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Anti-Assignment Clause?

By Steven B. Smith and Dana Gale Hefter

The commencement of a Chapter 11 bankruptcy case by a tenant will typically give rise to myriad issues and challenges for a commercial landlord, based upon various Bankruptcy Code provisions that may, and often will, change the parties' otherwise applicable rights and obligations pursuant to the terms of the lease and applicable non-bankruptcy law.

One such issue that landlords are often faced with is the post-petition enforceability of anti-assignment provisions that are commonly found within lease agreements. The United States Court of Appeals for the Third Circuit recently weighed in on this issue by affirming an order from the Delaware Bankruptcy Court reopening a Chapter 11 case of a reorganized debtor in order to permit the debtor's assignee to exercise a purchase option in a lease notwithstanding the anti-assignment clauses contained therein. See In re Lazy Days' RV Center Inc., No. 12-4047, 2013 WL 3886735 (3d Cir. July 30, 2013). In doing so, the Third Circuit reaffirmed the policy underlying anti-assignment provisions in connection with bankruptcy cases, and the extent of bankruptcy courts' jurisdiction after closure of a case.

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