## Facts

- Pyxsys Corporation leased nonresidential real property in Sudbury, Massachusetts from Cummings Properties, LLC under a written lease with monthly rent of $8,891.05 due in advance.
- An involuntary Chapter 7 petition was filed on January 18, 2002; an order for relief entered February 5, 2002; a Chapter 7 trustee was appointed the next day.
- The trustee made no postpetition rent payments and did not formally assume or reject the lease.
- The lease was deemed rejected by operation of 11 U.S.C. § 365(d)(4) on April 6, 2002.
- After rejection, estate assets remained stored on the premises until sold by the trustee for approximately $65,000; the premises were fully vacated on May 6, 2002.
- The landlord moved for payment of (i) post-order-for-relief, pre-rejection rent and (ii) post-rejection use-and-occupancy charges, totaling $26,673.15.

## Issues

1. Whether rent obligations arising post-order-for-relief and pre-rejection under 11 U.S.C. § 365(d)(3) must be paid immediately on demand or are payable as administrative expenses in the ordinary course, subject to administrative solvency and priorities.
2. Whether post-rejection use-and-occupancy charges for continued storage of estate property qualify as administrative expenses under 11 U.S.C. § 503(b)(1)(A) and, if so, whether they must be paid immediately.

## Decision

- The court allowed the landlord’s post-order-for-relief, pre-rejection rent claim as an administrative claim measured by the lease terms under § 365(d)(3).
- The court allowed the landlord’s post-rejection use-and-occupancy claim as an administrative expense under § 503(b)(1)(A) because the estate benefited from continued storage enabling liquidation.
- The court denied the landlord’s request to compel immediate payment of either claim, holding that neither statute confers a superpriority or an automatic right to immediate payment ahead of other administrative claimants.
- Payment timing remained subject to the court’s discretion and the estate’s overall administrative administration and priorities.

## Legal Principles

- Section 365(d)(3) requires performance of nonresidential lease obligations pending assumption or rejection and fixes the measure of the landlord’s entitlement by the contract terms, without requiring a separate “benefit to the estate” showing under § 503(b)(1) for that pre-rejection period.
- Section 365(d)(3) does not, by its “timely perform” language, create a superpriority or mandate immediate payment ahead of other administrative expenses.
- Post-rejection occupancy that provides an actual benefit to the estate (such as storage facilitating sale of estate assets) supports an administrative expense claim under § 503(b)(1)(A).
- The timing of payment of administrative expenses is generally discretionary and may be deferred to protect orderly administration and ensure equal treatment among administrative claimants under the priority scheme.

## Conclusion

The court granted administrative priority to the landlord for both pre-rejection rent under § 365(d)(3) and post-rejection use-and-occupancy under § 503(b)(1)(A), but refused to order immediate payment, treating both as administrative expenses payable subject to court discretion and the estate’s administrative priority structure.


In re Pyxsys Corp., 288 B.R. 309 (Bankr. D. Mass. 2003)