The Leasing Hotline

Bankruptcy

A debtor's obligation under a lease should be prorated to cover the post-petition, pre-rejection period. In re Elizabethtown Family Care Clinic, LLC, Case NO. 08-31544(1)(7), December 18, 2008.

The tenant (debtor), a medical office, and landlord entered into a lease agreement for a term of three years. Thereafter, the tenant defaulted on the lease and filed a voluntary petition under Chapter 7 of the Bankruptcy Code. The landlord filed a motion seeking administrative expenses under 11 USC ' 503(b)(1)(A). Although the parties agreed that the landlord was entitled to an administrative claim, the amount of the claim was in dispute. The trustee, on behalf of the debtor, argued that the amount of rent should have been prorated for the month that the debtor filed its bankruptcy claim. The court agreed. It held that a debtor's obligation under a lease should be prorated to cover the post-petition, pre-rejection period, regardless of the date that the rent was billed under the lease.

Restrictive Covenants

A court may not award a judgment on the pleadings for a restrictive covenant where the definitions as contained in the original declaration were not clear. Dillon Real Estate Co., Inc. v. American National Insurance Co., No. CV-08-01508-PHX-FJM, United States District Court for the District of Arizona, Dec. 11, 2008.

Two property owners owned adjoining pieces of land upon which one shopping center was built. The owners signed a declaration with restrictive covenants, including exclusive use provision, and easements that run with the land. One of the property owners leased space to a company called SFDC (d/b/a Fry's Food & Drug Store). Thereafter, the other property owner sold the property and the successor-in-interest leased space to a Dollar Tree store. The other property owner commenced an action, holding that the Dollar Tree was selling grocery items in violation of the exclusive use provision, and sought compensatory damages and injunctive relief. It then moved for a judgment on the pleadings. The court denied the motion, holding that a judgment on the pleadings is only appropriate where the moving party has established that no material issues of fact exist. The court held that because the issue of “grocery items” was not defined in the original declaration, it remained in dispute whether Dollar Tree actually sold “grocery items.” Furthermore, the declaration was unclear whether it applied to the successor-in-interest.

Bankruptcy

A debtor's obligation under a lease should be prorated to cover the post-petition, pre-rejection period. In re Elizabethtown Family Care Clinic, LLC, Case NO. 08-31544(1)(7), December 18, 2008.

The tenant (debtor), a medical office, and landlord entered into a lease agreement for a term of three years. Thereafter, the tenant defaulted on the lease and filed a voluntary petition under Chapter 7 of the Bankruptcy Code. The landlord filed a motion seeking administrative expenses under 11 USC ' 503(b)(1)(A). Although the parties agreed that the landlord was entitled to an administrative claim, the amount of the claim was in dispute. The trustee, on behalf of the debtor, argued that the amount of rent should have been prorated for the month that the debtor filed its bankruptcy claim. The court agreed. It held that a debtor's obligation under a lease should be prorated to cover the post-petition, pre-rejection period, regardless of the date that the rent was billed under the lease.

Restrictive Covenants

A court may not award a judgment on the pleadings for a restrictive covenant where the definitions as contained in the original declaration were not clear. Dillon Real Estate Co., Inc. v. American National Insurance Co., No. CV-08-01508-PHX-FJM, United States District Court for the District of Arizona, Dec. 11, 2008.

Two property owners owned adjoining pieces of land upon which one shopping center was built. The owners signed a declaration with restrictive covenants, including exclusive use provision, and easements that run with the land. One of the property owners leased space to a company called SFDC (d/b/a Fry's Food & Drug Store). Thereafter, the other property owner sold the property and the successor-in-interest leased space to a Dollar Tree store. The other property owner commenced an action, holding that the Dollar Tree was selling grocery items in violation of the exclusive use provision, and sought compensatory damages and injunctive relief. It then moved for a judgment on the pleadings. The court denied the motion, holding that a judgment on the pleadings is only appropriate where the moving party has established that no material issues of fact exist. The court held that because the issue of “grocery items” was not defined in the original declaration, it remained in dispute whether Dollar Tree actually sold “grocery items.” Furthermore, the declaration was unclear whether it applied to the successor-in-interest.