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In the aftermath of the financial crisis, landlords are increasingly sensitive to the financial viability of tenants. While a landlord’s first line of defense is to perform due diligence to understand the creditworthiness of a potential tenant and to create an appropriate security package, there are other steps that an owner can take to reduce the likelihood of facing a tenant in bankruptcy, and, if a tenant enters bankruptcy, to be in the strongest possible position to enforce ownership’s rights and apply security without violating the Bankruptcy Code.

In evaluating the financial strength of a prospective tenant, due diligence should include:

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