What is an unexpired lease?
Table of Contents,
- 1 What is an unexpired lease?
- 2 Can a landlord reject a lease in bankruptcy?
- 3 What contracts can be rejected in bankruptcy?
- 4 Do you need to register a lease extension?
- 5 How does lease extension work?
- 6 What happens to a commercial lease after bankruptcy?
- 7 Can a debtor assign a lease in bankruptcy?
- 8 Can a landlord use bankruptcy to evict a tenant?
- 9 Can a landlord cap a claim in bankruptcy?
What is an unexpired lease?
A leasehold interest in a property is a diminishing asset; as the unexpired term of the lease gets shorter the value of the property falls. When the lease expires the property will, in theory, revert to the landlord and it is, therefore, necessary to ‘extend’ the lease well before this happens.
Can a landlord reject a lease in bankruptcy?
If the debtor-tenant rejects the lease, the landlord may assert a “rejection damage” claim. This right will override an anti-assignment provision in the lease. And that is not all: Unlike an ordinary assignment, a bankruptcy assignment will terminate the obligation of the original assignor.
What contracts can be rejected in bankruptcy?
Under section 365 of the Bankruptcy Code, the Debtor has the option to either assume or reject unexpired leases and executory contracts. (In simple terms, an executory contract is one under which at least one of the parties has obligations to perform.)
Do you need to register a lease extension?
To be legally entitled to extend your lease, you need to have been registered as the owner of the property with the Land Registry for at least two years. The registration date usually happens a few days to a few months after you complete the purchase of your property.
How does lease extension work?
In brief, the Act provides the leaseholder with a right to extend the lease term by a further 90 years and extinguishes the ground rent. This is known as a statutory lease extension. Furthermore, as the term of the lease gets shorter, the premium payable for the extension increases.
What happens to a commercial lease after bankruptcy?
If the debtor is the tenant under an unexpired commercial lease, it must either assume or reject the lease within 120 days of the filing of bankruptcy. The court can extend this time period without the landlord’s consent for 90 additional days, making a total of 210 days, but any further extensions require the landlord’s prior written consent.
Can a debtor assign a lease in bankruptcy?
Assignments of leases in bankruptcy. Although some leases contain restrictions or outright prohibitions on the tenant’s ability to assign the lease, many of these provisions will be unenforceable in bankruptcy. This can allow a debtor to “assume and assign” a lease to a third party over the landlord’s objection.
Can a landlord use bankruptcy to evict a tenant?
Landlord as debtor . Sometimes the debtor is not a tenant but a landlord. In that situation, although the debtor can reject a lease and no longer perform any of its duties as landlord, it cannot use bankruptcy to evict a tenant that prefers to stay in possession of the premises.
Can a landlord cap a claim in bankruptcy?
This ability to cap a landlord’s claim in bankruptcy is often a major benefit to a debtor tenant, especially when the lease rejected is a long-term lease with rent obligations higher than current market rates.