EXECUTORY CONTRACTS

for a period, but not paying its landlord for the same period.

The obligation to perform obligations arising out under the lease after the bankruptcy filing under § 365(d)(3) is even more complicated in the context of percentage rent. Where the tenant owes additional rent beyond the minimum stated rent based upon a percentage of sales, and the bankruptcy filing occurs during the year, the bankruptcy court must determine what, if any, percentage rent must be paid post-petition under § 365(d)(3). There are at least three alternatives. An approach which focuses on the day that the rent is due, typically upon billing, is easiest to apply. Courts that pro-rate obligations under the lease as of the petition date based upon a calendar year have more difficulty. They can choose between simply prorating the total percentage rent due in the calendar year on a monthly basis, or by looking to the date that the location exceeded the percentage rent threshold and requiring percentage rent paid after that date. The district court rejected the billing date approach following Handy Andy. The court also rejected methods that prorate the percentage rents based upon sales method or calendar months because neither approach attempts to determine when a tenant's obligation to pay percentage rent under the lease arises. The district court instead adopted a "sales break point approach." This method determined when the location met the amount of sales that triggered percentage rent. If the percentage rent breakpoint occurs after the bankruptcy filing, all percentage rent would be an obligation arising after the order for relief. If the sale breakpoint occurred before the bankruptcy petition date, only the percentage rent arising from post-petition sales would be recovered as a post petition obligation.