Colder Than a Landlord\u27s Heart? Reconciling a Debtor\u27s Authority to Sell Property Free and Clear of a Lease Under Bankruptcy Code Section 363(f) with the Tenant\u27s Right to Remain in Possession on a Lease Rejection Under Bankruptcy Code Section 365(h)

The question examined in this Article is a simple one—Can a tenant with a right to possession under section 365(h) of the Bankruptcy Code be ousted from possession by a free and clear sale of the real property by the debtor-landlord pursuant to section 363(f) of the Bankruptcy Code? The Seventh Circuit, the only court of appeals to have considered the issue, said “yes” in Precision Industries, Inc. v. Qualitech Steel SBQ, LLC and authorized a sale free and clear of the lease and the tenant’s right to remain in possession. Subsequent decisions from the district and bankruptcy courts are split, and most say “no.