Bankrupt Tenant Needn’t File Formal Court Motion to Assume Lease

November 25, 2024

What Happened: A Rite Aid tenant in Redwood, Calif., notified the landlord of its desire to extend the lease for another five years. But the parent company filed for bankruptcy shortly thereafter. Under Section 365(d)(4) of the bankruptcy laws, a debtor in possession of commercial property has 120 days to assume the unexpired lease or the lease is deemed rejected. Before the deadline passed, Rite Aid gave the court a Notice of Assumption with an attached exhibit listing all of the locations and leases that it intended to assume including Redwood.

What Happened: A Rite Aid tenant in Redwood, Calif., notified the landlord of its desire to extend the lease for another five years. But the parent company filed for bankruptcy shortly thereafter. Under Section 365(d)(4) of the bankruptcy laws, a debtor in possession of commercial property has 120 days to assume the unexpired lease or the lease is deemed rejected. Before the deadline passed, Rite Aid gave the court a Notice of Assumption with an attached exhibit listing all of the locations and leases that it intended to assume including Redwood. The landlord claimed that this wasn’t a valid assumption because Rite Aid didn’t file a formal court motion to assume the lease. As a result, it argued that the Redwood lease should be deemed rejected.

Ruling: The U.S. bankruptcy court in California ruled that Rite Aid did assume the Redwood lease before the deadline expired. 

Reasoning: The point of the Section 365(d)(4) assumption deadline is to “provide a landlord with certainty about the fate of its property.” The court noted that the bankruptcy statute doesn’t say that the debtor has to file a court motion to assume the lease. All it has to do is “clearly and unequivocally express an intention to assume.” And including the Redwood lease on the list of properties it intended to assume was enough to make the landlord aware of Rite Aid’s plans for the lease, the court concluded.

  • In re Rite Aid Corp., 2024 Bankr. LEXIS 2711, 2024 WL 4715336

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