Appellate Court Provides Practical Guide to Commercial Landlord's Bankruptcy Damage Claims

Relevance

Code §502(b)(6) caps (i.e., limits) a landlord-lessor's claim for "damages resulting from the termination of a lease of real property." 11 U.S.C. §502(b)(6) (emphasis added). After the court "determine[s] the amount of such claim," it may be allowed "except to the extent" that it exceeds "the rent reserved by such lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease." Id. The Code does not address whether it applies to a claim against a guarantor/debtor, "as opposed to a tenant/debtor … [It] does not distinguish among types of debtors." And the Second Circuit has not "addressed the question." 2024 WL 1301429, at *4.

Debtor-Guarantor Liability

The court rejected the appellant lessor's argument that the statutory cap on damages did not apply to its claim against a lease guarantor. As the bankruptcy court noted, other courts have repeatedly "held that section 502(b)(6) applies to limit claims of a lessor for damages for the termination of a lease whether the debtor is the lessee itself or is a guarantor of the lease." Id., citing In re Ancona, 2016 WL 828099, at *5 (Bankr. S.D.N.Y. 2016) (collecting cases and noting that most courts have held that the cap applies to claims against a debtor-guarantor of a lease). "…[T]he goal behind the statutory damages cap is to compensate a lessor for his damages, while at the same time insuring that the landlord's claim is not permitted to be so large that other general unsecured creditors are unable to get recovery from the estate." Id., citing Ancona, 2016 WL 828099, at *1. See also, In re Arden, 176 F.3d 1226, 1229 (9^th Cir. 1999) ("a plain reading of the section underscores that it is the claim of the lessor, not the status of the lessee — or its agent or guarantor — that triggers application of the Cap.").