A landlord’s priorities can change dramatically due to bankruptcy.  A bankruptcy trustee may attempt to throw out your billboard lease if they think they can receive more money from selling the real estate without your lease. Kendrick v Lamar demonstrates that a well written outdoor lease can defeat a hostile bankruptcy trustee.    Here are the facts:

• In 1999 Randy Edrington executed a 10 year sign lease with Lockridge Outdoor Advertising for a steel monopole four poster billboard.  At the end of the original 10 year term the lease automatically renewed for an additional five years unless terminated by Lockridge.

• Lockridge assigned its rights in the lease to Delite Outdoor Advertising which assigned its rights in the lease to Lamar.

• In 2006 Donna and Oliver Parr purchased the property from Randy Edrington.

• In 2009 the billboard lease was extended for an additional 5 years to 2015

• In 2013 the Parrs filed Chapter 7 bankruptcy.  The bankruptcy trustee attempted to sell the property on which the billboard sat.  A bank wanted to buy the property but insisted that the billboard must be removed as a condition of closing.

• The Bankruptcy trustee asked for a declaratory judgement in Kentucky Bankruptcy Court to force the billboard to be removed.  The trustee stated that Lamar must remove the billboard because the Trustee was rejecting the billboard lease as part of the Parr’s bankruptcy proceeding.  The trustee also argued that the lease was a lease of personal property rather than real property because the lease involved “space” and not land.

• Lamar argued that the lease was a lease of real property and the Kentucky bankruptcy law allowed a lessee of a rejected real property lease to continue to retains its rights under a lease.

• The court ruled in favor of Lamar. It held that “the Sign Lease is a lease of non-residential real property under which the Debtor is the lessor; thus upon rejection , Lamar may elect to retain its rights under the rejected Sign Lease.”  Lamar got to stay on the property until the billboard lease ran out.

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