[co-author: Justin Kanoff]
In a recent decision,
In re Le Tote, Inc., No. 20-33332-KLP, 2020 Bankr. LEXIS 3044 (Bankr. E.D. Va. Oct. 30, 2020), the Bankruptcy Court for the Eastern District of Virginia held that a trust that holds a commercial mortgage backed securities (“CMBS”) loan to certain landlords, secured by those landlords’ leases with a chapter 11 debtor, could not compel the debtor to pay rent to its landlords when the trust held no rights under the relevant lease agreement. With more and more retail stores filing for bankruptcy because of the general decline in brick-and-mortar retail, which has been exacerbated by the impact of the COVID-19 pandemic, disagreements between landlords and their lenders have proliferated. While landlords may be concerned with the long term survival of their tenant’s business, lenders to those landlords may care more about receiving the payments due under their loans. Practitioners should be aware that, absent a specific provision