Enforcing Commercial Landlord's Rights in Bankruptcy

Despite the unambiguous language of Bankruptcy Code Section 365(d), which requires a debtor, debtor-in-possession, or bankruptcy trustee to "timely perform" all obligations under an unexpired non-residential lease, it is somewhat common-place for these lease obligations to be ignored based on an assumption that they are merely entitled to an "administrative claim" and need not be immediately paid. However, nothing could be further from the truth in the Ninth Circuit.

The Ninth Circuit has held that any obligation of a debtor-in-possession under a non-residential lease of real property, pending assumption or rejection of the lease, whether or not related to debtor's use of the property, enjoys the administrative expense status and right to prompt performance conferred by 11 U.S.C. ยง 365(d)(3). See e.g. In re Art & Architecture Books of the 21st Century, 522 B.R. 249, 259-260, (Bankr. C.D. Cal. 2014); See also In re Cukierman, 265 F.3d at 850. For the avoidance of doubt, the Bankruptcy Code affords a commercial landlord not only the right to post-petition rent payments at the full contracted rate, but also timely performance of all obligations under the lease. Id.

Plainly, commercial landlords who are faced with a tenant in bankruptcy are not without options - however, the requisite payments to such a landlord may only come after an unscrupulous debtor is put on notice that you know your rights. If you are a commercial landlord with this problem, or if you anticipate this problem arising in the future, Shulman Bastian Friedman & Bui LLP, one of California's leading full service business law firms, has a team of lawyers experienced in representing creditors and landlords in and out of the bankruptcy court. We can be contacted at www.shbllp.com or via phone at 949-340-340 

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