## Facts

- A restaurant operator leased commercial space in Chicago under a lease requiring monthly rent on the first of each month and containing a force majeure clause that included “orders of government.”
- The tenant failed to pay February 2020 rent due February 1, then filed a Chapter 11 petition on February 24, 2020.
- The landlord’s agent moved to compel payment of post-petition rent under 11 U.S.C. § 365(d)(3) and sought relief from the automatic stay under § 362(d), including eviction if rent was not paid.
- Illinois executive orders beginning March 16, 2020 prohibited on-premises consumption at restaurants and bars, while allowing delivery and takeout; the restrictions continued through at least late May 2020.
- The tenant’s business primarily depended on sit-down dining and bar service but could still use the kitchen for carry-out and delivery.
- The kitchen comprised roughly 25% of the leased premises; the remaining areas were dedicated to dine-in and bar service.

## Issues

1. Whether § 365(d)(3) required full, timely payment of post-petition rent under an unexpired nonresidential real property lease despite a force majeure clause triggered by COVID-19 governmental orders.
2. Whether the Illinois COVID-19 executive orders qualified as an “order of government” under the lease force majeure clause, excusing rent performance in whole or in part.
3. If force majeure applied, whether rent should be fully abated or reduced proportionally based on the tenant’s remaining lawful use of the premises.
4. Whether the landlord’s agent was entitled to relief from the automatic stay under § 362(d) to pursue eviction based on nonpayment.

## Decision

- The court held that the Illinois executive orders were “orders of government” that triggered the lease’s force majeure clause.
- The court ruled that § 365(d)(3) requires performance of the lease’s post-petition “obligations,” but does not prevent contractual modification or excuse of those obligations under the lease and applicable nonbankruptcy law.
- The court ordered only partial rent payment for the restriction period, requiring payment of 25% of post-petition rent to reflect the tenant’s continued ability to use the kitchen for takeout and delivery.
- February 2020 rent was treated as a pre-petition obligation because it came due before the petition date, and it was not reduced under § 365(d)(3).
- The motion to compel payment under § 365(d)(3) was granted in part and denied in part; the request for stay relief to evict was denied or effectively denied in favor of enforcing the reduced rent obligation.

## Legal Principles

- Under § 365(d)(3), whether an obligation is post-petition depends on when the lease makes the obligation due; amounts due before the petition date are pre-petition claims.
- Section 365(d)(3) enforces the debtor’s existing lease obligations pending assumption or rejection; it does not create new obligations and does not displace contractual risk allocation in the lease.
- A force majeure clause that expressly includes “orders of government” may be triggered by governmental restrictions that prohibit or hinder a tenant’s ability to operate as contemplated by the lease.
- Where a force majeure clause excuses performance only “to the extent” prevented, rent relief may be partial rather than total if the tenant retains lawful, practical use of part of the premises.
- In considering stay relief under § 362(d) in this setting, a court may deny eviction-focused relief where the debtor is ordered to comply with a reduced, contractually determined rent obligation.

## Conclusion

The bankruptcy court held that COVID-19 closure orders triggered a commercial lease force majeure clause and, because the tenant could still operate takeout and delivery from a portion of the premises, required payment of only 25% of post-petition rent during the restriction period while rejecting eviction-based stay relief.


In re Hitz Restaurant Group, 616 B.R. 374 (Bankr. N.D. Ill. 2020)