Thursday, February 20

Jon Aberman, a Partner in the Troutman Pepper Locke Bankruptcy and Restructuring Practice Group, recently served as a panelist on the Financial Poise webinar titled “Ethical Issues in Real Estate-Based Bankruptcies / Insider Lease Agreements.”

The webinar discussed a common play in real estate to create a separate operating entity to serve as a tenant and execute a lease between the owner of the property and himself. Typically, this happens in assets that serve as a real estate-based business, such as a retail property. The structure enables the operator to reduce the taxable income of the business and also provides a liability shield for the property owner. However, this arrangement can easily lead to some ethical issues, should the property owner become distressed. Where is the line between a savvy real estate strategy and unethical behavior?

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