Table of Contents

• Jurisdiction: United States

Table of Contents

Overview......................................................1

Chapter One: Pre-Bankruptcy Strategies.......5

I. Pre-Petition Termination of the Lease................................6

A. Introduction.......................................................................................6

B. The Concept of "Termination" Pertaining to Real Estate Leases...............6

C. Strategy Pointers: Risks and Benefits from Termination..........................11

1. General................................................................................................................................11

2. Starting the Cap on Damages................................................................................................11

3. The Importance of a Notice of Default...................................................................................12

4. The Need for State Court Judgment/Barrier to Reviving Terminated Lease..............................12

II. Challenging the Termination of the Lease as a Fraudulent Conveyance..................................................14

A. Cases Holding that Lease Termination Is a Fraudulent Conveyance........14

B. Cases Holding that Lease Termination Is Not a Fraudulent Conveyance .. 17

III. Pre-Petition Rent Payments as Preferences........................19

A. Introduction....................................................................................... 19

B. Cases Finding Rent Payments to Be Avoidable Preferences .................... 19

Chapter Two: The Debtor's Obligations to the Landlord Prior to Assumption or Rejection of the Lease..................................................23

I. Introduction...................................................................24

II. The Debtor's Duty to Timely Perform Its Lease Obligations Pending Assumption or Rejection....................................25

A. Rationale for the Rule ......................................................................... 25

B. The Duty to Perform Lease Obligations Is Independent of the Standards for Administrative Claims..........................................27

C. The Contrary View on Post-Petition Lease Obligations..........................30

D. What Is an "Obligation" under the Lease?...........................................30

E. When Does an Obligation Arise? "Proration" vs. "Performance"...........31

1. The Proration (or Accrual) Rule...