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Annual Spring Meeting 2015: Asset Sales and Real Estate Committees

Don’t Restrict My Sale: The Enforceability of Restrictive Covenants and Easements in Assets Sales in Bankruptcy

ABI Commission’s Proposed Changes to Code Affecting Real Estate

In 2012, ABI initiated a comprehensive analysis of chapter 11 business bankruptcy cases and possible reforms. Following a three-year review process, the ABI Commission to Study the Reform of Chapter 11 recently issued its “2012-2014 Final Report and Recommendations.”[1] ABI believed that such a report was appropriate in light of the changes in businesses, capital structures and the global marketplace since enactment of the Bankruptcy Code in 1978.

Impact of ABI Commission’s Final Report and Recommendations on SARE Cases

A single-asset real estate (SARE) case is defined as “real property constituting a single property or project, other than residential real property with fewer than [four] residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.”[1] In plain terms, it is a special-purpose entity that holds a single parcel or several parcels of real property

Designation Rights: A Dangerous Creep Around the Landlord Protections in § 365 Amounts to Sanctioned Hijacking

In 2002, Hon. Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York published In re Ames Dep’t Stores Inc.,[1] a case that has often been cited as being an innovative approach to addressing issues arising in debtor estates with numerous locations subject to unexpired real property leases.

Abandoned, Exempt or Stripped: Recent Developments in Lien-Stripping in Bodensiek

In In re Bodensiek,[1] a chapter 7 case involving an abandoned Florida homestead, the bankruptcy court addressed the issue of whether a debtor can strip[2] a wholly unsecured claim on account of a second mortgage on abandoned homestead property. The question, as phrased by the court, was whether it had the authority under prevailing law to strip off a wholly unsecured lien, even if the property to which the lien was attached is no longer subject to administration in the case.

Limits on Oversecured Creditors’ Attorneys’ Fees

There are two types of foreclosure proceedings in the U.S.: judicial and nonjudicial. Both proceedings contain procedures for oversecured creditors to recover attorneys’ fees and costs from the proceeds of the collateral securing the indebtedness. Judicial foreclosure jurisdictions subscribe to the theory that loans secured by real property are liens (i.e., lien theory states), while nonjudicial foreclosure jurisdictions subscribe to the theory that the lender is the title owner of the real property until the borrower repays its obligations (i.e., title theory states).

Loop Becomes a Knot: The Importance of More than One Impaired, Consenting Class and Other Takeaways from In re Loop 76 LLC

[1]When we last reported on In re Loop 76,[2] the case was on appeal with the Ninth Circuit Bankruptcy Appellate Panel (BAP). In a lengthy decision that one could argue expanded the bankruptcy court’s ruling on classification, the BAP has since affirmed the bankruptcy court’s decision permitting separate classification of unsecured deficiency claims.[3]

Dirt-for-Debt Buries Creditor with Risk and Uncertainty

In order to confirm a chapter 11 reorganization plan, a debtor must satisfy all of the provisions of § 1129(a) of the Bankruptcy Code, except for § 1129(a)(8), which requires that each class of creditors either (1) accept the proposed plan or (2) is unimpaired under the proposed plan. When a debtor fails to meet § 1129(a)(8), the debtor can “cram down” a dissenting unimpaired secured creditor pursuant to § 1129(b), but only if the plan is “fair and equitable” with respect to that creditor.

 

Absolute Assignment of Rents Does Not Always Bar Debtor’s Use of Business Income for Reorganization Efforts

Two recent decisions have provided guidance concerning the scope of a lender’s right to collect “rents” generated by a debtor in possession, and the debtor’s corresponding ability to use those “rents” in furtherance of its restructuring efforts: In re Ocean Place Development LLC[1] and In re Soho 25 Retail LLC.[2] The issue of whether certain post-petition income generated by a debtor constitutes property of the estate under § 541(a) of the Bankruptcy Code was at t

Right to Protection of Leasehold Interest in Real Property in a § 363 Sale by a Debtor/Landlord: Section 363(f) vs. Section 365(h)

Two sections of the Bankruptcy Code seemingly stand at odds regarding the protections offered to lessees of real property owned by a bankrupt debtor. Section 365(h) strongly protects a lessee’s right to possession of real property in the face of debtor’s rejection of the lease. The legislative history of § 365(h) indicates that Congress had a desire to protect a lessee’s expectations in real estate transactions. However, § 363(f) allows a trustee or debtor in possession (DIP) to sell real property free and clear of “any interest” in such property, including a leasehold interest.