Court Ruling Declares NYC Rent-stabilized Apartments a Public Benefit

More New York residents will be able to keep their apartment leases after a recent Court of Appeals ruling declared rent-stabilized apartments exempt from seizure during personal bankruptcy filings.

The ruling by the highest court in New York State decided in a 5-2 vote that these apartments are a public benefit, just like disability or unemployment benefits, and therefore cannot be seized if the tenant files for bankruptcy. Not only does this mean that people with rent-stabilized leases can stay in their apartments, but it also prevents landlords from evicting tenants who have filed for bankruptcy but keep up with their rent payments.

The case began back in 2011 when Mary Veronica Santiago’s husband passed away, leaving her financially unstable. She eventually filed for bankruptcy, during which her court-appointed trustee, John S. Pereira, made a deal with Mrs. Santiago’s landlord to sell the lease for the apartment back to the landlord for $23,000.

Although the agreement would allow Santiago and her son to remain in the apartment, it would prevent her son from inheriting the lease when she passes away. Santiago therefore refused the agreement and instead challenged the decision in court.

After losing her case during two different trials, Santiago asked the United States Court of Appeals for the Second District to review her case. The court passed the decision on to the New York State court to make the final ruling, based on state laws.

“When the rent-stabilization regulatory scheme is considered against the backdrop of the crucial role that it plays in the lives of New York residents, and the purpose and effect of the program, it is evident that a tenant’s rights under a rent-stabilized lease are a local public assistance benefit,” stated Judge Sheila Abdus-Salam for the majority decision, according to the New York Times

Mrs. Santiago had the support of the state and New York City throughout her court hearings, with both parties hoping that the court would decide to protect the rights of rent-stabilized tenants who rely on these leases for housing. The two judges who sided with the bankruptcy trustee, however, argued that rent-stabilized leases are not a of public benefit and that hardly any of the tenants living in these apartments receive any form of public assistance.

Mrs. Santiago’s East 7th Street apartment costs $703 per month. She has lived in the two-bedroom apartment since 1963 andnow shares the space with her son, who, thanks to the court’s ruling, now has rights to the lease after his mother passes.