankruptcy stay being lifted, the owner was free to make a deal with a new restaurateur, Tenant 5! Good luck Tenant 5 – we are all rooting for you!

Respectfully submitted,

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