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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38879
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I have a apartment tenant occupied. I have filed Bankruptcy.

Resolved Question:

I have a apartment tenant occupied. I have filed Bankruptcy. These tenants have not paid rent for months. I know I can still sue them for back rent... Do I have any other obligations to them after the trustee takes over the property? Are they responsible for maintenance of the property etc?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 7 years ago.

Do I have any other obligations to them after the trustee takes over the property?


A: Since your bankruptcy prevents the tenant from suing you to enforce the lease prior to the bankruptcy filing. And, after the bankruptcy filing it's up to the bankruptcy trustee to either assume or reject the leases, so you still have no "obligation" to the tenants under the lease contract, with one exception -- the security deposit.


Under DC Muni. Reg. 14-308.4, a tenant's security deposit is held "in trust" for the tenant. This means that the deposit is not part of the bankruptcy estate. It remains the tenant's property, subject to a determination that the tenant has breached the lease and is not entitled to the return of the deposit. Upon filing bankruptcy, the bankruptcy trustee obtains your interest as landlord in the tenants' security deposits. Thus, it becomes the trustee's problem as to whether or not to refund the deposit.


In sum, your duty is to turn over the deposit accounts to the trustee. After that, you're off the hook.


Are they responsible for maintenance of the property etc?


A: Yes and no. The tenant has an equitable obligation to not commit "waste" (damage) on the property, regardless of whether or not the lease is assumed or rejected by the bankruptcy trustee. However, you have an obligation to not damage the bankruptcy trustee's interest in the property -- otherwise, the trustee could use your failure to maintain as a demonstration of bad faith and thereby have your Chapter 7 dismissed. So, you can't just strand the tenants, until you have asked the court to force the trustee to assume or reject the leases.


Hope this helps.


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