There They go Again! Another Modification of Lessee Rights in Bankruptcy with Questionable Notice
Alec P. Ostrow
Stevens & Lee, P.C.; New York
In 2003, the Seventh Circuit in Precision Industries Inc. v. Qualitech Steel SBQ permitted the sale of real property free and clear of a lessee’s interest under §363(f) of the Bankruptcy Code, and held inapplicable the lessee’s right to remain in possession of a rejected real property lease under §365(h). Although this decision has sparked controversy concerning its interpretation of the interplay between §§363(f) and 365(h), in an article for both the NABT and ABI, I complained about the inadequacy of the notice given to the lessee. In particular, I noted that the lessee was never specifically informed that, as a consequence of the proposed sale, its lease was proposed to be not rejected, but forfeited. This lack of specific notice may have resulted in the inability of the lessee to protect its rights, an issue not addressed by the decision itself.
Winter Leadership Conference Committee Meeting and Presentation
At the Winter Leadership Conference, the Committee will present a discussion on the changes made to the practice of real estate issues in bankruptcy by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. In addition to the co-chairs, our featured speakers will be Maita Prout, a partner and head of the bankruptcy practice in the Los Angeles office of Holland & Knight LLP, and William Lenhart, a partner based in New York and national director of the financial recovery practice at BDO Seidman LLP. Although the discussion will focus principally on changes to the practice concerning retail leases, the panel will also discuss provisions concerning single-asset real estate cases, serial filings and real property taxes. We expect a lively, informative and entertaining discussion.
Model Annotated Real Estate Contract Drafting Session
The committee has long been discussing, and has even started work on, a project to create a model annotated contract for the sale of real estate in a bankruptcy case. We contemplate that the contract would be used by a trustee in bankruptcy or debtor-in-possession to sell real property of the debtor's estate, subject to higher and better offers. The contract will be accompanied by other standard documents, such as an escrow agreement and a motion to the bankruptcy court for approval of the transaction. In particular, the contract will include bidding inducements, such as a topping fee, granted to the initial contracting purchaser (sometimes known as the "stalking horse bidder"). The model contract and accompanying documents are to be annotated with explanations of their salient provisions and references to governing statutes and seminal cases. Because real property laws and practices vary from state to state, to achieve consistency in the documentation, one state - New York - has been selected as the forum state for the transaction. The annotations will note when particular laws or practices in New York are considered to be significantly different from those in other states.
To give the project a special push, there will be a drafting session open to committee members and other interested persons who wish to participate at St. John's University School of Law in Jamaica, Queens, New York, on Monday, Jan. 23, 2006, beginning at noon. There will be conference call capability (and possibly, teleconference conference capability) for those who wish to participate remotely. Please contact the committee co-chairs for further information.
Get Involved-Volunteers Needed
Please consider contributing your time and talents to the committee. We are looking for articles for the newsletter, editors and listserve moderators, as well as topics for upcoming committee presentations. Volunteering for a committee is a great way to get involved in ABI and raise your professional profile. Please contact the committee co-chairs for further information.
Learn more about GET INVOLVED!—ABI’s new professional development initiative.