In a Landlord Bankruptcy Sale, What Happens to the Lease?

The U.S. Court of Appeals for the Third Circuit held on Nov. 30, 2018 that “Section 365(h) of the Bankruptcy Code and the doctrine of equitable recoupment entitled [a commercial tenant] to continue paying [reduced] rent … even after its landlord filed for bankruptcy and rejected the [l]ease,” in In re Revel AC Inc. Affirming the lower courts, the Third Circuit explained that “[n]othing in the agreements or court orders governing [a third party’s] purchase of the [debtor’s] casino in bankruptcy changes this result.” In this article, of counsel Michael Cook discusses the Revel decision and the effect of a landlord debtor’s bankruptcy upon tenants.