To prevent landlords under long-term real property leases from reaping a windfall for future rent claims at the expense of other creditors, the Bankruptcy Code caps the amount of a landlord's claim against a debtor-tenant for damages "resulting from the termination" of a real property lease.

The perspective of a landlord

In brief

A tenant's insolvency hits landlords particularly hard. Existing rental securities (e.g., rent deposit, landlord's lien) cannot always cushion the loss of rent and operating costs. Especially in times of the current energy crisis and rising costs, this issue is becoming increasingly explosive. This is demonstrated by the numerous insolvencies in the fashion retail sector, such as Galeria, Peek & Cloppenburg, KaDeWe and Esprit. High rents are often of the main reasons for insolvency.

One of the main advantages for a debtor to seek protection under the Companies’ Creditors Arrangement Act (CCAA) or the Bankruptcy and Insolvency Act (BIA) is the stay of proceedings that prevents creditors faced with a default in payment from taking any action against the debtor. This allows the debtor, among other things, to reorganize itself or dispose of some or all of its assets under the court’s supervision. Be that as it may, there are exceptions.

If a tenant appoints a voluntary administrator, the Corporations Act protects the administrator from Landlords who would otherwise be able to re-enter the premises.

It is important to act decisively to recover possession of your premises before an administrator is appointed.

Preparing a business for an exit can be a complex and time-consuming task.

Gläubigerbenachteiligungsvorsatz bei der Vorsatzanfechtung im Rahmen von Grundstücksverkäufen (BGH, Urteil vom 22. Februar 2024 – IX ZR 226/20).

In In re New Dragon Toy Wholesale, Inc., Chief Bankruptcy Judge Martin Glenn denied a debtor/tenant’s motion for a temporary restraining order to enjoin a landlord and the New York City marshal from evicting the debtor from a commercial property, holding that the eviction was excepted from the automatic stay since the commercial lease terminated pre-bankruptcy.

Background

The real estate industry forms a significant portion of the flourishing Indian economy. However, it is also plagued with inordinate delays, cash-flow issues and anguished homebuyers. The Insolvency and Bankruptcy Board of India (“IBBI”) has recently added to the array of steps being taken to address these issues. 

For RSLs who are routinely contracting with housebuilders for golden brick delivery of affordable housing across multiple phases, we discuss the four key actions that can help if the housebuilder becomes insolvent.

1. Pre-Insolvency – Financial Distress Provisions and Due Diligence

The National Company Law Appellate Tribunal (“NCLAT”) in Anjani Kumar Prashar v. Manab Datta & Ors, Company Appeal (AT) (Ins) No.