Source: http://www.athalerlaw.com/blog/when-a-tenant-or-landlord-files-bankruptcy-1
Timestamp: 2017-12-14 12:57:35
Document Index: 491800201

Matched Legal Cases: ['arty\n1', '§ 362', '§ 362', '§ 365', '§ 365', '§ 365', '§ 365', '§ 365', '§ 365', '§ 503', '§ 502', '§365', '§365', '§365', '§ 365', '§365', '§ 363', '§ 362', '§ 362', '§ 362', '§ 362', '§ 365', '§ 365', '§ 365', '§ 365', '§365', '§ 365', '§ 365', '§ 365', '§ 362', '§ 362', '§ 362', '§ 362', '§ 365', '§ 365', '§ 365', '§ 365', '§ 554', '§ 554', '§ 554', '§ 362', '§ 365']

When A Tenant Or Landlord Files Bankruptcy 1
A. Landlord and tenant bankruptcies; overview of rights of principal players
1. Tenant files bankruptcy
a) Tenant’s rights
1) Tenant benefits from an automatic stay that stops commencement or
continuation of eviction, collection, or other proceedings.2
2) Tenant has the right not to be evicted or have other action taken against it
or the property without the landlord first making a motion in the
bankruptcy court to lift the automatic stay.3
3) Tenant has the choice to assume, assume and assign, or reject the lease.4
4) Time periods for assumption and rejection gives the tenant time to attempt
to successfully reorganize.5
5) Tenant’s prior defaults are not a basis for the landlord to terminate the
lease (i.e., ipso facto clauses are not enforceable in bankruptcy).6
b) Landlord’s rights
1) Tenant is obligated to continue making rent payments under the lease until
such time as the tenant rejects the lease.7
a. “Stub rent” is the term used for the rent due during the month the
tenant filed its bankruptcy petition. The bankruptcy court may order
that the rent due for that month must be prorated, entitling the landlord
to administrative rent only for the portion of rent representing the time
period between petition date and the end of the month.8
2) Rent accruing post-petition and pre-decision to assume or reject the lease
is given priority as an administrative expense.9
3) Tenant is obligated to comply with non-monetary lease provisions.10
4) If the tenant assumes and later breaches a commercial real estate lease, the
landlord is entitled to damages equal to the sum of all monetary
obligations due, aside from penalties, for the two year period “following
the later of the rejection date or the date of actual turnover of the
premises.”11
a. The landlord’s claim for remaining sums due under the balance of the
lease term are limited to the greater of rent for one year or 15% of
three years of the remaining lease term.12
5) If the lease expires on its own terms, the landlord cannot be compelled,
absent a provision in the lease, to renew or extend the lease.13
2. Landlord files bankruptcy
1) Tenant’s security deposit held by the landlord-debtor is generally safe and
does not become property of the bankruptcy estate.14
2) If the landlord-debtor rejects the lease, and rejection amounts to a breach
entitling the tenant to treat the lease as terminated under the terms of the
agreement or applicable non-bankruptcy law, the tenant has two options:
a. The tenant may treat the lease as terminated or, if the lease term has
commenced, the tenant may retain its rights under the lease for the rest
of the lease term and for any renewal or extension to the extent that
such rights are enforceable under applicable non-bankruptcy law.15
i. This provision in effect protects tenants from eviction in the case
the landlord files bankruptcy.
b. If the tenant elects to retain its rights under the lease or agreement it
must continue to pay rent and fulfill other obligations required by the
terms of the lease or agreement.16
i. However, the tenant may offset against the rent it owes the value
of any damage caused by the debtor’s nonperformance after the
date of rejection, but the tenant does not have any other rights
against the debtor for any damages resulting from the debtor’s
nonperformance after rejection of the lease.17
1. For example, the bankruptcy court may permit the tenant to
offset from the amount of rent the tenant owes amounts the
tenant expended to make repairs the landlord-debtor was
required to make under the terms of the lease.18
1) Landlord has the choice to assume, assume and assign, or reject the lease,
subject to the tenant’s ability to retain its rights under the lease.19
2) Landlord may, under certain circumstances, sell property free and clear of
liens and other interests, including the interests of tenants.20
a. This right is qualified by certain protections for the tenant in the
Bankruptcy Code, such as limited grounds entitling the landlord to a
free and clear sale and the right to adequate protection if such a sale
B. Review of the automatic stay and assumption and/or rejection procedure and (commercial
v. residential)
a) Prevents the landlord from taking any action against the tenant without first
obtaining the bankruptcy court’s permission.21
1) Landlord must first make a motion in the bankruptcy court to lift the stay
for cause (e.g., continuing damage to the property and lack of adequate
protection).22
b) The landlord cannot commence or continue an action in landlord-tenant court
for nonpayment of rent or to evict the tenant without first obtaining relief from
the automatic stay.23
1) Even if the landlord has already obtained a warrant of eviction, which
terminates the landlord-tenant relationship under the lease, if the landlord
has not yet executed the warrant of eviction, the landlord must first obtain
relief from the automatic stay before proceeding against the tenant.24 (See
limitation below in residential cases where landlord has judgment for
c) Landlord is not permitted to setoff a security deposit for unpaid rent without
the bankruptcy court’s permission.25
2. Assumption and rejection
a. In order to assume a lease, the tenant must cure any defaults and
provide adequate assurance of future performance.26
i. By assuming the lease, the tenant confirms its continuing
obligation to pay rent to the landlord, and the landlord is obligated
to continue to give the tenant possession of the premises.27
a. After a tenant rejects a lease, the landlord can file a claim for damages,
including damages for unpaid past and future rents.28
b. Rejection does not result in automatic termination of the lease.29
i. The landlord must take further action (i.e., obtain relief from the
automatic stay) in order to effect a termination.30
b) Commercial real estate leases
1) In chapters 7 and 11, the tenant-debtor or trustee must determine within
120 days whether to assume or reject a commercial lease.31
a. The court may extend the 120-day period by 90 days without the
landlord’s consent, but any further extensions of time require the
landlord’s consent.32
i. If the tenant-debtor or trustee fails to make a decision to assume or
reject the commercial lease within the specified time period the
lease is deemed rejected, and the tenant-debtor or trustee must
immediately surrender the property to the landlord.33
c) Residential real estate leases
1) In chapter 7, the trustee must assume or reject a residential lease within 60
days.34
a. In the Eastern District of New York, if the trustee files a motion
seeking to extend the time to assume or reject a residential lease that is
returnable no more than 14 days after the expiration of the 60 days, the
trustee must file with its motion a proposed order seeking an extension
for cause to the date of the hearing on the motion, which the court may
enter without further notice or a hearing.35 In the Southern District of
New York, the trustee need not submit a proposed order seeking an
extension for cause to the date of the hearing on the motion, because
the time to assume or reject is automatically extended until the entry of
an order resolving motion.36
i. If the trustee fails to assume or reject the lease within the specified
time the lease is deemed rejected.37
2) In chapters 11 and 13, the trustee may assume or reject a residential lease
at any time prior to plan confirmation, but the court may order the trustee
to assume or reject sooner upon request of a party to the residential lease.38
1. If the landlord obtained a judgment for possession prior to the residential tenant’s
bankruptcy, the automatic stay will not prevent the landlord from enforcing the
judgment immediately.39
a) But if the tenant files with his or her bankruptcy petition a certification that
under state law the tenant may cure any default and the tenant deposits with
the clerk any unpaid rent, the tenant will have 30 days to cure.40
2. If the landlord commenced an eviction action against the residential tenant for
endangerment of the property or illegal use of controlled substances on the
property prior to commencement of the bankruptcy case, the automatic stay will
terminate 15 days after the tenant’s bankruptcy filing unless the tenant objects to
the landlord’s certification within that time period.41
D. Treatment of leases and executory contracts under the Bankruptcy Code
1. Nunc pro tunc rejection
a) Tenant-debtor can reject lease retroactively, effectively causing the rejection
to be deemed to have occurred as of the date of the motion.42
1) If the date of the rejection motion is the same day as the petition date, by
rejecting a lease nunc pro tunc the tenant might be able to avoid paying
the landlord as an administrative expense rent that accrued post-petition
but pre-rejection.
a. In order for this to not be inequitable to the landlord, the debtor must
have previously stated its unequivocal intent to reject the lease.43
b) Because retroactive rejection prevents the landlord from receiving
administrative rent, bankruptcy courts consider the following factors in
1) Absence of delay on the part of the tenant in moving for an order to reject
the lease.44
2) The date when the tenant vacated the premises.45
3) The landlord’s motivation if opposing rejection of the lease nunc pro
tunc.46
4) Other factors of equity (e.g., prejudice to the estate).
a) A tenant with no intention to use a lease might choose to assume the lease for
the purpose of assigning it to another party
1) If the lease is below-market or otherwise valuable to a potential assignee,
the tenant-debtor or trustee might sell the lease in order to obtain value for
the bankruptcy estate, notwithstanding provisions in the lease and
applicable law restricting assignment.47
a. For example, a trustee could assume a debtor’s apartment lease and
assign the lease to the debtor’s landlord in exchange for value.48
2) Just as if the tenant were to assign the lease for itself, the proposed
assignee takes the lease subject to its terms and must give the landlord
adequate protection of its interest.49
3) Assigning a lease relieves the tenant from any further liability for any
breach occurring after assignment.50
a) While rejection serves as a breach of the lease, it does not automatically
terminate the lease.51
b) A rejected lease thus remains estate property until the landlord takes
affirmative action to terminate the lease or the trustee abandons the lease in
1) The trustee can affirmatively abandon the property during the pendency of
the bankruptcy case.52
2) A party an interest may seek an order compelling the trustee to abandon
the property.53
3) The trustee can take no action at all to administer the property, and the
property is abandoned to the debtor at the closing of the case, so long as
the debtor properly scheduled the property in its petition.54
1 Prepared by Andrew M. Thaler and Spiros Avramidis. Mr. Thaler is a founding member of Thaler Law Firm
PLLC, located at 675 Old Country Road, Westbury, New York 11590. The firm concentrates in bankruptcy, debtor
and creditor rights, mediation, and trustee representation. Mr. Thaler is also a Chapter 7 Panel Trustee for the
Eastern District of New York Bankruptcy Court. Mr. Avramidis is an associate at Thaler Law Firm PLLC.
2 11 U.S.C. § 362(a).
3 11 U.S.C. § 362(d).
4 11 U.S.C. § 365(a).
5 11 U.S.C. § 365(d).
6 11 U.S.C. § 365(e)(1).
7 11 U.S.C. § 365(d)(3).
8 See In re Stone Barn Manhattan, LLC, 398 B.R. 359, 365–68. Not all Circuits follow the “stub rent” theory.
9 11 U.S.C. § 365(d)(3).
10 11 U.S.C. § 365(d)(3).
11 11 U.S.C. § 503(b)(7).
12 11 U.S.C. § 502(b)(6).
13 In re Kong, 162 B.R. 86, 90–91 (Bankr. E.D.N.Y. 1991).
14 In re Trafalgar Associates, 53 B.R. 693, 695–96 (Bankr. S.D.N.Y. 1985).
15 11 U.S.C. §365(h)(1)(A).
16 11 U.S.C. §365(h)(1)(B).
17 11 U.S.C. §365(h)(1)(B).
18 In re Flagstaff Realty Associates, 60 F.3d 1031, 1034–35 (3d Cir. 1995).
19 11 U.S.C. § 365(a); 11 U.S.C. §365(h)(1)(B).
20 11 U.S.C. § 363(f); Precision Industries, Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537, 547–48 (7th Cir. 2003).
21 11 U.S.C. § 362(a).
22 11 U.S.C. § 362(d).
23 11 U.S.C. § 362(a)(3).
24 In re Eclair Bakery Ltd., 255 B.R. 121, 133–34 (Bankr. S.D.N.Y. 2000).
25 11 U.S.C. § 362(a)(7).
26 11 U.S.C. § 365(b)(1).
27 In re Penn Traffic Co., 524 F.3d 373, 378 (2d Cir. 2008).
28 In re Child World, Inc., 147 B.R. 847, 850 (Bankr. S.D.N.Y. 1991).
29 11 U.S.C. § 365(g).
30 In re Lavigne, 114 F.3d 379, 386–87 (2d Cir. 1997).
31 11 U.S.C. § 365(d)(4)(A).
32 11 U.S.C. § 365(d)(4)(B).
33 11 U.S.C. §365(d)(4)(A).
34 11 U.S.C. § 365(d)(1).
35 E.D.N.Y. LBR 6006-1(a).
36 S.D.N.Y. LBR 6006-1(b).
37 11 U.S.C. § 365(d)(1).
38 11 U.S.C. § 365(d)(2).
39 11 U.S.C. § 362(b)(22).
40 11 U.S.C. § 362(l).
41 11 U.S.C. § 362(b)(23); 11 U.S.C. § 362(m).
42 In re Fleming Cos., Inc., 304 B.R. 85, 96 (Bankr. D. Del. 2003).
44 In re Thinking Machines Corp., 67 F.3d 1021, 1028–29 (1st Cir. 1995).
45 Adelphia Business Solutions, Inc. v. Abnos, 482 F.3d 602, 608 (2d Cir. 2007).
46 In re Jamesway Corp., 179 B.R. 33, 38 (S.D.N.Y. 1995)
47 11 U.S.C. § 365(f); In re Ames Dept. Stores, Inc., 316 B.R. 772, 794–95 (Bankr. S.D.N.Y. 2004).
48 But see Santiago-Monteverde v. Pereira 2015 WL 868307 (2d Cir. March 2, 2015) The Second Circuit upheld the
decision of the New York Court of Appeals, holding that an interest in a rent-stabliized lease is a local public
assistance benefit under New York State Debtor and Creditor Law Section 282(2) and therefor exempt from a
49 11 U.S.C. § 365(f)(2).
50 11 U.S.C. § 365(k).
51 11 U.S.C. § 365(g); see In re Henderson, 245 B.R. 449, 453 (Bankr. S.D.N.Y. 2000).
52 11 U.S.C. § 554(a); see In re Henderson, 245 B.R. at 454.
53 11 U.S.C. § 554(b); see In re Henderson, 245 B.R. at 454.
54 11 U.S.C. § 554(c); see In re Henderson, 245 B.R. at 454.
11 U.S.C. § 362 – Automatic stay
(a) Except as provided in subsection (b) of this section, a petition filed under section 301,
302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities
Investor Protection Act of 1970, operates as a stay, applicable to all entities, of--
(1) the commencement or continuation, including the issuance or employment of
process, of a judicial, administrative, or other action or proceeding against the
debtor that was or could have been commenced before the commencement of the
case under this title, or to recover a claim against the debtor that arose before the
commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a
judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the
estate or to exercise control over property of the estate;
(b) The filing of a petition under section 301, 302, or 303 of this title, or of an application
under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate
as a stay--
(10) under subsection (a) of this section, of any act by a lessor to the debtor under
a lease of nonresidential real property that has terminated by the expiration of the
stated term of the lease before the commencement of or during a case under this
title to obtain possession of such property;
(22) subject to subsection (l), under subsection (a)(3), of the continuation of any
eviction, unlawful detainer action, or similar proceeding by a lessor against a
debtor involving residential property in which the debtor resides as a tenant under
a lease or rental agreement and with respect to which the lessor has obtained
before the date of the filing of the bankruptcy petition, a judgment for possession
of such property against the debtor;
(23) subject to subsection (m), under subsection (a)(3), of an eviction action that
seeks possession of the residential property in which the debtor resides as a tenant
under a lease or rental agreement based on endangerment of such property or the
illegal use of controlled substances on such property, but only if the lessor files
with the court, and serves upon the debtor, a certification under penalty of perjury
that such an eviction action has been filed, or that the debtor, during the 30-day
period preceding the date of the filing of the certification, has endangered
property or illegally used or allowed to be used a controlled substance on the
(c) Except as provided in subsections (d), (e), (f), and (h) of this section--
(C) if the case is a case under chapter 7 of this title concerning an
individual or a case under chapter 9, 11, 12, or 13 of this title, the time a
discharge is granted or denied;
(d) On request of a party in interest and after notice and a hearing, the court shall grant
relief from the stay provided under subsection (a) of this section, such as by terminating,
annulling, modifying, or conditioning such stay--
(1) for cause, including the lack of adequate protection of an interest in property
of such party in interest;
(2) with respect to a stay of an act against property under subsection (a) of this
(l)(1) Except as otherwise provided in this subsection, subsection (b) (22) shall apply on
the date that is 30 days after the date on which the bankruptcy petition is filed, if the
debtor files with the petition and serves upon the lessor a certification under penalty of
perjury that--
(A) under nonbankruptcy law applicable in the jurisdiction, there are
circumstances under which the debtor would be permitted to cure the
entire monetary default that gave rise to the judgment for possession, after
that judgment for possession was entered; and
(B) the debtor (or an adult dependent of the debtor) has deposited with the
clerk of the court, any rent that would become due during the 30-day
period after the filing of the bankruptcy petition.
(m)(1) Except as otherwise provided in this subsection, subsection (b) (23) shall apply on
the date that is 15 days after the date on which the lessor files and serves a certification
described in subsection (b)(23).
11 U.S.C. § 365 – Executory contracts and unexpired leases
(a) Except as provided in sections 765 and 766 of this title and in subsections (b), (c), and
(d) of this section, the trustee, subject to the court's approval, may assume or reject any
executory contract or unexpired lease of the debtor.
(b)(1) If there has been a default in an executory contract or unexpired lease of the
debtor, the trustee may not assume such contract or lease unless, at the time of
assumption of such contract or lease, the trustee--
(A) cures, or provides adequate assurance that the trustee will promptly
cure, such default other than a default that is a breach of a provision
relating to the satisfaction of any provision (other than a penalty rate or
penalty provision) relating to a default arising from any failure to perform
non-monetary obligations under an unexpired lease of real property, if it is
impossible for the trustee to cure such default by performing nonmonetary
acts at and after the time of assumption, except that if such default arises
from a failure to operate in accordance with a nonresidential real property
lease, then such default shall be
cured by performance at and after the time of assumption in accordance
with such lease, and pecuniary losses resulting from such default shall be
compensated in accordance with the provisions of this paragraph;
(B) compensates, or provides adequate assurance that the trustee will
promptly compensate, a party other than the debtor to such contract or
lease, for any actual pecuniary loss to such party resulting from such
(C) provides adequate assurance of future performance under such
(2) Paragraph (1) of this subsection does not apply to a default that is a breach of
a provision relating to--
(A) the insolvency or financial condition of the debtor at any time before
(C) the appointment of or taking possession by a trustee in a case under
this title or a custodian before such commencement; or
(D) the satisfaction of any penalty rate or penalty provision relating to a
default arising from any failure by the debtor to perform nonmonetary
obligations under the executory contract or unexpired lease.
(3) For the purposes of paragraph (1) of this subsection and paragraph (2)(B) of
subsection (f), adequate assurance of future performance of a lease of real
property in a shopping center includes adequate assurance--
(A) of the source of rent and other consideration due under such lease, and
in the case of an assignment, that the financial condition and operating
performance of the proposed assignee and its guarantors, if any, shall be
similar to the financial condition and operating performance of the debtor
and its guarantors, if any, as of the time the debtor became the lessee
(B) that any percentage rent due under such lease will not decline
(C) that assumption or assignment of such lease is subject to all the
provisions thereof, including (but not limited to) provisions such as a
radius, location, use, or exclusivity provision, and will not breach any such
provision contained in any other lease, financing agreement, or master
agreement relating to such shopping center; and
(D) that assumption or assignment of such lease will not disrupt any tenant
mix or balance in such shopping center.
(4) Notwithstanding any other provision of this section, if there has been a default
in an unexpired lease of the debtor, other than a default of a kind specified in
paragraph (2) of this subsection, the trustee may not require a lessor to provide
services or supplies incidental to such lease before assumption of such lease
unless the lessor is compensated under the terms of such lease for any services
and supplies provided under such lease before assumption of such lease.
debtor, whether or not such contract or lease prohibits or restricts assignment of rights or
delegation of duties, if--
(1)(A) applicable law excuses a party, other than the debtor, to such contract or
lease from accepting performance from or rendering performance to an entity
other than the debtor or the debtor in possession, whether or not such contract or
lease prohibits or restricts assignment of rights or delegation of duties; and
(2) such contract is a contract to make a loan, or extend other debt financing or
financial accommodations, to or for the benefit of the debtor, or to issue a security
(3) such lease is of nonresidential real property and has been terminated under
applicable non-bankruptcy law prior to the order for relief.
(d)(1) In a case under chapter 7 of this title, if the trustee does not assume or reject an
executory contract or unexpired lease of residential real property or of personal property
of the debtor within 60 days after the order for relief, or within such additional time as the
court, for cause, within such 60-day period, fixes, then such contract or lease is deemed
(2) In a case under chapter 9, 11, 12, or 13 of this title, the trustee may assume or
reject an executory contract or unexpired lease of residential real property or of
personal property of the debtor at any time before the confirmation of a plan but
the court, on the request of any party to such contract or lease, may order the
trustee to determine within a specified period of time whether to assume or reject
such contract or lease.
(3) The trustee shall timely perform all the obligations of the debtor, except those
specified in section 365(b)(2), arising from and after the order for relief under any
unexpired lease of nonresidential real property, until such lease is assumed or
rejected, notwithstanding section 503(b)(1) of this title. The court may extend, for
cause, the time for performance of any such obligation that arises within 60 days
after the date of the order for relief, but the time for performance shall not be
extended beyond such 60-day period. This subsection shall not be deemed to
affect the trustee's obligations under the provisions of subsection (b) or (f) of this
section. Acceptance of any such performance does not constitute waiver or
relinquishment of the lessor's rights under such lease or under this title.
(4)(A) Subject to subparagraph (B), an unexpired lease of nonresidential real
property under which the debtor is the lessee shall be deemed rejected, and the
trustee shall immediately surrender that nonresidential real property to the lessor,
if the trustee does not assume or reject the unexpired lease by the earlier of--
(B)(i) The court may extend the period determined under subparagraph
(A), prior to the expiration of the 120-day period, for 90 days on the
motion of the trustee or lessor for cause.
(ii) If the court grants an extension under clause (i), the court may
grant a subsequent extension only upon prior written consent of the
lessor in each instance.
(5) The trustee shall timely perform all of the obligations of the debtor, except
those specified in section 365(b)(2), first arising from or after 60 days after the
order for relief in a case under chapter 11 of this title under an unexpired lease of
personal property (other than personal property leased to an individual primarily
for personal, family, or household purposes), until such lease is
assumed or rejected notwithstanding section 503(b)(1) of this title, unless the
court, after notice and a hearing and based on the equities of the case, orders
otherwise with respect to the obligations or timely performance thereof. This
subsection shall not be deemed to affect the trustee's obligations under the
provisions of subsection (b) or (f). Acceptance of any such performance does not
constitute waiver or relinquishment of the lessor's rights under such lease or under
(e)(1) Notwithstanding a provision in an executory contract or unexpired lease, or in
terminated or modified, and any right or obligation under such contract or lease may not
be terminated or modified, at any time after the commencement of the case solely
because of a provision in such contract or lease that is conditioned on--
this title or a custodian before such commencement.
(2) Paragraph (1) of this subsection does not apply to an executory contract or
restricts assignment of rights or delegation of duties, if--
(A)(i) applicable law excuses a party, other than the debtor, to such
contract or lease from accepting performance from or rendering
performance to the trustee or to an assignee of such contract or lease,
whether or not such contract or lease prohibits or restricts assignment of
rights or delegation of duties; and
(ii) such party does not consent to such assumption or assignment;
(B) such contract is a contract to make a loan, or extend other debt
financing or financial accommodations, to or for the benefit of the debtor,
or to issue a security of the debtor.
(f)(1) Except as provided in subsections (b) and (c) of this section, notwithstanding a
provision in an executory contract or unexpired lease of the debtor, or in applicable law,
that prohibits, restricts, or conditions the assignment of such contract or lease, the trustee
may assign such contract or lease under paragraph (2) of this subsection.
(2) The trustee may assign an executory contract or unexpired lease of the debtor
(A) the trustee assumes such contract or lease in accordance with the
provisions of this section; and
(B) adequate assurance of future performance by the assignee of such
contract or lease is provided, whether or not there has been a default in
(3) Notwithstanding a provision in an executory contract or unexpired lease of the
debtor, or in applicable law that terminates or modifies, or permits a party other
than the debtor to terminate or modify, such contract or lease or a right or
obligation under such contract or lease on account of an assignment of such
contract or lease, such contract, lease, right, or obligation may not be terminated
or modified under such provision because of the assumption or assignment of
such contract or lease by the trustee.
(g) Except as provided in subsections (h)(2) and (i)(2) of this section, the rejection of an
executory contract or unexpired lease of the debtor constitutes a breach of such contract
or lease--
(1) if such contract or lease has not been assumed under this section or under a
plan confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the
date of the filing of the petition; or
(2) if such contract or lease has been assumed under this section or under a plan
confirmed under chapter 9, 11, 12, or 13 of this title--
(A) if before such rejection the case has not been converted under section
1112, 1208, or 1307 of this title, at the time of such rejection; or
(B) if before such rejection the case has been converted under section
1112, 1208, or 1307 of this title--
(i) immediately before the date of such conversion, if such contract
or lease was assumed before such conversion; or
(ii) at the time of such rejection, if such contract or lease was
assumed after such conversion.
(h)(1)(A) If the trustee rejects an unexpired lease of real property under which the debtor
is the lessor and--
(i) if the rejection by the trustee amounts to such a breach as would
entitle the lessee to treat such lease as terminated by virtue of its
terms, applicable non-bankruptcy law, or any agreement made by
the lessee, then the lessee under such lease may treat such lease as
terminated by the rejection; or
(ii) if the term of such lease has commenced, the lessee may retain
its rights under such lease (including rights such as those relating
to the amount and timing of payment of rent and other amounts
payable by the lessee and any right of use, possession, quiet
enjoyment, subletting, assignment, or hypothecation) that are in or
appurtenant to the real property for the balance of the term of such
lease and for any renewal or extension of such rights to the extent
that such rights are enforceable under applicable non-bankruptcy
(B) If the lessee retains its rights under subparagraph (A)(ii), the lessee
may offset against the rent reserved under such lease for the balance of the
term after the date of the rejection of such lease and for the term of any
renewal or extension of such lease, the value of any damage caused by the
nonperformance after the date of such rejection, of any obligation of the
debtor under such lease, but the lessee shall not have any other right
against the estate or the debtor on account of any damage occurring after
such date caused by such nonperformance.
(C) The rejection of a lease of real property in a shopping center with
respect to which the lessee elects to retain its rights under subparagraph
(A)(ii) does not affect the enforceability under applicable nonbankruptcy
law of any provision in the lease pertaining to radius, location, use,
exclusivity, or tenant mix or balance.
(D) In this paragraph, “lessee” includes any successor, assign, or
mortgagee permitted under the terms of such lease.
(2)(A) If the trustee rejects a timeshare interest under a timeshare plan under
which the debtor is the timeshare interest seller and--
(i) if the rejection amounts to such a breach as would entitle the
timeshare interest purchaser to treat the timeshare plan as
terminated under its terms, applicable nonbankruptcy law, or any
agreement made by timeshare interest purchaser, the timeshare
interest purchaser under the timeshare plan may treat the timeshare
plan as terminated by such rejection; or
(ii) if the term of such timeshare interest has commenced, then the
timeshare interest purchaser may retain its rights in such timeshare
interest for the balance of such term and for any term of renewal or
extension of such timeshare interest to the extent that such rights
are enforceable under applicable nonbankruptcy law.
(B) If the timeshare interest purchaser retains its rights under subparagraph
(A), such timeshare interest purchaser may offset against the moneys due
for such timeshare interest for the balance of the term after the date of the
rejection of such timeshare interest, and the term of any renewal or
extension of such timeshare interest, the value of any damage caused by
the nonperformance after the date of such rejection, of any obligation of
the debtor under such timeshare plan, but the timeshare interest purchaser
shall not have any right against the estate or the debtor on account of any
damage occurring after such date caused by such nonperformance.
(i)(1) If the trustee rejects an executory contract of the debtor for the sale of real property
or for the sale of a timeshare interest under a timeshare plan, under which the purchaser is
in possession, such purchaser may treat such contract as terminated, or, in the alternative,
may remain in possession of such real property or timeshare interest.
(A) such purchaser shall continue to make all payments due under such
contract, but may, offset against such payments any damages occurring
after the date of the rejection of such contract caused by the
nonperformance of any obligation of the debtor after such date, but such
purchaser does not have any rights against the estate on account of any
damages arising after such date from such rejection, other than such offset;
(B) the trustee shall deliver title to such purchaser in accordance with the
provisions of such contract, but is relieved of all other obligations to
perform under such contract.
(j) A purchaser that treats an executory contract as terminated under subsection (i) of this
section, or a party whose executory contract to purchase real property from the debtor is
rejected and under which such party is not in possession, has a lien on the interest of the
debtor in such property for the recovery of any portion of the purchase price that such
purchaser or party has paid.