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The calculation of a landlord's claim resulting from a bankrupt tenant's rejection of a nonresidemial real properly lease pursuant to $ 365 of the Bankruptcy Code, a seemingly straightforward task, is actually fairly complex. In particular, the application of the cap imposed by S 502bK6) of the Code is the subject of conflicting judicial interpretations. This article will provide some practical guidance on the calculation of a landlord's claim resulting from the rejection of an unexpired lease of real property, a general unsecured claim pursuant to $ 365(g). A single s l a n - dard applies under S 502(h)(6) in both chapter 7 liquidation and chapter I 1 reorganization cases. A landlord's claim for damages for future rent and other iease obligations resulting from a debtor's rejection of a lease of real property with more than one year remaining is limited to the rent reserved by the lease, without acceleration, for the greater of (aj one year or (b) 15 percent, not to exceed three years of the remaining lease term following the earlier of (\) the petition date and <y) the date on which the landlord repossessed or the debtor surrendered the property. The § 502(h)(6) limitation does not affect the landlord's separate claim for any unpaid rent and orher charges due under the lease, without acceleration, as of either the date of the filing of the bankruptcy petition or the date on which ihe landlord obtains possession, whichever is earlier.
The application of the § 502(b)(6) damages cap is premised on the landlord actually having a claim for damages resulting from the debtor's rejection of its lease. For example, if the landlord has re-let the premises at a higher rent, the landlord may have no allowable claim under § 502(a). The landlord has the burden of proving lhat it has an allowed claim for rejection damages. If it docs, S 502(b)(6) applies and may limit the extent of that claim.
Although the statutory language speaks in terms of the time remaining under the lease, a majority of courts instead apply the 15 percent factor in § 502(b)(6) to the total dollar amount of vent remaining under the lease. Thus, to determine the maximum allowable amount of a landlord's claim...