The Government must provide actual notice of forfeiture proceedings to those the Government knows have claimed an interest in property to be forfeited. In a fact pattern the Sixth Circuit characterized as "befitting a John Grisham novel," the Government dug up (literally) a fraudster’s $250,000 on a golf course. The Government found the money in October 2009 and instituted forfeiture proceedings. In November and December 2009, the Government posted a generalized notice of forfeiture on the internet.
Lehman Brothers Special Financing, Inc. v. Ballyrock ABS-CDO 2007-1 Limited (In re Lehman Brothers Holdings, Inc.) No. 09-01032 (JMP) (Bankr. S.D.N.Y. May 12, 2011)
CASE SNAPSHOT
In a recent decision, Marrama v. Citizens Bank of Massachusetts1, the United States Supreme Court considered whether a debtor has an absolute right under Section 706(a) of the Bankruptcy Code to convert a case to Chapter 13, clarifying a growing split among circuits as to whether the debtor’s bad faith conduct prior to his proposed conversion results in the forfeiture of the debtor’s right to convert.
In previous editions of the Business Restructuring Review, we reported on a pair of highly controversial rulings handed down in late 2005 and early 2006 by the New York bankruptcy court overseeing the chapter 11 cases of embattled energy broker Enron Corporation and its affiliates. In the first, Bankruptcy Judge Arthur J. Gonzalez held that a claim is subject to equitable subordination under section 510(c) of the Bankruptcy Code even if it is assigned to a third-party transferee who was not involved in any misconduct committed by the original holder of the debt.
By some accounts, there is over $300 billion of commercial real estate debt set to mature over each of the next four years. As a result of a lack of demand, a lack of liquidity and lackluster valuations, a significant portion of this debt will go into default. In many cases, bankruptcies will ensue for both the projects and their owners.
In previous editions of the Business Restructuring Review, we reported on a pair of highly controversial rulings handed down in late 2005 and early 2006 by the New York bankruptcy court overseeing the chapter 11 cases of embattled energy broker Enron Corporation and its affiliates. In the first, Bankruptcy Judge Arthur J. Gonzalez held that a claim is subject to equitable subordination under section 510(c) of the Bankruptcy Code even if it is assigned to a third-party transferee who was not involved in any misconduct committed by the original holder of the debt.
The case of Goldacre v Nortel, decided in December, has clarified the circumstances in which an administrator is liable to pay rent under a lease as an expense of an administration. If rent is an expense of the administration, the landlord will almost certainly be paid in full for as long as the administrator uses the property. If it is not such an expense, the landlord will be an unsecured creditor who will be lucky to receive a few pence in the pound.
In the last edition of Real Estate Update, we considered the position of a landlord wishing to keep the lease of premises to a company in administration ongoing and in what circumstances he will receive the full rent (ie 100 pence in the pound). If, however, the tenant is in administration and the landlord would like to bring the lease to an end, he would only be entitled to forfeit the lease if the administrator consents or the court grants an order giving him permission to do so.1
1. Can I lock the tenant out of the property until they pay?
No. If a tenant has been placed in administration then there will be a moratorium in place. This gives a company some breathing space. Rights against the company, such as forfeiture or conducting legal proceedings, can only be pursued with either the consent of the administrator or a court order. As noted last week, changing the locks is likely to forfeit the lease. Unless you intend to forfeit and obtain the necessary permission to do so, you should not change the locks.
In a recent decision, Marrama v. Citizens Bank of Massachusetts1, the United States Supreme Court considered whether a debtor has an absolute right under Section 706(a) of the Bankruptcy Code to convert a case to Chapter 13, clarifying a growing split among circuits as to whether the debtor’s bad faith conduct prior to his proposed conversion results in the forfeiture of the debtor’s right to convert.