Rent-stabilized lease can't be sold to satisfy bankruptcy creditors, says 2nd Circuit
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A New York City rent-stabilized lease cannot be seized and sold to satisfy bankruptcy creditors, the 2nd U.S. Circuit Court of Appeals ruled Monday.
According to Reuters, the lease is held by Mary Santiago-Monteverde, and she’s lived in the East Village apartment for more than 40 years and currently pays about $700 per month. She filed for Chapter 7 bankruptcy protection in 2011, the opinion (PDF) states, after her husband died and she experience financial difficulties.
The opinion centers on whether her lease was a “local public assistance benefit,” under the New York Debtor and Creditor Law. Previously, the bankruptcy court found that the lease was not exempt from Santiago-Monteverde’s estate, and the U.S. district court affirmed the ruling. About 2.2 million New York City residents occupy rent-stabilized apartments.
On appeal, the 2nd Circuit certified the question of whether the lease was a local public assistance benefit to the New York Court of Appeals, which in 2014 published an opinion finding that it was. Based on that finding, the 2nd Circuit opinion states that Santiago-Monteverde can claim her lease as an exemption from her bankruptcy estate.
Initially in the bankruptcy filing, Santiago-Monteverde’s trustee found that she had no assets. Then a development group approached him, with an offer to buy her lease for $150,000, the opinion states. That would have satisfied her debts and fees. Santiago-Monteverde would be allowed to stay in the apartment under the deal, but it would lose rent-stabilized status.
She filed a motion to exempt the lease, arguing that selling it would amount to her being evicted, and she would lose the rights to pass the lease to her adult son.
