What Must a Retailer Do to Timely Assume a Shopping Center Lease Under Bankruptcy Code §365(d)(4)?

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Published in Shopping Center Legal Update - Vol. 31, Issue 3, Fall/Winter 2011

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “2005 Act”) brought significant changes to a number of sections of the United States Bankruptcy Code. Among many of the sections of the Bankruptcy Code, Congress focused on eliminating past abuses relating to the period of time within which a debtor/tenant may assume, assume and assign, or reject a lease of non-residential real property under 11 U.S.C. § 365(d (4).1 Prior to passage of the 2005 Act, as long as a retail debtor could establish “cause” (a term not defined by the Bankruptcy Code) for an extension of time under § 365(d)(4), bankruptcy courts granted multiple extensions of time that, in some cases, stretched on for years. Following prolonged debate, Congress mandated a maximum period of 210 days after an order for relief is entered following a bankruptcy petition for a debtor/tenant to assume a non-residential real property lease. But what, exactly, must a retail debtor do to assume a shopping center lease? Despite the plain language of the statute, two schools of thought have emerged: (1) that a debtor need only file its motion to assume before the 210th day of the case; (2) that the bankruptcy court’s lease assumption order must be entered by the 210th day of the case. An analysis of the legislative history of the 2005 Act, the language of § 365(d)(4), and several related sections of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure support the conclusion that the debtor needs to have a lease assumption order in hand (or on the docket) to avoid having the lease deemed rejected and being forced to surrender possession to the landlord.

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Published In: Bankruptcy Updates, General Business Updates, Commercial Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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