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In Re Dollar Rons II, LLC

2008 WL 1767064 (Bkrtcy. Ct. D. N.J. 2008) (Unpublished)

LEASES; ABANDONMENT — With respect to a commercial real estate lease, there is no minimum period of time following lease termination after which the lease can deem a tenant’s property to be abandoned, and once abandoned, a landlord is not accountable to its tenant for the proceeds of its sale and the proceeds don’t have to be applied to the tenant’s debt to its landlord.

A commercial tenant, which was also a debtor in a bankruptcy proceeding, was locked out of its place of business after the landlord obtained a judgment for possession. The tenant’s inventory remained on the premises after the lock-out. According to the lease, any inventory or property that remained on the premises for more than five days after the tenant vacated its premises was to be considered abandoned unless the tenant made an attempt to recover those assets. The lease also gave the landlord the right to sell or dispose of any such property at the tenant’s expense.

The Bankruptcy Court noted that the five-day period in which the tenant had the right to recover its inventory was too short, under law, for a residential lease, but that there was no similar statutory protection for a commercial tenant. It found that the terms of the lease covering the removal of the tenant’s inventory after the premises were vacated survived the termination of the lease. The Court also noted the statute allowing landlords to consider property abandoned five days following a dispossession only applied if there was reason to believe that the lessee had no intention of asserting a claim on such property, but found that the statute did not void a lease provision dealing with abandoned inventory. The Court also found that since the remaining inventory was considered abandoned, the landlord was not accountable to the tenant for the proceeds of any sale of the inventory and that such proceeds didn’t have to be applied to the tenant’s debt to the landlord. Thus, the Court dismissed the tenant’s claims for the turnover of the remaining inventory and granted the landlord’s summary judgment motion on its claims that the inventory was abandoned.

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