I Declare Assumption! In Satisfaction of 11 U.S.C.’s § 365(d)(4)’s Statutory Deadlines

By Camber M. Jones

Section 365 of the Bankruptcy Code addresses executory contracts and unexpired leases. It gives a debtor in possession (DIP) the power to determine whether to assume or reject a contract or lease, enabling the debtor to maximize the value of its estate by assuming executory contracts and unexpired leases that benefit the estate and rejecting those that do not. It also sets forth requirements that must be met by a debtor who chooses assumption over rejection.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) revised § 365(d)(4) to substantially limit a debtor’s ability to assume or reject nonresidential real property leases beyond a specified time period. Pre-BAPCPA, § 365(d)(4) provided:

Notwithstanding paragraphs (1) and (2), in a case under any chapter of this title, if the trustee does not assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor.

Under this framework, a pre-BAPCPA tenant/debtor could, with little pushback, extend its time to assume or reject nonresidential real property leases for multiple consecutive 60-day periods, often through and including the date of plan confirmation.1 As amended, § 365(d)(4) now states:

(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 —

(i) the date that is 120 days after the date of the order for relief; or

(ii) the date of the entry of an order confirming a plan.

(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.

This “210-day rule” removes judicial discretion to approve extensions ad infinitum and provides landlords with a “drop dead” date by which their leases must either be assumed or rejected, absent their express consent to a further extension of time. This revised language prevents the continuous extensions that were routinely granted by numerous courts under the prior statutory language,2 and provides landlords with certainty about the fate of their property.3 In fact, the time frame within which debtors have disposed of their various real estate leases has generally decreased since BAPCPA’s enactment, suggesting that landlords are now, broadly speaking, provided with this “certainty” at an earlier date than they would have been prior to 2005.4

Rite Aid: A Different Interpretation

Section 365(d)(4)(A) provides that a lease is automatically rejected “if the trustee does not assume or reject” by the statutory deadline. Post-BAPCPA, courts have generally held that filing a motion to assume prior to the expiration of the 120- or (appropriately extended) 210-day deadline satisfies the requirements of the current iteration of § 365(d)(4) and provides a landlord with sufficient certainty as to the disposition of its property.5 However, in October 2024, Hon. Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey issued a memorandum opinion in In re Rite Aid Corp.6 that arguably removes some of the certainty provided by revised § 365(d)(4).

In Rite Aid, pursuant to an appropriate motion, the debtor’s deadline to assume or reject its nonresidential real property leases was extended through May 13, 2024. Before this deadline, the debtor filed several notices and schedules listing various leases to be assumed through its plan. However, when the debtor did not file a motion to assume the leases before the May 13, 2024, deadline, the landlord, Fair Oaks LLC, filed a motion to compel rejection of its lease (which had been consistently listed on the debtor’s filings as a lease scheduled for assumption), arguing that the debtor’s failure to file an assumption motion meant that the lease was automatically rejected by virtue of § 365.7 Both the debtor and Judge Kaplan disagreed, and the court held that any mechanism clearly expressing an intention to assume, including a notice of intent, is sufficient to satisfy the requirements of § 365(d)(4).

Judge Kaplan declined in his opinion to equate the action of assumption with the filing of a motion to assume, stating that doing so would “effectively add words into the statute that are not there.”8 He compared subsection (d)(4) with other subsections of § 365 that use the word “assume” and have not (or cannot) meaningfully be interpreted to mean “file a motion to assume.”9 He further noted that nothing in the statute explicitly requires a motion to effectuate assumption, so the statutory language is “clear and unambiguous,” requiring no further analysis.10

Nevertheless, Judge Kaplan pointed out that his ruling is also “consistent with the underlying purpose of § 365(d)(4), which is to provide a deadline by which a trustee or [DIP] must take action.”11 He stated that “[t]his purpose is served when a trustee or [DIP] makes up his mind to [assume or reject] and communicates his decision in an appropriate manner.”12 Therefore, he determined that while a motion is an appropriate way to take action, “neither the statutory text nor binding precedent requires it to be done that way,” and a motion is not required in order to satisfy § 365(d)(4) where a debtor “clearly and unequivocally expresses an intention to assume,” including by filing a notice of intent or assumption schedule.13

Striking a Balance?

Broadly, § 365 of the Bankruptcy Code attempts to strike a balance between the interests of a debtor and those of its contractual counterparties. Debtors have the power to exercise their business judgment and determine whether to assume or reject an unexpired lease, and the Code provides them with time in which to do so. However, to protect the interests of landlords, if a debtor wishes to assume a lease, it must cure defaults and continue to perform under the lease’s terms. Moreover, a debtor does not have unlimited time in which to assume.

While a lease cannot be assumed absent a court order, reading § 365(d)(4) to require that assumption orders be entered prior to the 210-day deadline may allow landlords to effectively game the system and force rejection by, for example, delaying an assumption hearing until the deadline has passed. Such a requirement would also leave debtors subject to the mercy of a court’s calendar, which might not allow for a hearing prior to the statutory deadline, even if the debtor had timely filed an assumption motion.

On the other hand, allowing notice alone to satisfy § 365(d)(4) permits debtors to play similar games by, for example, filing a notice of assumption or listing a lease on a filed schedule of leases to be assumed, then leaving the merits of assumption to be determined at plan confirmation, which might be months beyond the 210-day statutory deadline. Moreover, even having initially stated their “clear and unequivocal” intent to assume a lease by filing such a notice, it is not uncommon for debtors to unilaterally reserve the right to amend that notice.14 If they do not agree with or like the adjudicated cure amount owed or some other aspect of the presumptively assumed lease, a debtor may later reject that same lease that it had previously, and unequivocally, expressed an intent to assume.

These scenarios provide no certainty to landlords, particularly where the merits of assumption and the debtor’s ability to perform are in dispute, and they could cause significant financial harm to landlords who are denied the time and ability to mitigate rejection damages by marketing their property to new tenants. On balance — although a motion may always be withdrawn — requiring a debtor to file a motion to assume any nonresidential real property lease prior to the 210-day deadline provides more certainty to landlords than a mere notice, and arguably protects a debtor from any landlord gamesmanship that could occur if § 365 were read to require that an assumption order be actually entered prior to the deadline.

Conclusion

Ultimately, if “notice” is sufficient to satisfy the statutory deadline, the pre-BAPCPA practice of granting a debtor essentially unlimited time in which to determine whether to assume or reject an unexpired nonresidential real property lease has effectively been revived, the result of which directly conflicts with the stated purpose of revised § 365(d)(4). This decrease in protections could prove increasingly troublesome to commercial landlords.

As of late April 2025, Fair Oaks LLC’s appeal of the Rite Aid decision has been fully briefed. It is pending for decision on the papers before Hon. Georgette Castner in the U.S. District Court for the District of New Jersey.15

Camber Jones is Of Counsel with Spencer Fane LLP in Springfield, Mo., and is a 2024 ABI “40 Under 40” honoree. Her practice includes bankruptcy and restructuring, and she represents debtors, creditors and other parties-in-interest nationwide.