Single asset real estate debtors are subject to special provisions of the Bankruptcy Code. Unlike retailers and manufacturers that file for chapter 11 protection, the Bankruptcy Code imposes certain restrictions and special expedited procedures upon debtors whose estates consist of a single property or project.
The Bankruptcy code defines the term single asset real estate as a single property or project, other than residential real property with fewer than four residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental.
Thus, under the Bankruptcy Code, the following three primary criteria must be met in order for real property to be considered single asset real estate for purposes of avoiding the automatic stay:
- the real property is a single property or project, other than property with fewer than four residential units;
- the real property generates substantially all the income of the debtor; and
- the debtor must not be involved in any substantial business other than the operation of such property.
The Bankruptcy Code provides circumstances under which creditors of a single asset real estate debtor may obtain relief from the automatic stay which are not available to creditors in ordinary bankruptcy cases. On request of a creditor with a claim secured by the single asset real estate and after notice and a hearing, the court will grant relief from the automatic stay to the creditor unless the debtor files a feasible plan of reorganization or begins making interest payments to the creditor within 90 days from the date of the filing of the case, or within 30 days of the court’s determination that the case is a single asset real estate case. The interest payments should be equal to the non-default contract interest rate on the value of the creditor’s interest in the real estate.