Unexpired Lease

The term “unexpired lease” refers to a lease of personal or real property that has not expired as of the filing of a bankruptcy case.  If a lease is an “unexpired lease,” the chapter 11 debtor party is empowered by the Bankruptcy Code to assume (and possibly assign) or reject the lease.  The debtor-tenant under an unexpired lease of real property has the right to operate in the leased premises prior to the lease being assumed or rejected (and afterward, if debtor-tenant assumes but does not assign the unexpired lease).  In chapter 11 cases, the debtor-lessee may assume or reject an unexpired lease of residential or personal property at any time before confirmation of a chapter 11 plan.  Section 365(d)(4) provides that a debtor- lessee of non-residential real property must assume or reject the lease within 120 days (which deadline can be extended by 90 days upon the debtor’s motion for cause), or the lease is automatically rejected and the property must be surrendered.  Section 365(d)(1) provides that if a chapter 7 trustee does not assume or reject an unexpired lease of residential real property or personal property of the debtor within 60 days after the filing of the case, such lease is considered rejected.  But what is an “unexpired lease” to which these rules pertain?  The term is not defined in the Bankruptcy Code.  Whether a particular lease is “unexpired” is determined under state laws, which vary across states.  For example, a real property lease may not be considered to have expired in certain jurisdictions until an order of possession in the landlord’s favor has been entered by a court.

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