Ever since WeWork mentioned the potential of bankruptcy and CEO David Tolley’s desire to “renegotiate nearly all our leases,” landlords have likely been sweating and for good reason, attorneys say. The options range from unappetizing to bad.
The mention of bankruptcy “is one of the primary debtor tenant negotiating tactics,” says John Sparacino, a principal with McKool Smith’s Bankruptcy Litigation practice area. “You’re going to get really screwed if I file bankruptcy. Do you want to work out something a little better for you or do you want to wait for bankruptcy? And landlords, unless someone puts down a big security deposit or there’s a significant personal guarantee behind the lease, are really exposed.”
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