Section 363 Sales Free and Clear of Interests: Why the Seventh Circuit Erred In Precision Industries v. Qualitech Steel

Rarely does a bankruptcy case have the potential to profoundly impact the non-bankruptcy world. In Precision Industries v. Qualitech Steel, the Seventh Circuit allowed a debtor to sell land free and clear of an unexpired ground lease in apparent disregard of the lessee's rights to retain possession of the leased premises. This case will have profound implications on bankruptcy sales, real estate leasing, and real estate lease financing. This Article examines the decision in Precision Industries and its effect on the rights afforded to lessees by § 365(h) of the Bankruptcy Code. The author contends that the case is wrongly decided. The author discusses some of the practical problems created by Precision Industries and suggests some strategies that can be employed to avoid its perils.