NYC Rent-Stabilization Deemed ‘Essential Need’

MANHATTAN (CN) - In a boon to tenants citywide, New York's highest appellate court told creditors to unhand the rent-stabilized, East Village apartment where an 80-year-old widow has lived for four decades.

"Affordable housing is an essential need," Judge Sheila Abdus-Salaam wrote for the majority.

Mary Santiago-Monteverde has been shooing away creditors since her husband died three years ago.

Quickly falling behind on her credit card debt, Santiago filed for bankruptcy months later, only to find herself at the center of a legal squabble threatening the regulation that has helped millions of New Yorkers for nearly half a century.

Enacted in 1969, rent-stabilization laws protect New York City tenants from sharp, annual increases. Santiago benefited from the regulation by paying $703 per month on an apartment a short walk east from Tompkins Square Park, where rents regularly rise thousands of dollars higher, the New York Times reported.

Santiago kept current on her rent, even as her credit card debt accrued to nearly three times the annual cost of her apartment.

She risked losing her home anyway, however, when her bankruptcy trustee, John Pereira, listed it as an unexpired lease on her petition.

An objection by Santiago's pro bono lawyers brought the case to the 2nd Circuit, which asked the New York Court of Appeals to clarify whether rent stabilization qualified as public assistance.

The court was divided 5-2 in answering yes on Thursday.

"While the classic examples of public assistance benefits may be solely government subsidized, or a mixture of subsidy and regulation as with Medicare, nothing prevents a targeted regulation from qualifying as a public assistance benefit," the majority opinion states. "The rare regulatory scheme of rent-stabilization is such a benefit."

Ronald Mann, a Columbia Law School professor who represented Santiago on appeal, said the decision made his client "overjoyed - in fact she was in tears."

Thursday's ruling "restores the status quo that has protected rent-subsidized tenants for so many years," Mann said in an email.

"The rejection of what the bankruptcy court did in this case is crucial for the million households in rent-subsidized housing in New York," he added. "Without this decision, it would be risky indeed for such a household to seek bankruptcy relief, because of the likelihood the family would lose its home, presumably to become homeless."

Judges Jonathan Lippman, Victoria Graffeo, Eugene Pigott and Jenny Rivera concurred with the opinion.

The dissenters, Judges Robert Smith and Susan Read, took the narrow view that "public assistance" and "welfare" are synonymous.

"I would like to try asking every rent-controlled or rent-stabilized tenant in New York: 'Do you receive public assistance?'" Smith asked in the dissent. "I would be surprised to find even one (apart from those receiving government subsidies from other programs) who answered yes." (Parentheses in original.)

The bankruptcy trustee's lawyer, Troutman Sanders LLP partner John Campo, commented in a phone interview that his client "proceeded in this case in accordance with both his and our construction with the way the law stood before this ruling."

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