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The Bankruptcy StrategistFeaturesBankruptcyLandlord Tenant LawLitigation

Resolving the Competing Desires of Buyers and Tenants In Bankruptcy

By Daniel A. Lowenthal
September 01, 2019

Chapter 11 cases take less time from start to finish than they did 10 to 15 years ago. Companies often don't file these days to stay in business but to sell assets and liquidate. Sometimes the key assets are buildings where people have their homes or businesses sell their goods. Buyers will want to update buildings they purchase to attract new tenants who can pay more than current ones. But current tenants might want to stay where they are and not move.

The Bankruptcy Code offers support to both buyers and tenants. Section 363 lets debtors sell assets free and clear of liens, claims, and other interests. Such interests can include real property leases. But Bankruptcy Code §365 allows tenants with leases debtors reject in bankruptcy to retain their rights that are "appurtenant" to the real property for the lease term and any extension. This means tenants can stay in their homes or their businesses even when a debtor rejects a lease.

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