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LEASES, OPTIONS, LEASE-BACKS, EQUITABLE MORTGAGE

IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO.  WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.

In re McCray, 342 B.R. 668 (Bkrtcy.D.Dist.Colo. 2006) S. Martin Teel, JR., Bankruptcy Judge newly enacted provisions of § 362(b)(22) preventing stay of eviction from arising in serial filing cases requires a lease or rental agreement.

NEWLY ENACTED PROVISIONS OF § 362(d)(4) GIVING COURT POWER TO GRANT RELIEF FROM STAY FOR TWO YEARS IN ANY SUBSEQUENT CASE REQUIRES THE CREDITOR TO HOLD A SECURITY INTEREST IN THE PROPERTY

The debtors had filed several petitions to frustrate eviction by an owner who had newly acquired the property in a foreclosure. The court held that there was no lease or rental agreement, nor did the owner have a “security interest” per se because by acquiring ownership its security interest was extinguished, and accordingly new BAPCPA provisions of § 362 did not apply. Nevertheless the court ruled that it had the power under § 105(a) to terminate the stay and issue order preventing stay from arising in any case filed within the next 2 years.

Lessee’s interest in real property does not survive a “free and clear” sale in bankruptcy court:

Reprint from article published in Lexology (blog – Kate Thomas, Squire Patton Boggs) In the Matter of Spanish Peaks Holdings II, LLC, Do a lessee’s possessory interests in real property survive a “free and clear” sale of the property under section 363 of the Bankruptcy Code? In a recent decision, the Ninth Circuit Court of Appeals said “no,” holding that section 365(h) did not protect the interest of the lessee in the context of a section 363 sale when there had been no prior formal rejection of the lease under section 365. In so holding, the Ninth Circuit joined the Seventh Circuit Court of Appeals in rejecting the majority view that a sale of real property under 363(f) does not extinguish leasehold interests in that property. The Ninth Circuit’s decision undermines the notion that lessees enjoy special protections under the Bankruptcy Code and underscores the need for lessees to be proactive in protecting their interests when their lessors file bankruptcy.

An automobile sale/lease-back/option-to-buy agreement that meets Merryweather v. Pendleton test is a security device for a loan and subject to Consumer Lenders Act; latter act is not void for vagueness. SAL Leasing, Inc. v Arizona, 1 CA-CV 99-0631, 10/3/00.

A lender who takes title, then allowing old owner to reside in property under premise of a lease to purchase; Arizona Question regarding Equitable Mortgages There is a good discussion of “disguised real estate security transactions” in Nelson and Whitman’s hornbook on Real Estate Financing, Chapter 3, and an old law review article by Cunningham and Tischler in 26 Rutgers Law Review 1 (1972).

Note: pre-BAPCPA

Pacific Shores v. At Homes Corp., No. 03-15769 (9th Cir. December 28, 2004) A bankruptcy court may approve retroactively the rejection of an unexpired nonresidential lease.

Note: pre-BAPCPA

In re Anderson, 2019 Bankr. LEXIS 2800 (Bankr. D. Mass. 2019) the court suggested that court approval of a lease-assumption agreement is the best means of ensuring
that a debtor can achieve the goal of motor vehicle retention without fear of repossession, and creditors can achieve the goal of a leasehold obligation that survives the bankruptcy discharge.  The court described the road to lease assumption as follows: (1) include the lease on the statement of intention and indicate that the lease will be assumed; (2) notify the lessor in writing of the intention to assume; (3) thereafter and within 30 days notify the lessor that the lease is assumed;31 (4) reach an agreement on the terms of the assumed lease; and (5) submit the written assumption agreement to the court for approval and “include a request for a determination that the assumed lease is a post-petition obligation of the debtor.