When Does a Lease Terminate Pre-Petition?
Two Florida bankruptcy courts have addressed a similar issue with different results. The scenario is common enough, a tenant and landlord enter into a lease which the tenant subsequently defaults under. The landlord brings a cause of action for eviction, obtains a judgment and eventually a writ of possession. But, before the writ of possession is executed the tenant files for bankruptcy. At that point is the lease one which can be assumed under the Bankruptcy Code 365?
In In re Key Largo Watersports, 377 BR 738, the court held no. There the court held that the judgment and writ of possession terminated the tenant’s rights and thus there was no lease to assume. However, in In re 2408 W. Kennedy, 512 BR 708, the court held that until the writ was executed the tenant still had a right of possession and thus there was in fact a lease to assume.
These two cases stress the importance of properly entering into and terminating a lease before bankruptcy; and, understanding how a lawsuit and/or bankruptcy can impact your lease.