Rent-Controlled NYC Apartment Dwellers Can’t Be Evicted Through Bankruptcy

New York City tenants who file for bankruptcy can’t get booted from their rent-controlled apartments, according to a decision by the New York State Court of Appeals and the Manhattan-based U.S. Court of Appeals. The move protects those who file for bankruptcy in New York from being evicted from their exceptionally valuable apartments, as long as they’re current with their rent.

Rent control laws stemming from as long ago as World War II cover a portion of the New York City housing stock. Tenants are able to enjoy extremely low rent (comparatively speaking for New York versus elsewhere, that is) and the freedom of eviction protection. However, in 2012, a federal district judge told a NY woman who was filing for bankruptcy that her landlord could buy the value of her lease, as the property of the bankruptcy estate.

That woman took her case to the federal appeals court, which in turn asked the New York Court of Appeals to decide if the right to live in a rent-stabilized apartment should be classified as saleable property. The ruling came back, 5-2, that rent stabilization rights are public assistance and therefore an exempt asset that cannot be sold.

The above case concerned a $700-a-month apartment on Manhattan’s East Seventh Street. Not only did the landlord offer to buy the least from the trustee and pay the tenant’s creditors in full, but he also offered to pay the tenant $100,000 to move out of the apartment. Additionally, the landlord offered the option of allowing the tenant to stay forever, as long as she didn’t sublet, or bequeath the apartment upon her death.

Landlords in NYC are not so happy with the outcome, calling the decision a “radical interpretation.” They argued that the ruling may actually hurt tenants, creating “unforeseen tax consequences for rent-stabilized tenants, in the form of imputed income.”

Bankruptcy law is an ever-evolving process. One thing is for sure: it’s a complex set of legal guidelines. If you are wondering how bankruptcy might impact your life, including your house, apartment, or retirement accounts, contact an experienced NY bankruptcy attorney today.

Robert “Bob” Jacovetti helps clients in New York and beyond manage their debt issues. If bankruptcy is the best option for you, he will use his experience and knowledge to guide you through the process every step of the way. Contact him today for a free phone consultation.


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