Overview

• Jurisdiction: United States

This book is intended to be a basic guide to many of the business and legal issues that confront real property owners, lenders, tenants, legal counsel and other professional advisors when dealing with bankruptcy cases under chapter 11 of the U.S. Bankruptcy Code.⁶ This is an update to an earlier version of the book. The text has now been expanded to more fully reflect the various changes brought about by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which became operative on Oct. 17, 2005.

This book is written both for the real estate professional who may be familiar with an adjacent area of the law or business, such as banking or leasing, but may not be familiar with the terminology, rules and judicial interpretation of bankruptcy law, as well as for bankruptcy lawyers who are searching for a ready reference to the leading cases that govern some of the recurring issues that arise in chapter 11 bankruptcy cases. The focus of this book is commercial real property — that is, retail space, commercial office buildings and shopping centers. Such property is described in the Bankruptcy Code as "nonresidential real property."

The need for this book reflects the increasing number of retail bankruptcies in the U.S., as well as the significant impact that such cases have on real property issues and on those who own, lease and finance real property. The number of retail cases involving significant nonresidential real property issues continues to grow each year, affecting landlords and growing the dollar value of landlord claims arising from such bankruptcy filings.

Much is at stake for landlords, lenders and lessees in a typical bankruptcy case. Landlord issues have become big-ticket items in many of the larger bankruptcy cases. Unanticipated changes in case law require leasehold mortgagees and other lenders to be more vigilant about actions taken during the course of a case, and even before a bankruptcy petition is filed. This is evidenced by recent case law holding that a debtor can sell its assets free and clear of virtually any interest, in-eluding a leasehold estate that is subject to a mortgage.⁷ Landlords that suffer large monetary damages due to a tenant's bankruptcy, which might be recoverable under state law, continue to discover that the effect of the damages "cap" imposed by the Code has severe consequences, and that important legal rights can be lost through momentary inadvertence or failure to protest certain debtor...