Landlords Beware: Lease Rejection Does Not Mean Lease Termination
By: Susan Barnes de Resendiz
Mark S. Melickian
Jason Goitia

Landlords and their counsel often assume that an order authorizing the rejection of a real property lease pursuant to 11 U.S.C. §365 effectively terminates the lease. Although practitioners and, to a lesser degree, courts may appear, as a matter of shorthand, to treat lease rejection as a termination in many circumstances, it is generally, though not universally, recognized that the rejection of a lease under §365 does not, in and of itself, terminate the debtor’s interest in the lease. In re Palace Quality Servs. Indus., Inc., 283 B.R. 868 (Bankr. E.D. Mich. 2002). Since lease rejection may require that parties take additional steps to assure termination of a lease in a bankruptcy case, a landlord should consult with bankruptcy counsel when a debtor-tenant rejects a lease. Furthermore, because the law on these issues varies from circuit to circuit and from bankruptcy court to bankruptcy court, the landlord should take care not to violate the automatic stay when it exercises its contractual right to evict a debtor-tenant upon breach. To read full story, click here

Back to Basics: Exempting Real Estate Transfers from Taxation
Post-Hechinger
By:Jeffrey Kurtzman

The practice of seeking bankruptcy court approval of an exemption from applicable state and local transfer tax under §1146(c) in conjunction with the pre-confirmation sale of real property was commonplace, even routine, prior to the decision of the Third Circuit Court of Appeals in Baltimore County v. Hechinger Liquidation Trust (In re Hechinger Inv. Co. of Del.), 335 F.3d 243 (3d Cir. 2003). In chapter 11 cases in which a reorganization plan had yet to be formulated or filed, bankruptcy courts frequently incorporated transfer tax exemption provisions in sale orders on a number of grounds.To read full story, click here

E-Newsletter Authors Wanted

The editors of the Real Estate Committee’s e-newsletter are once again searching for willing authors to contribute on a regular basis to the newsletter. The articles will generally be short case notes or articles of current interest on reorganization subjects. Authors need not be lawyers of course, and articles would be appreciated and accepted from any of ABI’s varied disciplines, including financial advisory services, accounting, investment banking, appraisal services, claims administration, communications, and the like. If you would like to be a regular author, please send an e-mail with your contact information to John Collen.