Court Caps Landlord's Bankruptcy Claim Against Lease Guarantor

Chair emeritus and finance and restructuring partner Andrew Kassner and counsel Joseph Argentina coauthored an article for The Legal Intelligencer titled, “Court Caps Landlord’s Bankruptcy Claim Against Lease Guarantor.”

Kassner and Argentina discuss the bankruptcy case In re Cortlandt Liquidating, where the U.S. District Court for the Southern District of New York, sitting as an appellate court, reviewed a Bankruptcy Court decision that addressed a number of issues involving a commercial landlord’s claims in bankruptcy.

The authors state that, given the magnitude of damages that can be asserted under state law when a tenant defaults under significant long-term commercial real estate leases, this case is yet another example that many issues must be examined—and may need to be addressed—by both the tenant and landlord when a tenant is in financial distress. For the landlord, simply relying on state landlord-tenant law on termination and damage calculation and obtaining a substantial letter of credit from a guarantor may not end the analysis and provide the comfort and credit enhancement the landlord anticipates. The Section 502(b)(6) cap has been in place for decades, but as this decision demonstrates, the law continues to evolve on its application.

The full article is available for The Legal Intelligencer subscribers.