11 U.S. Code § 365 - Executory contracts and unexpired leases
(a)
Except as provided in sections
765 and
766
of this title and in subsections (b), (c), and (d) of this section, the
trustee, subject to the court’s approval, may assume or reject any
executory contract or unexpired lease of the debtor.
(b)
(1)
If there has been a default in an
executory contract or unexpired lease of the debtor, the trustee may not
assume such contract or lease unless, at the time of assumption of such
contract or lease, the trustee—
(A)
cures, or provides adequate
assurance that the trustee will promptly cure, such default other than a
default that is a breach of a provision relating to the satisfaction of
any provision (other than a penalty rate or penalty provision) relating
to a default arising from any failure to perform nonmonetary
obligations under an unexpired lease of real property, if it is
impossible for the trustee to cure such default by performing
nonmonetary acts at and after the time of assumption, except that if
such default arises from a failure to operate in accordance with a
nonresidential real property lease, then such default shall be cured by
performance at and after the time of assumption in accordance with such
lease, and pecuniary losses resulting from such default shall be
compensated in accordance with the provisions of this paragraph;
(2)
Paragraph (1) of this subsection does not apply to a default that is a breach of a provision relating to—
(3)
For the purposes of paragraph (1) of
this subsection and paragraph (2)(B) of subsection (f), adequate
assurance of future performance of a lease of real property in a
shopping center includes adequate assurance—
(A)
of the source of rent and other
consideration due under such lease, and in the case of an assignment,
that the financial condition and operating performance of the proposed
assignee and its guarantors, if any, shall be similar to the financial
condition and operating performance of the debtor and its guarantors, if
any, as of the time the debtor became the lessee under the lease;
(C)
that assumption or assignment of
such lease is subject to all the provisions thereof, including (but not
limited to) provisions such as a radius, location, use, or exclusivity
provision, and will not breach any such provision contained in any other
lease, financing agreement, or master agreement relating to such
shopping center; and
(4)
Notwithstanding any other provision of
this section, if there has been a default in an unexpired lease of the
debtor, other than a default of a kind specified in paragraph (2) of
this subsection, the trustee may not require a lessor to provide
services or supplies incidental to such lease before assumption of such
lease unless the lessor is compensated under the terms of such lease for
any services and supplies provided under such lease before assumption
of such lease.
(c)
The trustee may not assume or assign any
executory contract or unexpired lease of the debtor, whether or not such
contract or lease prohibits or restricts assignment of rights or
delegation of duties, if—
(1)
(A)
applicable law excuses a party,
other than the debtor, to such contract or lease from accepting
performance from or rendering performance to an entity other than the
debtor or the debtor in possession, whether or not such contract or
lease prohibits or restricts assignment of rights or delegation of
duties; and
(d)
(1)
In a case under chapter
7
of this title, if the trustee does not assume or reject an executory
contract or unexpired lease of residential real property or of personal
property of the debtor within 60 days after the order for relief, or
within such additional time as the court, for cause, within such 60-day
period, fixes, then such contract or lease is deemed rejected.
(2)
In a case under chapter 9, 11, 12, or
13 of this title, the trustee may assume or reject an executory contract
or unexpired lease of residential real property or of personal property
of the debtor at any time before the confirmation of a plan but the
court, on the request of any party to such contract or lease, may order
the trustee to determine within a specified period of time whether to
assume or reject such contract or lease.
(3)
The trustee shall timely perform all the obligations of the debtor, except those specified in section
365
(b)(2),
arising from and after the order for relief under any unexpired lease
of nonresidential real property, until such lease is assumed or
rejected, notwithstanding section
503
(b)(1)
of this title. The court may extend, for cause, the time for
performance of any such obligation that arises within 60 days after the
date of the order for relief, but the time for performance shall not be
extended beyond such 60-day period. This subsection shall not be deemed
to affect the trustee’s obligations under the provisions of subsection
(b) or (f) of this section. Acceptance of any such performance does not
constitute waiver or relinquishment of the lessor’s rights under such
lease or under this title.
(4)
(A)
Subject to subparagraph (B), an
unexpired lease of nonresidential real property under which the debtor
is the lessee shall be deemed rejected, and the trustee shall
immediately surrender that nonresidential real property to the lessor,
if the trustee does not assume or reject the unexpired lease by the
earlier of—
(5)
The trustee shall timely perform all of the obligations of the debtor, except those specified in section
365
(b)(2), first arising from or after 60 days after the order for relief in a case under chapter
11
of this title under an unexpired lease of personal property (other than
personal property leased to an individual primarily for personal,
family, or household purposes), until such lease is assumed or rejected
notwithstanding section
503
(b)(1)
of this title, unless the court, after notice and a hearing and based
on the equities of the case, orders otherwise with respect to the
obligations or timely performance thereof. This subsection shall not be
deemed to affect the trustee’s obligations under the provisions of
subsection (b) or (f). Acceptance of any such performance does not
constitute waiver or relinquishment of the lessor’s rights under such
lease or under this title.
(e)
(1)
Notwithstanding a provision in an
executory contract or unexpired lease, or in applicable law, an
executory contract or unexpired lease of the debtor may not be
terminated or modified, and any right or obligation under such contract
or lease may not be terminated or modified, at any time after the
commencement of the case solely because of a provision in such contract
or lease that is conditioned on—
(2)
Paragraph (1) of this subsection does
not apply to an executory contract or unexpired lease of the debtor,
whether or not such contract or lease prohibits or restricts assignment
of rights or delegation of duties, if—
(A)
(i)
applicable law excuses a party,
other than the debtor, to such contract or lease from accepting
performance from or rendering performance to the trustee or to an
assignee of such contract or lease, whether or not such contract or
lease prohibits or restricts assignment of rights or delegation of
duties; and
(f)
(1)
Except as provided in subsections (b)
and (c) of this section, notwithstanding a provision in an executory
contract or unexpired lease of the debtor, or in applicable law, that
prohibits, restricts, or conditions the assignment of such contract or
lease, the trustee may assign such contract or lease under paragraph (2)
of this subsection.
(2)
The trustee may assign an executory contract or unexpired lease of the debtor only if—
(3)
Notwithstanding a provision in an
executory contract or unexpired lease of the debtor, or in applicable
law that terminates or modifies, or permits a party other than the
debtor to terminate or modify, such contract or lease or a right or
obligation under such contract or lease on account of an assignment of
such contract or lease, such contract, lease, right, or obligation may
not be terminated or modified under such provision because of the
assumption or assignment of such contract or lease by the trustee.
(g)
Except as provided in subsections (h)(2)
and (i)(2) of this section, the rejection of an executory contract or
unexpired lease of the debtor constitutes a breach of such contract or
lease—
(1)
if such contract or lease has not been
assumed under this section or under a plan confirmed under chapter 9,
11, 12, or 13 of this title, immediately before the date of the filing
of the petition; or
(2)
if such contract or lease has been
assumed under this section or under a plan confirmed under chapter 9,
11, 12, or 13 of this title—
(A)
if before such rejection the case has not been converted under section
1112,
1208, or
1307 of this title, at the time of such rejection; or
(h)
(1)
(A)
If the trustee rejects an unexpired lease of real property under which the debtor is the lessor and—
(i)
if the rejection by the trustee
amounts to such a breach as would entitle the lessee to treat such
lease as terminated by virtue of its terms, applicable nonbankruptcy
law, or any agreement made by the lessee, then the lessee under such
lease may treat such lease as terminated by the rejection; or
(ii)
if the term of such lease has
commenced, the lessee may retain its rights under such lease (including
rights such as those relating to the amount and timing of payment of
rent and other amounts payable by the lessee and any right of use,
possession, quiet enjoyment, subletting, assignment, or hypothecation)
that are in or appurtenant to the real property for the balance of the
term of such lease and for any renewal or extension of such rights to
the extent that such rights are enforceable under applicable
nonbankruptcy law.
(B)
If the lessee retains its rights
under subparagraph (A)(ii), the lessee may offset against the rent
reserved under such lease for the balance of the term after the date of
the rejection of such lease and for the term of any renewal or extension
of such lease, the value of any damage caused by the nonperformance
after the date of such rejection, of any obligation of the debtor under
such lease, but the lessee shall not have any other right against the
estate or the debtor on account of any damage occurring after such date
caused by such nonperformance.
(C)
The rejection of a lease of real
property in a shopping center with respect to which the lessee elects to
retain its rights under subparagraph (A)(ii) does not affect the
enforceability under applicable nonbankruptcy law of any provision in
the lease pertaining to radius, location, use, exclusivity, or tenant
mix or balance.
(2)
(A)
If the trustee rejects a timeshare interest under a timeshare plan under which the debtor is the timeshare interest seller and—
(i)
if the rejection amounts to
such a breach as would entitle the timeshare interest purchaser to treat
the timeshare plan as terminated under its terms, applicable
nonbankruptcy law, or any agreement made by timeshare interest
purchaser, the timeshare interest purchaser under the timeshare plan may
treat the timeshare plan as terminated by such rejection; or
(ii)
if the term of such timeshare
interest has commenced, then the timeshare interest purchaser may retain
its rights in such timeshare interest for the balance of such term and
for any term of renewal or extension of such timeshare interest to the
extent that such rights are enforceable under applicable nonbankruptcy
law.
(B)
If the timeshare interest purchaser
retains its rights under subparagraph (A), such timeshare interest
purchaser may offset against the moneys due for such timeshare interest
for the balance of the term after the date of the rejection of such
timeshare interest, and the term of any renewal or extension of such
timeshare interest, the value of any damage caused by the nonperformance
after the date of such rejection, of any obligation of the debtor under
such timeshare plan, but the timeshare interest purchaser shall not
have any right against the estate or the debtor on account of any damage
occurring after such date caused by such nonperformance.
(i)
(1)
If the trustee rejects an executory
contract of the debtor for the sale of real property or for the sale of a
timeshare interest under a timeshare plan, under which the purchaser is
in possession, such purchaser may treat such contract as terminated,
or, in the alternative, may remain in possession of such real property
or timeshare interest.
(2)
If such purchaser remains in possession—
(A)
such purchaser shall continue to
make all payments due under such contract, but may, offset against such
payments any damages occurring after the date of the rejection of such
contract caused by the nonperformance of any obligation of the debtor
after such date, but such purchaser does not have any rights against the
estate on account of any damages arising after such date from such
rejection, other than such offset; and
(j)
A purchaser that treats an executory
contract as terminated under subsection (i) of this section, or a party
whose executory contract to purchase real property from the debtor is
rejected and under which such party is not in possession, has a lien on
the interest of the debtor in such property for the recovery of any
portion of the purchase price that such purchaser or party has paid.
(k)
Assignment by the trustee to an entity of a
contract or lease assumed under this section relieves the trustee and
the estate from any liability for any breach of such contract or lease
occurring after such assignment.
(l)
If an unexpired lease under which the
debtor is the lessee is assigned pursuant to this section, the lessor of
the property may require a deposit or other security for the
performance of the debtor’s obligations under the lease substantially
the same as would have been required by the landlord upon the initial
leasing to a similar tenant.
(m)
For purposes of this section
365 andsections
541
(b)(2) and
362
(b)(10), leases of real property shall include any rental agreement to use real property.
(n)
(1)
If the trustee rejects an executory
contract under which the debtor is a licensor of a right to intellectual
property, the licensee under such contract may elect—
(A)
to treat such contract as
terminated by such rejection if such rejection by the trustee amounts to
such a breach as would entitle the licensee to treat such contract as
terminated by virtue of its own terms, applicable nonbankruptcy law, or
an agreement made by the licensee with another entity; or
(B)
to retain its rights (including a
right to enforce any exclusivity provision of such contract, but
excluding any other right under applicable nonbankruptcy law to specific
performance of such contract) under such contract and under any
agreement supplementary to such contract, to such intellectual property
(including any embodiment of such intellectual property to the extent
protected by applicable nonbankruptcy law), as such rights existed
immediately before the case commenced, for—
(2)
If the licensee elects to retain its rights, as described in paragraph (1)(B) of this subsection, under such contract—
(3)
If the licensee elects to retain its
rights, as described in paragraph (1)(B) of this subsection, then on the
written request of the licensee the trustee shall—
(o)
In a case under chapter
11 of this title, the trustee shall be deemed to have assumed (consistent with the debtor’s other obligations under section
507),
and shall immediately cure any deficit under, any commitment by the
debtor to a Federal depository institutions regulatory agency (or
predecessor to such agency) to maintain the capital of an insured
depository institution, and any claim for a subsequent breach of the
obligations thereunder shall be entitled to priority under section
507. This subsection shall not extend any commitment that would otherwise be terminated by any act of such an agency.
(p)
(1)
If a lease of personal property is
rejected or not timely assumed by the trustee under subsection (d), the
leased property is no longer property of the estate and the stay under
section
362
(a) is automatically terminated.
(2)
(A)
If the debtor in a case under
chapter 7 is an individual, the debtor may notify the creditor in
writing that the debtor desires to assume the lease. Upon being so
notified, the creditor may, at its option, notify the debtor that it is
willing to have the lease assumed by the debtor and may condition such
assumption on cure of any outstanding default on terms set by the
contract.
(3)
In a case under chapter 11 in which the
debtor is an individual and in a case under chapter 13, if the debtor
is the lessee with respect to personal property and the lease is not
assumed in the plan confirmed by the court, the lease is deemed rejected
as of the conclusion of the hearing on confirmation. If the lease is
rejected, the stay under section
362 and any stay under section
1301 is automatically terminated with respect to the property subject to the lease.
Source
(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2574; Pub. L. 98–353, title III, §§ 362,
402–404,July 10, 1984, 98 Stat. 361, 367; Pub. L. 99–554, title II, §§ 257(j), (m),
283(e),Oct. 27, 1986, 100 Stat. 3115, 3117; Pub. L. 100–506, § 1(b),Oct. 18, 1988, 102 Stat. 2538; Pub. L. 101–647, title XXV, § 2522(c),Nov. 29, 1990, 104 Stat. 4866; Pub. L. 102–365, § 19(b)–(e), Sept. 3, 1992, 106 Stat. 982–984; Pub. L. 103–394, title II, §§ 205(a),
219(a), (b), title V, § 501(d)(10),Oct. 22, 1994, 108 Stat. 4122, 4128, 4145; Pub. L. 103–429, § 1,Oct. 31, 1994, 108 Stat. 4377; Pub. L. 109–8, title III, §§ 309(b),
328
(a), title IV, § 404,Apr. 20, 2005, 119 Stat. 82, 100, 104.)
Historical and Revision Notes
legislative statements
Section
365
(b)(3) represents a compromise between H.R. 8200
as passed by the House and the Senate amendment. The provision adopts
standards contained in section 365(b)(5) of the Senate amendment to
define adequate assurance of future performance of a lease of real
property in a shopping center.
Section 365(b)(4) of the House amendment
indicates that after default the trustee may not require a lessor to
supply services or materials without assumption unless the lessor is
compensated as provided in the lease.
Section
365
(c)(2) and (3) likewise represent a compromise between H.R. 8200 as passed by the House and the Senate amendment. Section
365
(c)(2)
is derived from section 365(b)(4) of the Senate amendment but does not
apply to a contract to deliver equipment as provided in the Senate
amendment. As contained in the House amendment, the provision prohibits a
trustee or debtor in possession from assuming or assigning an executory
contract of the debtor to make a loan, or extend other debt financing
or financial accommodations, to or for the benefit of the debtor, or the
issuance of a security of the debtor.
Section
365
(e) is a refinement of comparable provisions contained in the House bill and Senate amendment. Sections
365
(e)(1) and (2)(A) restate 365(e) of H.R. 8200 as passed by the House. Sections
365
(e)(2)(B)
expands the section to permit termination of an executory contract or
unexpired lease of the debtor if such contract is a contract to make a
loan, or extend other debt financing or financial accommodations, to or
for the benefit of the debtor, or for the issuance of a security of the
debtor.
Characterization of contracts to make a
loan, or extend other debt financing or financial accommodations, is
limited to the extension of cash or a line of credit and is not intended
to embrace ordinary leases or contracts to provide goods or services
with payments to be made over time.
Section
365
(f) is derived from H.R. 8200
as passed by the House. Deletion of language in section 365(f)(3) of
the Senate amendment is done as a matter of style. Restrictions with
respect to assignment of an executory contract or unexpired lease are
superfluous since the debtor may assign an executory contract or
unexpired lease of the debtor only if such contract is first assumed
under section 364(f)(2)(A) of the House amendment.
Section 363(h) of the House amendment
represents a modification of section 365(h) of the Senate amendment. The
House amendment makes clear that in the case of a bankrupt lessor, a
lessee may remain in possession for the balance of the term of a lease
and any renewal or extension of the term only to the extent that such
renewal or extension may be obtained by the lessee without the
permission of the landlord or some third party under applicable
non-bankruptcy law.
senate report no. 95–989
Subsection (a) of this section authorizes
the trustee, subject to the court’s approval, to assume or reject an
executory contract or unexpired lease. Though there is no precise
definition of what contracts are executory, it generally includes
contracts on which performance remains due to some extent on both sides.
A note is not usually an executory contract if the only performance
that remains is repayment. Performance on one side of the contract would
have been completed and the contract is no longer executory.
Because of the volatile nature of the
commodities markets and the special provisions governing commodity
broker liquidations in subchapter IV of chapter 7, the provisions
governing distribution in section
765
(a) will govern if any conflict between those provisions and the provisions of this section arise.
Subsections (b), (c), and (d) provide
limitations on the trustee’s powers. Subsection (b) requires the trustee
to cure any default in the contract or lease and to provide adequate
assurance of future performance if there has been a default, before he
may assume. This provision does not apply to defaults under ipso facto
or bankruptcy clauses, which is a significant departure from present
law.
Subsection (b)(3) permits termination of
leases entered into prior to the effective date of this title in
liquidation cases if certain other conditions are met.
Subsection (b)(4) [enacted as (c)(2)]
prohibits the trustee’s assumption of an executory contract requiring
the other party to make a loan or deliver equipment to or to issue a
security of the debtor. The purpose of this subsection is to make it
clear that a party to a transaction which is based upon the financial
strength of a debtor should not be required to extend new credit to the
debtor whether in the form of loans, lease financing, or the purchase or
discount of notes.
Subsection (b)(5) provides that in lease
situations common to shopping centers, protections must be provided for
the lessor if the trustee assumes the lease, including protection
against decline in percentage rents, breach of agreements with other
tenants, and preservation of the tenant mix. Protection for tenant mix
will not be required in the office building situation.
Subsection (c) prohibits the trustee from
assuming or assigning a contract or lease if applicable nonbankruptcy
law excuses the other party from performance to someone other than the
debtor, unless the other party consents. This prohibition applies only
in the situation in which applicable law excuses the other party from
performance independent of any restrictive language in the contract or
lease itself.
Subsection (d) places time limits on
assumption and rejection. In a liquidation case, the trustee must assume
within 60 days (or within an additional 60 days, if the court, for
cause, extends the time). If not assumed, the contract or lease is
deemed rejected. In a rehabilitation case, the time limit is not fixed
in the bill. However, if the other party to the contract or lease
requests the court to fix a time, the court may specify a time within
which the trustee must act. This provision will prevent parties in
contractual or lease relationships with the debtor from being left in
doubt concerning their status vis-a-vis the estate.
Subsection (e) invalidates ipso facto or
bankruptcy clauses. These clauses, protected under present law,
automatically terminate the contract or lease, or permit the other
contracting party to terminate the contract or lease, in the event of
bankruptcy. This frequently hampers rehabilitation efforts. If the
trustee may assume or assign the contract under the limitations imposed
by the remainder of the section, the contract or lease may be utilized
to assist in the debtor’s rehabilitation or liquidation.
The unenforcibility [sic] of ipso facto or
bankruptcy clauses proposed under this section will require the courts
to be sensitive to the rights of the nondebtor party to executory
contracts and unexpired leases. If the trustee is to assume a contract
or lease, the court will have to insure that the trustee’s performance
under the contract or lease gives the other contracting party the full
benefit of his bargain.
This subsection does not limit the
application of an ipso facto or bankruptcy clause if a new insolvency or
receivership occurs after the bankruptcy case is closed. That is, the
clause is not invalidated in toto, but merely made inapplicable during
the case for the purposes of disposition of the executory contract or
unexpired lease.
Subsection (f) partially invalidates
restrictions on assignment of contracts or leases by the trustee to a
third party. The subsection imposes two restrictions on the trustee: he
must first assume the contract or lease, subject to all the restrictions
on assumption found in the section, and adequate assurance of future
performance must be provided to the other contracting party. Paragraph
(3) of the subsection invalidates contractual provisions that permit
termination or modification in the event of an assignment, as contrary
to the policy of this subsection.
Subsection (g) defines the time as of
which a rejection of an executory contract or unexpired lease
constitutes a breach of the contract or lease. Generally, the breach is
as of the date immediately preceding the date of the petition. The
purpose is to treat rejection claims as prepetition claims. The
remainder of the subsection specifies different times for cases that are
converted from one chapter to another. The provisions of this
subsection are not a substantive authorization to breach or reject an
assumed contract. Rather, they prescribe the rules for the allowance of
claims in case an assumed contract is breached, or if a case under
chapter 11 in which a contract has been assumed is converted to a case
under chapter 7 in which the contract is rejected.
Subsection (h) protects real property
lessees of the debtor if the trustee rejects an unexpired lease under
which the debtor is the lessor (or sublessor). The subsection permits
the lessee to remain in possession of the leased property or to treat
the lease as terminated by the rejection. The balance of the term of the
lease referred to in paragraph (1) will include any renewal terms that
are enforceable by the tenant, but not renewal terms if the landlord had
an option to terminate. Thus, the tenant will not be deprived of his
estate for the term for which he bargained. If the lessee remains in
possession, he may offset the rent reserved under the lease against
damages caused by the rejection, but does not have any affirmative
rights against the estate for any damages after the rejection that
result from the rejection.
Subsection (i) gives a purchaser of real
property under a land installment sales contract similar protection. The
purchaser, if the contract is rejected, may remain in possession or may
treat the contract as terminated. If the purchaser remains in
possession, he is required to continue to make the payments due, but may
offset damages that occur after rejection. The trustee is required to
deliver title, but is relieved of all other obligations to perform.
A purchaser that treats the contract as
terminated is granted a lien on the property to the extent of the
purchase price paid. A party with a contract to purchase land from the
debtor has a lien on the property to secure the price already paid, if
the contract is rejected and the purchaser is not yet in possession.
Subsection (k) relieves the trustee and
the estate of liability for a breach of an assigned contract or lease
that occurs after the assignment.
house report no. 95–595
Subsection (c) prohibits the trustee from
assuming or assigning a contract or lease if applicable nonbankruptcy
law excuses the other party from performance to someone other than the
debtor, unless the other party consents. This prohibition applies only
in the situation in which applicable law excuses the other party from
performance independent of any restrictive language in the contract or
lease itself. The purpose of this subsection, at least in part, is to
prevent the trustee from requiring new advances of money or other
property. The section permits the trustee to continue to use and pay for
property already advanced, but is not designed to permit the trustee to
demand new loans or additional transfers of property under lease
commitments.
Thus, under this provision, contracts such
as loan commitments and letters of credit are nonassignable, and may
not be assumed by the trustee.
Subsection (e) invalidates ipso facto or
bankruptcy clauses. These clauses, protected under present law,
automatically terminate the contract or lease, or permit the other
contracting party to terminate the contract or lease, in the event of
bankruptcy. This frequently hampers rehabilitation efforts. If the
trustee may assume or assign the contract under the limitations imposed
by the remainder of the section, then the contract or lease may be
utilized to assist in the debtor’s rehabilitation or liquidation.
The unenforceability of ipso facto or
bankruptcy clauses proposed under this section will require the courts
to be sensitive to the rights of the nondebtor party to executory
contracts and unexpired leases. If the trustee is to assume a contract
or lease, the courts will have to insure that the trustee’s performance
under the contract or lease gives the other contracting party the full
benefit of his bargain. An example of the complexity that may arise in
these situations and the need for a determination of all aspects of a
particular executory contract or unexpired lease is the shopping center
lease under which the debtor is a tenant in a shopping center.
A shopping center is often a carefully
planned enterprise, and though it consists of numerous individual
tenants, the center is planned as a single unit, often subject to a
master lease or financing agreement. Under these agreements, the tenant
mix in a shopping center may be as important to the lessor as the actual
promised rental payments, because certain mixes will attract higher
patronage of the stores in the center, and thus a higher rental for the
landlord from those stores that are subject to a percentage of gross
receipts rental agreement. Thus, in order to assure a landlord of his
bargained for exchange, the court would have to consider such factors as
the nature of the business to be conducted by the trustee or his
assignee, whether that business complies with the requirements of any
master agreement, whether the kind of business proposed will generate
gross sales in an amount such that the percentage rent specified in the
lease is substantially the same as what would have been provided by the
debtor, and whether the business proposed to be conducted would result
in a breach of other clauses in master agreements relating, for example,
to tenant mix and location.
This subsection does not limit the
application of an ipso facto or bankruptcy clause to a new insolvency or
receivership after the bankruptcy case is closed. That is, the clause
is not invalidated in toto, but merely made inapplicable during the case
for the purpose of disposition of the executory contract or unexpired
lease.
Amendments
2005—Subsec. (b)(1)(A). Pub. L. 109–8,
§ 328(a)(1)(A), inserted before semicolon at end “other than a
default that is a breach of a provision relating to the satisfaction of
any provision (other than a penalty rate or penalty provision) relating
to a default arising from any failure to perform nonmonetary obligations
under an unexpired lease of real property, if it is impossible for the
trustee to cure such default by performing nonmonetary acts at and after
the time of assumption, except that if such default arises from a
failure to operate in accordance with a nonresidential real property
lease, then such default shall be cured by performance at and after the
time of assumption in accordance with such lease, and pecuniary losses
resulting from such default shall be compensated in accordance with the
provisions of this paragraph”.
Subsec. (b)(2)(D). Pub. L. 109–8, § 328(a)(1)(B), substituted “penalty rate or penalty provision” for “penalty rate or provision”.
Subsec. (c)(4). Pub. L. 109–8,
§ 328(a)(2), struck out par. (4) which read as follows: “such
lease is of nonresidential real property under which the debtor is the
lessee of an aircraft terminal or aircraft gate at an airport at which
the debtor is the lessee under one or more additional nonresidential
leases of an aircraft terminal or aircraft gate and the trustee, in
connection with such assumption or assignment, does not assume all such
leases or does not assume and assign all of such leases to the same
person, except that the trustee may assume or assign less than all of
such leases with the airport operator’s written consent.”
Subsec. (d)(4). Pub. L. 109–8,
§ 404(a), amended par. (4) generally. Prior to amendment, par. (4)
read as follows: “Notwithstanding paragraphs (1) and (2), in a case
under any chapter of this title, if the trustee does not assume or
reject an unexpired lease of nonresidential real property under which
the debtor is the lessee within 60 days after the date of the order for
relief, or within such additional time as the court, for cause, within
such 60-day period, fixes, then such lease is deemed rejected, and the
trustee shall immediately surrender such nonresidential real property to
the lessor.”
Subsec. (d)(5) to (10). Pub. L. 109–8,
§ 328(a)(3), redesignated par. (10) as (5) and struck out former
pars. (5) to (9) which related to rejection of leases under which the
debtor is an affected air carrier that is the lessee of an aircraft
terminal or aircraft gate.
Subsec. (f)(1). Pub. L. 109–8, § 404(b), substituted “provided in subsections (b) and” for “provided in subsection”.
Pub. L. 109–8,
§ 328(a)(4), struck out “; except that the trustee may not assign
an unexpired lease of nonresidential real property under which the
debtor is an affected air carrier that is the lessee of an aircraft
terminal or aircraft gate if there has occurred a termination event”
before period at end.
Subsec. (p). Pub. L. 109–8, § 309(b), added subsec. (p).
1994—Subsec. (b)(2)(D). Pub. L. 103–394, § 219(a), added subpar. (D).
Subsec. (d)(6)(C). Pub. L. 103–429, § 1(1), substituted “section
40102
(a) of title
49” for “section 101 of the Federal Aviation Act of 1958 (49 App. U.S.C. 1301)”.
Pub. L. 103–394, § 501(d)(10)(A), which directed the substitution of “section
40102 of title
49” for “the Federal Aviation Act of 1958 (49 U.S.C. 1301)”, could not be executed because the phrase “(49 U.S.C. 1301)” did not appear in text.
Subsec. (d)(10). Pub. L. 103–394, § 219(b), added par. (10).
Subsec. (g)(2)(A), (B). Pub. L. 103–394, § 501(d)(10)(B), substituted “1208, or 1307” for “1307, or 1208”.
Subsec. (h). Pub. L. 103–394, § 205(a), amended subsec. (h) generally. Prior to amendment, subsec. (h) read as follows:
“(h)(1) If the trustee rejects an
unexpired lease of real property of the debtor under which the debtor is
the lessor, or a timeshare interest under a timeshare plan under which
the debtor is the timeshare interest seller, the lessee or timeshare
interest purchaser under such lease or timeshare plan may treat such
lease or timeshare plan as terminated by such rejection, where the
disaffirmance by the trustee amounts to such a breach as would entitle
the lessee or timeshare interest purchaser to treat such lease or
timeshare plan as terminated by virtue of its own terms, applicable
nonbankruptcy law, or other agreements the lessee or timeshare interest
purchaser has made with other parties; or, in the alternative, the
lessee or timeshare interest purchaser may remain in possession of the
leasehold or timeshare interest under any lease or timeshare plan the
term of which has commenced for the balance of such term and for any
renewal or extension of such term that is enforceable by such lessee or
timeshare interest purchaser under applicable nonbankruptcy law.
“(2) If such lessee or timeshare interest
purchaser remains in possession as provided in paragraph (1) of this
subsection, such lessee or timeshare interest purchaser may offset
against the rent reserved under such lease or moneys due for such
timeshare interest for the balance of the term after the date of the
rejection of such lease or timeshare interest, and any such renewal or
extension thereof, any damages occurring after such date caused by the
nonperformance of any obligation of the debtor under such lease or
timeshare plan after such date, but such lessee or timeshare interest
purchaser does not have any rights against the estate on account of any
damages arising after such date from such rejection, other than such
offset.”
Subsec. (n)(1)(B). Pub. L. 103–394, § 501(d)(10)(C), substituted “a right to” for “a right to to”.
Subsec. (o). Pub. L. 103–394,
§ 501(d)(10)(D), substituted “a Federal depository institutions
regulatory agency (or predecessor to such agency)” for “the Federal
Deposit Insurance Corporation, the Resolution Trust Corporation, the
Director of the Office of Thrift Supervision, the Comptroller of the
Currency, or the Board of Governors of the Federal Reserve System, or
its predecessors or successors,”.
Subsec. (p). Pub. L. 103–429, § 1(2), which directed the amendment of subsec. (p) by substituting “section
40102
(a) of title
49” for “section 101(3) of the Federal Aviation Act of 1958”, could not be executed because subsec. (p) was repealed by Pub. L. 103–394, § 501(d)(10)(E). See below.
Pub. L. 103–394,
§ 501(d)(10)(E), struck out subsec. (p), which read as follows:
“In this section, ‘affected air carrier’ means an air carrier, as
defined in section 101(3) of the Federal Aviation Act of 1958, that
holds 65 percent or more in number of the aircraft gates at an airport—
“(1) which is a Large Air Traffic Hub as
defined by the Federal Aviation Administration in Report FAA–AP 92–1,
February 1992; and
“(2) all of whose remaining aircraft gates are leased or under contract on the date of enactment of this subsection.”
1992—Subsec. (c)(4). Pub. L. 102–365, § 19(c), added par. (4).
Subsec. (d)(5) to (9). Pub. L. 102–365, § 19(b), added pars. (5) to (9).
Subsec. (f)(1). Pub. L. 102–365,
§ 19(d), substituted for period at end “; except that the trustee
may not assign an unexpired lease of nonresidential real property under
which the debtor is an affected air carrier that is the lessee of an
aircraft terminal or aircraft gate if there has occurred a termination
event.”
Subsec. (p). Pub. L. 102–365, § 19(e), added subsec. (p).
1990—Subsec. (o). Pub. L. 101–647added subsec. (o).
1988—Subsec. (n). Pub. L. 100–506added subsec. (n).
1986—Subsec. (c)(1)(A). Pub. L. 99–554, § 283(e)(1), struck out “or an assignee of such contract or lease” after “debtor in possession”.
Subsec. (c)(3). Pub. L. 99–554, § 283(e)(2), inserted “is” after “lease” and “and” after “property”.
Subsecs. (d)(2), (g)(1). Pub. L. 99–554, § 257(j), (m)(1), inserted reference to chapter 12.
Subsec. (g)(2). Pub. L. 99–554, § 257(m)(2), inserted references to chapter 12 and section
1208 of this title.
Subsec. (h)(1). Pub. L. 99–554, § 283(e)(2), inserted “or timeshare plan” after “to treat such lease”.
Subsec. (m). Pub. L. 99–554, § 283(e)(3), substituted “362(b)(10)” for “362(b)(9)”.
1984—Subsec. (a). Pub. L. 98–353, § 362(a), amended subsec. (a) generally, making minor changes.
Subsec. (b). Pub. L. 98–353,
§ 362(a), amended subsec. (b) generally, inserting in par. (3)
reference to par. (2)(B) of subsec. (f) of this section, in par. (3)(A)
inserting provisions relating to financial condition and operating
performance in the case of an assignment, and in par. (3)(C)
substituting “that assumption or assignment of such lease is subject to
all the provisions thereof, including (but not limited to) provisions
such as a radius, location, use, or exclusivity provision, and will not
breach any such provision contained in any other lease, financing
agreement, or master agreement relating to such shopping center” for
“that assumption or assignment of such lease will not breach
substantially any provision, such as a radius, location, use, or
exclusivity provision, in any other lease, financing agreement, or
master agreement relating to such shopping center”.
Subsec. (c). Pub. L. 98–353,
§ 362(a), amended subsec. (c) generally, substituting in par.
(1)(A) “applicable law excuses a party, other than the debtor, to such
contract or lease from accepting performance from or rendering
performance to an entity other than the debtor or the debtor in
possession or an assignee of such contract or lease, whether or not such
contract or lease prohibits or restricts assignment of rights or
delegation of duties” for “applicable law excuses a party, other than
the debtor, to such contract or lease from accepting performance from or
rendering performance to the trustee or an assignee of such contract or
lease, whether or not such contract or lease prohibits or restricts
assignment of rights or delegation of duties” and adding par. (3).
Subsec. (d). Pub. L. 98–353,
§ 362(a), amended subsec. (d) generally, inserting in par. (1)
reference to residential real property or personal property of the
debtor, inserting in par. (2) reference to residential real property or
personal property of the debtor, and adding pars. (3) and (4).
Subsec. (h)(1). Pub. L. 98–353,
§ 402, amended par. (1) generally. Prior to amendment, par. (1)
read as follows: “If the trustee rejects an unexpired lease of real
property of the debtor under which the debtor is the lessor, the lessee
under such lease may treat the lease as terminated by such rejection,
or, in the alternative, may remain in possession for the balance of the
term of such lease and any renewal or extension of such term that is
enforceable by such lessee under applicable nonbankruptcy law.”
Subsec. (h)(2). Pub. L. 98–353,
§ 403, amended par. (2) generally. Prior to amendment, par. (2)
read as follows: “If such lessee remains in possession, such lessee may
offset against the rent reserved under such lease for the balance of the
term after the date of the rejection of such lease, and any such
renewal or extension, any damages occurring after such date caused by
the nonperformance of any obligation of the debtor after such date, but
such lessee does not have any rights against the estate on account of
any damages arising after such date from such rejection, other than such
offset.”
Subsec. (i)(1). Pub. L. 98–353, § 404, amended par. (1) generally, inserting provisions relating to timeshare interests under timeshare plans.
Subsecs. (l), (m). Pub. L. 98–353, § 362(b), added subsecs. (l) and (m).
Effective Date of 2005 Amendment
Amendment by Pub. L. 109–8effective
180 days after Apr. 20, 2005, and not applicable with respect to cases
commenced under this title before such effective date, except as
otherwise provided, see section 1501 ofPub. L. 109–8, set out as a note under section
101 of this title.
Effective Date of 1994 Amendment
Amendment by Pub. L. 103–394effective
Oct. 22, 1994, and not applicable with respect to cases commenced under
this title before Oct. 22, 1994, see section 702 ofPub. L. 103–394, set out as a note under section
101 of this title.
Effective Date of 1992 Amendment
Pub. L. 102–365, § 19(f),Sept. 2, 1992, 106 Stat. 984,
provided that: “The amendments made by this section [amending this
section] shall be in effect for the 12-month period that begins on the
date of enactment of this Act [Sept. 3, 1992] and shall apply in all
proceedings involving an affected air carrier (as defined in section
365
(p) of title
11,
United States Code, as amended by this section) that are pending during
such 12-month period. Not later than 9 months after the date of
enactment, the Administrator of the Federal Aviation Administration
shall report to the Committee on Commerce, Science, and Transportation
and Committee on the Judiciary of the Senate and the Committee on the
Judiciary and Committee on Public Works and Transportation of the House
of Representatives on whether this section shall apply to proceedings
that are commenced after such 12-month period.”
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–506effective Oct. 18, 1988, but not applicable to any case commenced under this title before such date, see section 2 ofPub. L. 100–506, set out as a note under section
101 of this title.
Effective Date of 1986 Amendment
Amendment by section 257 ofPub. L. 99–554effective
30 days after Oct. 27, 1986, but not applicable to cases commenced
under this title before that date, see section 302(a), (c)(1) ofPub. L. 99–554, set out as a note under section
581 of Title
28, Judiciary and Judicial Procedure.
Amendment by section 283 ofPub. L. 99–554effective 30 days after Oct. 27, 1986, see section 302(a) ofPub. L. 99–554.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–353effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) ofPub. L. 98–353, set out as a note under section
101 of this title.
Airport Leases
Pub. L. 102–365, § 19(a),Sept. 2, 1992, 106 Stat. 982, provided that: “Congress finds that—
“(1) there are major airports served by an air carrier that has leased a substantial majority of the airport’s gates;
“(2) the commerce in the region served by
such a major airport can be disrupted if the air carrier that leases
most of its gates enters bankruptcy and either discontinues or
materially reduces service; and
“(3) it is important that such airports be empowered to continue service in the event of such a disruption.”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
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