<p> COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>Panelists Jeffrey N. Pomerantz, Esq. Brian D. Huben, Esq. Pachulski Stang Ziehl & Jones LLP Katten Muchin Rosenman LLP Los Angeles, CA Los Angeles, CA</p><p>The Automatic Stay - What it is, and why you should care</p><p>► 11 U.S.C. § 362</p><p>● Certain creditor actions prohibited</p><p>♦ 11 U.S.C. § 362 and ipso facto clauses</p><p>● Relief from the stay – what can you get and when can you get it?</p><p>● Grounds for relief</p><p>♦ For “cause” based on pre-petition termination or forfeiture of the lease</p><p>□ 11 U.S.C. § 362(d)(1)</p><p>□ Notice to pay or quit containing forfeiture election</p><p>□ Lease not property of the estate under 11 U.S.C. § 541</p><p>Vanderpark Properties, Inc. v. Buchbinder (In re Windmill Farms, Inc.), 841 F.2d 1467 (9th Cir. 1988)</p><p>In re Escondido West Travelodge, 52 B.R. 376 (S.D. Cal. 1985)</p><p>Kearny Mesa Crossroads v. Acorn Investments (In re Acorn Investments), 8 B.R. 506 (Bankr. S.D. Cal. 1981)</p><p>Marquand v. Smith (In re Smith), 105 B.R. 50 (Bankr. C.D. Cal. 1989).</p><p>1 COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>The Automatic Stay - What it is, and why you should care (continued)</p><p>♦ Lack of “equity” in the property</p><p>□ 11 U.S.C. § 362(d)(2)(A)</p><p>In re Flexipak, Inc., 49 B.R. 641 (S.D.N.Y. 1985)</p><p>♦ Property not necessary to an effective reorganization</p><p>□ 11 U.S.C. § 362(d)(2)(B)</p><p>United Sav. Ass’n v. Timbers of Inwood Forest Assocs., 484 U.S. 365 (1988)</p><p>♦ Timing of the motion – moving too early in the case?</p><p>♦ When must the court rule on the motion?</p><p>□ 11 U.S.C. § 362(e)</p><p>♦ Shifting burden under the statute</p><p>□ 11 U.S.C. § 362(g)</p><p>● What can the Debtor do?</p><p>● Where’s the rent check?</p><p>♦ Motions to compel and relief from the stay</p><p>● Security deposits</p><p>● Disposition of personal property</p><p>2 COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>Post-Petition Use and Occupancy of the Premises by the Debtor</p><p>► 11 U.S.C. § 365</p><p>● Debtor may assume, assume and assign, or reject the lease</p><p>● When must the Debtor decide?</p><p>♦ Initial 120 day period</p><p>□ 11 U.S.C. § 365(d)(4)(A)(i)</p><p>□ 11 U.S.C. § 362(d)(4)(A)(ii) ( plan confirmation)</p><p>♦ Single 90 day extension</p><p>□ 11 U.S.C. § 365(d)(4)(B)(i)</p><p>♦ Additional time with landlord’s prior written consent</p><p>□ 11 U.S.C. § 365(d)(4)(B)(ii)</p><p>● The Debtor’s obligations to pay rent and timely perform under the lease</p><p>♦ 11 U.S.C. § 365(d)(3)</p><p>□ Debtor should timely perform all obligations under the lease and pay rent pending assumption or rejection; landlord is not required to act</p><p>Towers v. Chickering & Gregory (In re Pacific-Atlantic Trading Co.), 27 F.3d 401 (9th Cir. 1994)</p><p>In the Matter of The Barrister of Delaware, Ltd., 49 B.R. 446 (Bankr. D. Del. 1985)</p><p>3 COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>Post-Petition Use and Occupancy of the Premises by the Debtor (continued)</p><p>♦ The billing date theory</p><p>□ the debtor must make any payment under a lease that becomes due after the order for relief, even if attributable to periods prior to the order for relief</p><p>Centerpoint Properties v. Montgomery Ward Holding Corp. (In re Montgomery Ward Holding Corp.), 268 F.3d 205 (3rd Cir. 2001)</p><p>In re HQ Global Holdings, Inc., 282 B.R. 169 (Bankr. D. Del. 2002)</p><p>♦ The pro-ration/accrual theory</p><p>□ the Debtor must pay rent as it accrues for every day the debtor occupies the property</p><p>In re NETtel Corp., Inc., 289 B.R. 486 (Bankr. D. D.C. 2002)</p><p>In re Handy Andy Home Improvement Centers, Inc., 144 F.3d 1127 (7th Cir. 1998)</p><p>♦ Pro-ration v. billing date</p><p>□ Courts have generally recognized that the proration rule holds a slight majority</p><p>In re Furr’s Supermarkets, Inc., 283 B.R. 60 (Bankr. 10th Cir. 2002)</p><p>In re Treesource Industries, Inc., 363 F.3d 994 (9th Cir. 2004)</p><p>4 COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>Post-Petition Use and Occupancy of the Premises by the Debtor (continued)</p><p>● Assumption of the lease</p><p>♦ What it means</p><p>♦ What it requires</p><p>□ Cure of existing defaults - 11 U.S.C. § 365(b)</p><p>● Assumption and assignment of the lease</p><p>♦ What it means</p><p>□ Release of Debtor - 11 U.S.C. § 365(k)</p><p>♦ What it requires</p><p>□ Cure of existing defaults - 11 U.S.C. § 365(b)</p><p>□ Adequate assurance of future performance</p><p>11 U.S.C. § 365(f)(2)</p><p>□ Shopping center leases</p><p> different standard applies - 11 U.S.C. § 365(b)(3)</p><p>♦ What about triple-net adjustments?</p><p>5 COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>Post-Petition Use and Occupancy of the Premises by the Debtor (continued)</p><p>● Rejection of the lease</p><p>♦ What it means</p><p>□ Future rent damages capped by statute</p><p>11 U.S.C. § 502(b)(6)</p><p>♦ What it requires</p><p>□ Exercise of Debtor’s business judgment</p><p>♦ What the Debtor leaves behind and what to do with it</p><p>Bankruptcy claims</p><p>► 11 U.S.C. § 502(b)(6) and Federal Rules of Bankruptcy Procedure 3001 - 3007</p><p>● What’s a bar date?</p><p>● What can a landlord claim?</p><p>● When do claims get paid?</p><p>Proactive Involvement in Bankruptcy Cases</p><p>► Participation on Creditors’ Committee</p><p>● Committee Formation Process </p><p>● Pros</p><p>● Cons</p><p>6 COMMERCIAL REAL ESTATE LEASES PRACTICAL INFORMATION ON NEGOTIATIONS AND ENFORCEMENT BANKRUPTCY: WHAT TO DO WHEN IT HAPPENS</p><p>November 4, 2008</p><p>Proactive Involvement in Bankruptcy Cases (continued)</p><p>► Other Ways to Gather Information</p><p>● Court Pacer Website</p><p>● Debtor Case Website</p><p>A landlord can terminate a lease based upon the tenant's filing of a chapter 11 bankruptcy petition if the lease contains a provision making the file a bankruptcy petition an event of default. TRUE or FALSE?</p><p>A landlord can prevent a tenant who has filed bankruptcy from assigning the lease to a third party if the lease requires the landlord's consent to the assignment. TRUE or FALSE?</p><p>Landlords of shopping centers have greater protections against the assignment of leases of their tenants than do landlords of other commercial property. TRUE or FALSE?</p><p>7</p>