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Vol 12, Num 1 l April 2015

Technology and Intellectual Property

► In This Issue:

ABI Commission’s Proposed Changes to Code Affecting Real Estate

ABI

Scott Underwood
Buchanan Ingersoll
& Rooney PC
Tampa, Fla.

ABI

Frank Harrison
Buchanan Ingersoll
& Rooney PC
Tampa, Fla.

In 2012, ABI initiated a comprehensive analysis of chapter 11 business bankruptcy cases and possible reforms. Following a three-year review process, the ABI Commission to Study the Reform of Chapter 11 recently issued its “2012-2014 Final Report and Recommendations.” ABI believed that such a report was appropriate in light of the changes in businesses, capital structures and the global marketplace since enactment of the Bankruptcy Code in 1978. In particular, companies now frequently have substantial secured debt encumbering most, if not all, of their assets; the assets encumbered are more frequently intangible; the capital structures are more complex and heavily leveraged; and the operations and assets of companies are often located outside of the U.S. In addition, the Commission was cognizant of anecdotal evidence that chapter 11 cases had become too expensive.

With a goal of increasing reorganizations and preserving jobs while maximizing the asset values for debtors’ stakeholders, the Commission’s report covered various topics and exceeded 400 pages. Below are the proposals most directly affecting real estate issues, including (1) secured creditors’ rights; (2) § 363 sales; (3) assumption, rejection and related issues; and (4) plan treatment.

Proposals Affecting Secured Creditors’ Rights
The Commission made multiple proposals regarding adequate-protection provisions of the Bankruptcy Code. First, it noted that valuation for adequate-protection purposes should be determined based on the foreclosure value of the collateral property. The proposals limit this valuation to only the purposes of determining adequate protection and not for any other purpose. » Read More

Impact of ABI Commission’s Final Report and Recommendations on SARE Cases

ABI

Megan W. Murray
Trenam Kemker
Tampa, Fla.

A single-asset real estate (SARE) case is defined as “real property constituting a single property or project, other than residential real property with fewer than [four] residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.” In plain terms, it is a special-purpose entity that holds a single parcel or several parcels of real property upon which no real business is operating, there are no or few employees, the associated debt is secured by the real property and its rents, and there is minimal unsecured debt. » Read More

Abandoned, Exempt or Stripped: Recent Developments in Lien-Stripping in Bodensiek

ABI

Tina M. Talarchyk
The Talarchyk Firm
Palm Beach, Fla.

In In re Bodensiek, a chapter 7 case involving an abandoned Florida homestead, the bankruptcy court addressed the issue of whether a debtor can strip a wholly unsecured claim on account of a second mortgage on abandoned homestead property. The question, as phrased by the court, was whether it had the authority under prevailing law to strip off a wholly unsecured lien, even if the property to which the lien was attached is no longer subject to administration in the case. The bankruptcy court found in the affirmative after analyzing 11 U.S.C § 506(a), McNeal, the dissent by Justice Antonin Scalia in Dewsnup and the original bankruptcy petition and schedules. » Read More

Designation Rights: A Dangerous Creep Around the Landlord Protections in § 365 Amounts to Sanctioned Hijacking

ABI

Donald W. Clarke
Wasserman, Jurista
& Stolz, PC
Basking Ridge, N.J.

In 2002, Hon. Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York published In re Ames Dep’t Stores Inc., a case that has often been cited as being an innovative approach to addressing issues arising in debtor estates with numerous locations subject to unexpired real property leases. Those issues concern an estate’s interest in what could amount to hundreds or thousands of unexpired leases and the estate’s attempt to capture value from those leases in the face of its § 365‌(d)‌(3) obligation to timely perform under the lease, as well as manage any pre-rejection liability such as administrative expenses. The severity of these concerns will depend on the nature of the debtor’s business, the lease provisions, and general circumstances with respect to the property. Naturally, these concerns are magnified when the debtor is no longer operating or lacks the resources that are necessary to operate for any significant period after it files its petition. » Read More

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