Real Estate

Lease Debt Arises at Signing for Preference Analysis

By: Marissa Gross
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
Recently, in Midwest Holding # 7, LLC v. Anderson (In re Tanner Family, LLC),[1] the Eleventh Circuit held that a debt on a lease agreement is incurred at the time of signing and not when the rental payments become due. Under section 547(b) of the Code, a bankruptcy trustee can avoid “any transfer of an interest of the debtor in property” provided the transfer meets five elements.[2] Since one of those elements requires that the payment sought to be avoided must be “for or on account of an antecedent debt owed by the debtor before such transfer was made,” determining when a debt is incurred is essential to the analysis.[3]
 

Equities Can Adjust Administrative Claim for Stub Rent

By: Timothy Poydenis
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
The Bankruptcy Court for the District of Delaware recently held in In re Sportsman’s Warehouse, Inc., that landlords who seek payment of administrative claims for stub rent, the rent for the period from the petition date through the first of the following month, are not per se entitled to an administrative priority.[1] In this case, Sportsman’s Warehouse, a retail sporting goods store, filed for bankruptcy under chapter 11 on March 21, 2009. Sportsman’s Warehouse was renting the warehouse in which it operated its business. Despite the fact that rent was due and payable on the first of each month, Sportsman Warehouse failed to pay the rent due on March 1, 2009. Consequently, the landlord sought the allowance and immediate payment of the unpaid stub rent for the period from March 21, 2009, through March 31, 2009.[2] Although the court recently held that a debtor’s post-petition use and occupancy of leased premises, per se, creates an administrative claim,[3] the court held that its previous holding was a “misapplication of the law and will no longer be followed by this Court.”[4] Rather, the court held that a case-by-case analysis “must” be used to determine the amount of the benefit to the estate. The result of that determination will provide the amount of payment the landlord is entitled to as an administrative claim under section 503(b).