Retailers have a new tool to use in the scuffle between landlords and tenants: a court ruling that could help them withhold rent, Bloomberg News reported. Pier 1 Imports Inc. is the latest retailer to seize on the precedent, asking a judge to let it skip rent payments amid the coronavirus outbreak that has shuttered stores across the U.S. The judge overseeing Pier 1’s case signed an order yesterday approving the retailer’s request. The move came after a judge in New Jersey late last month approved Modell’s Sporting Goods Inc.’s request to pause its bankruptcy until the end of April, allowing it to forgo rent and other required payments. The ruling is significant because even in bankruptcy tenants are expected to pay rent on time, unlike many other obligations such as bond debt. Now, retailers both in and out of bankruptcy court are informing landlords that they’re cutting or withholding rents as customers shelter at home and states order most merchants to close. Amid the pandemic, lenders have been reluctant to push retailers to file for bankruptcy because stores can’t conduct the liquidation sales needed to come up with money to repay creditors. That could change if the lenders know that a judge will grant a temporary suspension. Property owners expect many April rents won’t get paid, and tenants are looking for legal justifications to skip sending in a check, said David Pollack, a retired bankruptcy attorney who spent decades representing landlords. A pause in rent makes sense under the circumstances, Pollack said, so the question then is what happens when business returns to normal.
