Judges appear split over highly charged rent-stabilization case

Court’s ruling could determine if landlords can sell leases of bankrupt tenants

Mayor Bill de Blasio
Mayor Bill de Blasio

Judges on the New York State Court of Appeals began hearing arguments yesterday in a much-anticipated case that could decide whether leases for rent-stabilized apartments can be sold when a tenant declares bankruptcy.

Based on questions and comments from the jurists, the court appears far from unified in its thinking on the issue.

The dispute involves a bankruptcy trustees’ plan to sell an 80-year-old woman’s apartment in the East Village. Arguments presented in court on Tuesday centered on the legal standing of rent-stabilized leases, according to the Wall Street Journal. Many landlords believe such leases should be considered the same as ordinary leases and can therefore be sold. But tenant advocates and some government officials – including Attorney General Eric Schneiderman and Mayor Bill de Blasio — argue that the contracts are public benefits, and thus protected by bankruptcy court.

Comments from Chief Judge Jonathan Lippman and Judge Eugene F. Pigott Jr. suggested they might not view rent-stabilized leases to be the same as public benefits

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“You don’t have to be in poverty” to have rent-stabilized leases,” Pigott said. He went on to suggest the phrase “public benefit” was intended to cover welfare payments for the poor, according to the Journal.

Judge Jenny Rivera, however, said she did not understand the difference between the government sending a check to a welfare recipient and the government providing a rent-stabilized lease for a tenant.

Lawyers for Schneiderman and de Blasio argued that rent-stabilized leases cannot be considered property since tenants cannot legally buy or sell them, according to the Journal.

The Court of Appeals took over the case after tenant Mary Santiago appealed a bankruptcy court decision that would have allowed her to live in Her East 7th Street co-op for the rest of her life — but barred Santiago from giving her apartment to her son.

Santiago, who pays $703 per month for her unit, filed for bankruptcy protection in 2011.[WSJ]Shant Shahrigian