Do Post-Bankruptcy Petition Lease Claims Automatically Result In An Administrative Expense Claim for Unpaid Rent?

As we reported in the May issue of The Bankruptcy Strategist, landlords often hold large claims in bankruptcy cases involving commercial real estate when the lease is rejected by the tenant debtor. In these cases, not only are rejection claims unsecured and capped, but, as all unsecured creditors experience, often unsecured claims receive pennies on the dollar. However, the Bankruptcy Code is better for landlords regarding the debtor's lease obligations that arise after the bankruptcy filing until the lease is rejected. The Bankruptcy Code provides that trustees and debtors-in-possession are required to perform all post-petition obligations arising under nonresidential leases, and their failure to do so can be treated as administrative claims, which are paid in full ahead of unsecured claims. That being said, courts disagree on whether these post-petition lease claims automatically result in a per se administrative expense claim for unpaid rent and other lease charges. Given that administrative claims are paid in full before unsecured claims, courts scrutinize administrative expense requests carefully.