Written by: John S. Stolz
Lowenstein Sandler PC; Roseland, N.J.
Wojciech F. Jung
Lowenstein Sandler PC; Roseland, N.J.
Two recent decisions have provided guidance concerning the scope of a lender’s right to collect “rents” generated by a debtor in possession, and the debtor’s corresponding ability to use those “rents” in furtherance of its restructuring efforts: In re Ocean Place Development LLC1 and In re Soho 25 Retail LLC.2 The issue of whether certain post-petition income generated by a debtor constitutes property of the estate under § 541(a) of the Bankruptcy Code was at the forefront in these cases.
In both cases, the debtors granted security interests to their respective lenders, including pre-petition assignments of leases and rents,3 in connection with certain financing transactions, pursuant to which the debtors made present assignments in favor of their lenders of the right to collect rents under secured leases. The debtors ultimately defaulted under their loans, and the lenders obtained judgments of foreclosure and scheduled foreclosure sales for the debtors’ assets. However, before the foreclosure sales could take place, each debtor filed for relief under chapter 11.
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Written by: Scott E. Schuster
McGuireWoods, LLP; Pittsburgh
Two sections of the Bankruptcy Code seemingly stand at odds regarding the protections offered to lessees of real property owned by a bankrupt debtor. Section 365(h) strongly protects a lessee’s right to possession of real property in the face of debtor’s rejection of the lease. The legislative history of § 365(h) indicates that Congress had a desire to protect a lessee’s expectations in real estate transactions. However, § 363(f) allows a trustee or debtor in possession (DIP) to sell real property free and clear of “any interest” in such property, including a leasehold interest.
The questions become (1) whether the lessee’s possessory rights are only protected if the lease is rejected or, alternatively, whether the possessory right can be defeated through a Section 363(f) sale and (2) if a § 363(f) sale can dispose of a tenant’s property rights, whether the lessee is entitled to adequate protection for its possessory interest. This article will explore the split among the courts regarding the relationship between § 363(f) and § 365(h).
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ABI presented a session titled "Mortgage Modifications or Surrender: Are They Getting Clients Relief?" at the Northeast Consumer Forum, held as part of the Northeast Bankruptcy Conference this past July. The Mortgage Modification panel offered attendees several articles on topics such as securitization documents, the 'Mortgage Follows the Note' Doctrine and related consumer issues, as well as several case studies and two charts on the loss mitigation program. The session was moderated by the Hon. James B. Haines, Jr. of the U.S. Bankruptcy Court for the District of Maine in Portland. Panelists included Stacy Bettez Ferrara of the Law Office of Stacy Bettez Ferrara, P.C. in Coventry, R.I., William K. Harrington of the Office of the U.S. Trustee for Region 1 in Boston, John S. McNicholas of Korde & Associates, P.C. in Chelmsford, Mass. and John Rao of the National Consumer Law Center Inc. in Boston. Click here to view the materials for "Mortgage Modifications or Surrender: Are They Getting Clients Relief?."
There were two excellent sessions of interest at the Southeast Bankruptcy Workshop, held in July at Kiawah Island, SC. The first was titled "Commercial Real Estate Issues: The Good, Bad Very Ugly and the Mixed Agendas of Loan Participants," and covered topics such as contract payments, Stay Relief under §362(d)(1) and (2) and current market trends, as well as provided several related case studies. The session was moderated by Robert P. Reynolds of Reynolds, Reynolds & Duncan, LLC in Tuscaloosa, Ala. Panelists included Charles R. Lemons of Empire Financial Services, Inc. in Milledgeville, Ga., Margaret Smith of GlassRatner Advisory & Capital in Miami and Margaret R. Westbrook of K&L Gates, LLP in Raleigh, N.C. Click here to view materials for "Commercial Real Estate Issues: The Good, Bad Very Ugly and the Mixed Agendas of Loan Participants."
Panelists for the session "Today's Chapter 7" provided readers with case study and discussion on topics such as exemptions, bank account freezes, pre- and post-BAPCPA issues related to inherited IRAs, judicial estoppel and a variety of claim objection issues. Neil C. Gordon of Arnall Golden Gregory LLP in Atlanta moderated the session. Panelists included Mary Beth Ausbrooks of Rothschild & Ausbrooks, PLLC in Nashville, Tenn. and the Hon. Catherine Peek McEwen of the U.S. Bankruptcy Court for the Middle District of Florida in Tampa. Click here to the view the materials for "Today's Chapter 7."
Click here to view all educational materials related to the Real Estate Committee.
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