In the decision of In re Metroplex on the Atlantic, LLC, 545 B.R. 786 (Bankr. E.D.N.Y. 2016), the United States Bankruptcy Court for the Eastern District of New York held that an easement is an in rem property interest, subject to sale free and clear under Bankruptcy Code section 363(f).
The debtor constructed a building on property facing the Far Rockaway ocean. Almost 100 years earlier, an easement had been granted to owners of an adjacent property, giving them a right of way to the ocean. The debtor and its secured creditor proposed a plan that provided for the property to be sold free and clear of all claims and interests, including the easement. The owner objected, arguing that the property could not be sold free and clear of the easement.
The bankruptcy court found that the easement was an in rem property interest: “An easement is more than a personal privilege to use another’s land, it is an actual interest in that land.” As such, the court held it was subject to sale free and clear under section 363(f), and concluded that the easement owner could be compelled to accept a monetary satisfaction for the easement under state law.
Carl D. Neff is a partner with the law firm of Fox Rothschild LLP. You can reach Carl at (302) 622-4272 or at email@example.com.