The US Bankruptcy Court for the Central District of California (the "Court") recently upheld the validity of a commercial lease provision by which a debtor/tenant waived its rights to seek relief from forfeiture (i.e., termination) of the lease under California law. As a result, the debtor/tenant had no right in the bankruptcy case to assume the lease. In re Art and Architecture Books of the 21st Century, Case No. 2:13-bk-14135-RK (September 18, 2014). This decision addresses an issue left open by the US Court of Appeals for the Ninth Circuit's decision in In re Windmill Farms, Inc., 841 F.2d 1467 (9th Cir. 1988).

The Windmill Farms Decision -

In Windmill Farms, the Ninth Circuit held that a debtor/tenant's nonresidential real property lease which was terminated under California law prior to a bankruptcy filing could not be assumed in the tenant's bankruptcy case. Left unanswered by the Ninth Circuit was the question of whether relief from forfeiture was even available to a party seeking to assume a lease in bankruptcy.