Hotel Revenues

Revenues from the operation of a hotel or other lodging property. Although they are sometimes characterized as “rents,” they are usually determined to be “accounts” or “general intangibles” (primarily because they arise as much from the provision of services as from the temporary occupancy of hotel rooms).

For a time, only “rents” were entitled to protection as proceeds under Sections 363(a) and 552, and some courts ruled that hotel revenues were not “rents” and thus not entitled to that protection. Congress came to the rescue of hotel lenders by amending the Code to protect both rents per se and also “the fees, charges, accounts, or other payments for the use or occupancy of rooms and other public facilities in hotels, motels or other lodging properties.” But this relief should not confuse the fact that a lender must not rely merely on its Assignment of Leases and Rents to perfect its security interest in hotel revenues, which are most often judicially characterized not as rents but as “accounts” or “general intangibles” under the Uniform Commercial Code. Thus, a purported security interest in rights to payment connected with a hotel operation perfected only through an Assignment of Leases and Rents is likely to be avoided by application of the strong arm powers under Section 544.

Bankruptcy Code §§ 363(a), 552(b)(2). See also Cash Collateral, Nursing Home Revenues, Strong Arm Powers.

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