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Friday, January 2, 2009

Lease Survives Bankruptcy Rejection

An individual who owned a business filed a personal Chapter 7 Bankruptcy. The business remained at the premises and continued to pay the rent, but the bankruptcy trustee failed to accept the Lease. Under bankruptcy rules such failure is an automatic rejection of the Lease. The Landlord filed a Motion to Lift Stay to eject the business from the space based upon the rejection of the Lease.

The Court ruled that the rejection of the Lease on behalf of the bankruptcy estate was not a termination of the Lease. So long as the debtor did not default on the Lease, the Landlord could not evict the business. Federal Realty Investment Trust v. Park, U.S. Bankruptcy Court for the Eastern District of Virginia (2002)

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