In the recently-passed Consolidated Appropriations Act, 2021 (the "Act"), Congress provided much-needed cover for landlords that enter into forbearance agreements with their tenants during the COVID-19 pandemic by protecting landlords from exposure to preference litigation arising out of the deferred rent payments if the tenant were to later file bankruptcy.

What is a preference?

It is no secret that business bankruptcies are surging in the wake of the COVID-19 pandemic.

In a small victory for landlords of bankrupt tenants, the Bankruptcy Court for the Southern District of Texas has ruled that the Chuck E. Cheese parent company may not use its bankruptcy filing to avoid paying its rent.

Across the country, the COVID-19 pandemic has significantly impacted the justice system. In many State and Federal courts, jury trials have been suspended and court hearings are limited to only criminal and emergency civil matters. Yet the Bankruptcy Courts, given the unique role they play in times of financial distress, are largely open for business, relying on electronic filing and conducting hearings by teleconference.