You Use It, You Pay for It: TRP Brands Reinforces Landlord Rights

When tenant debtors continue to use leased space after filing for bankruptcy, they, by definition, benefit from such use. Landlords often hold off on pressing available remedies because of the debtor’s continued use and failure to reject. The TRP Brands decision confirms that tenant debtors cannot have it both ways: post‑petition use induces landlord reliance, constitutes a post‑petition transactional relationship, and supports administrative priority for stub rent even where section 365(d)(3) of the Bankruptcy Code does not mandate prompt payment.

Key Takeaways

• When a tenant debtor, post-petition, uses property in an effort to generate value for the bankruptcy estate, fairness requires that the associated costs, including stub rent, receive administrative priority even in the absence of a stand‑alone obligation to promptly pay such rent under section 365(d)(3) of the Bankruptcy Code.
• Post-petition occupancy and operational use by a tenant debtor of leased property satisfies the “actual and necessary” benefit requirement under section 503(b)(1)(A) of the Bankruptcy Code, thereby giving rise to an administrative claim in favor of the landlord that must be paid under a confirmed plan.
• A tenant debtor’s post-petition decision to continue using leased premises, especially while running court‑approved store‑closing sales, induces landlords to refrain from exercising remedies such as demanding rejection, seeking adequate protection, or forcing earlier administrative claims litigation.

Introduction

Section 365 of the Bankruptcy Code, which allows a debtor to continue using a leased premises pending its decision to reject (i.e., repudiate) an unexpired lease, is a powerful provision frequently used by tenant debtors to manage cash flow. In theory, from the date of the bankruptcy filing onward, the debtor is required to pay rent under the lease. In reality, however, tenant debtors engage in myriad strategies to manage cash flow by moving the bankruptcy court to postpone, if not avoid altogether, paying post-petition rent. In this alert, we examine the basis for granting a non-debtor landlord’s administrative claims for “stub rent” where the debtor occupies and uses the leased property post-petition, an issue that was recently addressed by the U.S. Bankruptcy Court for the Northern District of Illinois in the case of In re TRP Brands LLC, No. 24 B 1529, 2026 WL 190452 (Bankr. N.D. Ill. Jan. 23, 2026).

Background

During the first year of COVID-19, several high-profile tenant debtors successfully sought to delay rent payments for up to two months after filing bankruptcy cases under the “rent holiday” clause in section 365(d)(3) of the Bankruptcy Code. See, e.g., In re JC Penney Co., Inc. et al., No. 20-20182 (DRJ) (Bankr. S.D. Tex. June 11, 2020) (Dkt. No. 721); In re True Religion Apparel, Inc., No. 20-10941 (CCS) (Bankr. D. Del. May 12, 2020) (Dkt. No. 221). Section 365(d)(3) of the Bankruptcy Code allows the bankruptcy court to extend “for cause” the time for performance (for up to sixty days) of any obligation that arises within the first sixty days of the bankruptcy case.

The debtor in Pier 1 Imports went further, seeking a “super rent holiday” to suspend rent payments beyond the initial sixty-day period. In re Pier 1 Imports, Inc., No. 20-30805-KRH (Bankr. E.D. Va. March 31, 2020) (Dkt. No. 438).

The debtors in Chuck E. Cheese and Hitz Restaurant Group sought to avoid paying rent altogether based on force majeure theories – Chuck E. Cheese was unsuccessful, but Hitz Restaurant Group succeeded in avoiding paying a portion of its rent obligations. See In re CEC Ent., Inc., 625 B.R. 344 (Bankr. S.D. Tex. 2020); In re Hitz Rest. Grp., 616 B.R. 374 (Bankr. N.D. Ill. 2020).

Another long-used strategy by tenant debtors to delay or avoid lease payments relies upon a clause in section 365(d) of the Bankruptcy Code, which states that the debtor “shall timely perform all the obligations of the debtor . . . arising from and after the order for relief” (i.e., petition date). Thus, if, for example, the obligation to pay rent falls on the first of the month, the tenant debtor will file bankruptcy after the due date and argue that the rent for the balance of the month (so-called “stub rent”) need not be immediately paid because the obligation to pay arose before the petition date.

The TRP Brands Decision

Against the backdrop, several landlords in TRP Brands sought allowance of administrative claims for stub rent, among other lease-related obligations. The dispute centered on whether landlords were entitled to administrative expense priority for “stub rent” under real property leases. The debtor argued that stub rent did not qualify for administrative priority because the rent for the month (though allocable to a post-petition period) first came due under the terms of the lease prior to the bankruptcy filing. As such, the tenant debtor argued that the payment obligation was not the result of a post-petition “transaction” with the debtor-in-possession.

The landlords countered that the debtor’s continued post-petition occupancy and use of the premises, particularly to operate stores and conduct court-approved liquidation sales, made the stub rent an actual, necessary cost of preserving the estate. Importantly, the landlords’ requests were brought after plan confirmation, so the issue being addressed by the bankruptcy court was not whether stub rent had to be paid immediately during the pendency of the case, but whether the claims were entitled to allowance and priority as administrative expenses at all.

The bankruptcy court in TRP Brands held that, although section 365(d)(3) of the Bankruptcy Code does not, in itself, require payment of stub period rent under Seventh Circuit law, that does not end the inquiry. Instead, stub rent may qualify under section 503(b)(1)(A) of the Bankruptcy Code as an “actual, necessary” cost of preserving the estate. Applying Seventh Circuit precedent, the bankruptcy court applied the two-part test for administrative expenses: the claim must arise from a transaction with the debtor-in-possession and must benefit the estate. The bankruptcy court held that the benefit prong was satisfied because the debtor continued to use the leased premises post-petition to operate its business and conduct going-out-of-business sales. On the transaction prong, the bankruptcy court reasoned that unexpired leases during the post-petition “option period” under section 365 of the Bankruptcy Code constitute ongoing, statutorily-compelled relationships between landlords and the debtor-in-possession. Thus, the post-petition occupancy and use of the property gave rise to obligations tied to a post-petition transactional relationship.

The bankruptcy court further explained that even if inducement were required under cases like Jartran, the debtor’s conduct in TRP Brands met that standard. See Matter of Jartran, Inc., 732 F.2d 584, 587 (7th Cir. 1984) (“inducement of the creditor’s performance by the debtor-in-possession is crucial to a claim for administrative priority”). Notably, early in the case, the debtor sought and obtained court approval to continue operating and to conduct store-closing sales at certain locations, representing that the sales were integral to maximizing estate value. This in turn induced landlords to continue performance during the post-petition period and to refrain from pursuing their available remedies, including demanding lease rejection, adequate protection, or immediate allowance of administrative expense claims.

The bankruptcy court emphasized that section 503(b)(1) of the Bankruptcy Code must be applied considering its purpose and fairness principles: where the estate uses leased property to generate value for creditors, it is fair that the associated costs receive administrative priority. Accordingly, most landlords’ stub rent claims were allowed as administrative expenses under section 503(b)(1) of the Bankruptcy Code, even though section 365(d)(3) of the Bankruptcy Code did not independently mandate earlier payment.

Conclusion

The TRP Brands decision reinforces a sensible rule: if a debtor continues using leased property after filing for bankruptcy, the resulting benefits to the estate create administrative priority obligations, including payment of stub rent. Landlords should not assume stub rent is unrecoverable simply because section 365(d)(3) of the Bankruptcy Code does not compel immediate payment. Debtors who continue to occupy a leased premises should expect to pay for the privilege, because their post-petition use induces landlord reliance and gives rise to administrative expense treatment under section 503(b)(1) of the Bankruptcy Code.