Insolvency Issues in Real Estate

Pillsbury

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09.18.25

The publications in this series tackle many facets (and potential applications) of the Bankruptcy Code as potential balm and bane for owners, landlords and lenders trying to navigate a landscape made exponentially more treacherous by recent economic and market conditions.

Landlords Beware: A Tenant’s Bankruptcy May Limit Your Recovery More than You Think (04.13.26)
Andrew M. Troop, Dania Slim, Patrick E. Fitzmaurice and Michael Stavros unpack a recent decision by a Delaware Bankruptcy Court that allowed litigation seeking to recover the proceeds of a landlord’s draw on a letter of credit to proceed, even though such draws are generally considered independent transactions.
Bankruptcy Court Dismisses Case Manufactured to Cap Lease Damages (9.18.25)
Hugh M. McDonald and Chazz Coleman explore how the Bedmar decision reinforces a growing judicial theme: Chapter 11 is not a mechanism to create artificial distress or engineer balance sheets for shareholder advantage.
U.S. Bankruptcy Court Holds that State-Court Receivership Order Does Not Bar Managing Member from Seeking LLC Bankruptcy Relief (10.25.24)
Patrick J. Potter, David L. Miller and Caroline Tart examine a recent U.S. Bankruptcy Court ruling that holds that managing members possess the constitutional right under the U.S. Bankruptcy Code to seek limited liability company bankruptcy relief for distressed real estate or other enterprises even if in receivership.
Lenders Beware: The Ponzi Scheme Presumption Can Trap an Unwitting Lender (10.15.24)
Jonathan Doolittle explores a recent Ninth Circuit decision which highlights how courts may hold lenders responsible for financial losses associated with a borrower's Ponzi scheme, even if they had no knowledge of the crime.
Bankruptcy Court Splits the Baby on Real Estate Landlord’s Claim for Unpaid Postpetition Rent (8.20.24)
Joshua D. Morse, Carmela D. Nicholas and Claire K. Wu examine a decision holding that a chapter 7 trustee-lessee’s failure to comply with postpetition, pre-rejection lease obligations does not automatically give the landlord an administrative expense claim.
Having Property in the United States: A Prerequisite to Chapter 15 Relief? (6.25.24)
Rahman Connelly discusses a ruling by the Eleventh Circuit (In re Al Zawawi) that section 109(a)’s debtor eligibility requirements do not apply to chapter 15 cases, reinforcing a split between the Second and Eleventh Circuits.
Commercial Real Estate Partnership Cancellation of Debt Income (3.22.24)
Nino Li, David L. Miller, Patrick J. Potter and Brett R. Willis discuss the complexities of cancellation debt income (CODI), including bankruptcy and insolvency implications.
Conflicting Court Rulings on Subchapter V Eligibility Leave Small Businesses in Limbo (3.12.24)
Patrick E. Fitzmaurice, Dania Slim and Caroline Tart examine two recent bankruptcy court decisions that reflect a split of authority on subchapter V eligibility.
Not So Fast: Satisfaction of Default-Rate Interest Required before Loan Reinstatement (11.6.23)
Joshua D. Morse, Kwame O. Akuffo and Caroline Tart discuss a recent decision requiring debtors under a chapter 11 plan to pay default-rate interest and fees to a secured lender as a condition to reinstatement of defaulted and accelerated debt.
Contiguous Condominiums Are Not “SARE” (6.29.23)
Dania Slim, Patrick E. Fitzmaurice and Alana A. Lyman discuss how a recent ruling by the U.S. Bankruptcy Court for the Southern District of New York that held that properties must share a common scheme or plan to constitute a “single property or project ”clarifies the classification of “single asset real estate.”
No Cutting the (Priority) Line!: Incidental Beneficiaries to Assumed Contracts and Leases Cannot Assert Cure Claims Against Debtors (5.3.23)
Dania Slim and Alana A. Lyman discuss the Second Circuit's finding that incidental beneficiaries without legal rights under assumed contracts or leases may not assert cure claims.
Time Approach Applied to Cap Rent Claim in Century 21 Department Stores Bankruptcy Cases (2.13.23)
Andrew M. Troop, Patrick J. Potter, David L. Miller, Dania Slim and Kwame O. Akuffo discuss a new case from the Southern District of New York, which breaks with precedent in that district and sides with the debtor-tenant argument that the time approach applies to reduce the landlords’ claims for lease termination damages.
If You Know Something, Say Something, or Lose Good-Faith Protection in a Bankruptcy Sale (4.18.22)
Patrick E. Fitzmaurice and Kwame O. Akuffo examine how asset purchasers with actual or constructive knowledge of a competing interest that fail to alert the bankruptcy court may be subject to claims by competing interest holders in an otherwise free and clear sale.
Is a By-the-Hour Motel a Single Asset Real Estate for Chapter 11 Purposes? (3.26.22)

Dania Slim and Alana Lyman examine a recent case that has further defined some limits concerning to which types of properties the SARE designation can be applied.
Bankruptcy Court Holds Debtor-Assignor Is Not Off the Hook for Pre- and Post-Assignment Damages Under Lease Assigned Pre-Bankruptcy Because Landlord Never Granted a Release (1.26.22)
Patrick J. Potter, Claire K. Wu and Kwame O. Akuffo examine In re RGN-Group Holdings, LLC, a recent bankruptcy court ruling that highlights why landlords, particularly in light of the ongoing COVID-19 pandemic, should continue to enforce their rights under commercial leases notwithstanding a tenant or former tenant’s bankruptcy filing.
Retail Debtor’s Bid for “Super” Rent Holiday and Rent Abatement Denied (5.11.21)
In the Journal of Bankruptcy Law, Patrick J. Potter, Patrick E. Fitzmaurice, Brian L. Beckerman and Kwame O. Akuffo break down In re CEC Entertainment.
Court Finds Pandemic Does Not Satisfy Lease’s Casualty Clause (3.31.21)
Patrick J. Potter, Christian A. Buerger, Hugh M. McDonald, Patrick E. Fitzmaurice and Jonathan Doolittle discuss a new case from the Southern District of New York that extends the trend of courts enforcing leases against tenants forced to close due to the impact of the COVID-19 pandemic.
Negative Amortization Chapter 11 Plans as a Potential Bridge Over the Economic Recovery Gap (2.23.21)
James Dickinson and Patrick Potter discuss the potential for hotels responding to the impact of COVID-19, particularly those with meaningful equity and presently depressed revenues, to confirm three-to-four-year reorganization plans that negatively amortize the mortgage debt while the debtor reestablishes its occupancy rates and revenue streams.
Bankruptcy Code Amendments Aimed at Allowing Extended Rent Holidays for Small Business Debtors Pose More Questions than They Answer (1.26.21)
Patrick Potter, Patrick Fitzmaurice and Kwame Akuffo discuss recent changes to section 365(d)(3) of the Bankruptcy Code under the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020.
Bankruptcy Court Denies Retail Debtor’s State-Law Based Arguments to Avoid Paying Rent During Chapter 11 (1.19.21)
In part two of our discussion of the recent Chuck E. Cheese decision, Patrick Potter, Patrick Fitzmaurice, Brian Beckerman and Kwame Akuffo examine how the bankruptcy court rejected the debtor’s efforts to defer and avoid paying rent during and after the initial 60-day period of the case.
Bankruptcy Court Rules Bankruptcy Code Does Not Permit Extended Rent Holiday for Retail Debtors (1.11.21)
Patrick Potter, Patrick Fitzmaurice and Kwame Akuffo discuss the portion of the recent Chuck E. Cheese decision denying the debtor’s/tenant’s request to defer paying rent after the 60-day “rent holiday” period prescribed in section 365(d)(3) of the Bankruptcy Code.
The Letter of Credit Conundrum: When a Debtor’s Default May Be Preferable to Its Late Payment (8.19.20)
Patrick Potter, David Miller and Dania Slim discuss the preference exposure to a landlord or other creditor that arises when the debtor makes a payment to the landlord or other creditor during the 90 days before its bankruptcy, which payment falls outside the parameters of the lease or other contractual relationship, and where a letter of credit supporting the debtor’s obligations expires after the bankruptcy (but before the landlord or creditor receives a demand for return of the preferential payment).
Court Holds COVID-19 Executive Order Triggers Lease’s Force Majeure Clause, Excusing Some Rent Obligations (7.16.20)
David Miller, Patrick Potter, Jessica Lee and Katie Bumpers evaluate the decision, In re Hitz Restaurant Group, where the Bankruptcy Court ruled that the Illinois Governor’s Executive Order, temporarily barring on-premises food service and consumption, triggered the force majeure language, thereby partially absolving the tenant-debtor from paying its rent.
Bankruptcy Blockers in Governance Documents May Not Prevent Real Estate or Other Bankruptcies (5.7.20)
Patrick Potter, Dania Slim and Kimberly Mann evaluate whether bankruptcy blockers in a debtor’s governance documents are likely to deter bankruptcies, and the likelihood of success of a motion to dismiss the bankruptcy case based on such blockers.
Personal Guaranties May Not Deter Property Owner Bankruptcies (5.1.20)
Patrick Potter, Joshua Morse, Deborah Baum and Dania Slim evaluate whether the existence of personal guaranties are likely to deter property owner bankruptcies
How Chapter 11 Solved One Multifamily Condo Regime’s Dual Challenges of Mounting Liabilities and Unpaid Dues (4.24.20)
Patrick Potter, David Miller and Dania Slim turn our attention to condominium associations with mounting liabilities who are looking for creative solutions to their financial problems.
Navigating Bankruptcy Exposure for Landlords Arising from Anticipated Lease Terminations During COVID-19 (4.17.20)
Patrick Potter, Christian Buerger, Dania Slim and Melissa Pettit examine lease terminations and how they may have unintended consequences for landlords. We conclude with a discussion of potential strategies for landlords.
A Single Asset Bankruptcy from the 1990s Gains New Relevance during COVID-19 (4.7.20)
Patrick J. Potter and Dania Slim look back a few decades at a case that could provide lessons for real estate projects with no or severely reduced cash flow (a condition many projects find or will find themselves in due to the impact of COVID-19).

Insolvency Issues in Real Estate

Pillsbury insights on insolvency-related solutions, obstacles and precedents for owners, landlords and lenders to consider.

Is a By-the-Hour Motel a Single Asset Real Estate for Chapter 11 Purposes? (3.26.22)

Dania Slim and Alana Lyman examine a recent case that has further defined some limits concerning to which types of properties the SARE designation can be applied.