How much is my Rent Stabilized Apartment Worth in Bankruptcy?
If you’re like the guy at 15 CPW it could be as much as $17 million to a bankruptcy trustee in a Chapter 7 in New York City. It’s the odd case, but the story of Herbert Sukenik highlights how much a rent stabilized apartment in a nice building can mean to a landlord. Herb was the last holdout in a building that now sells a two bedroom luxury condo for over $12 million. Your rent stabilized apartment might not be where the next celebrity condos are going up, but your lease could be worth a lot more to your landlord than what you are paying in rent each month.
Rent stabilized apartments are great for tenants, but basically a loss for landlords. They only way a landlord can force you to leave is if they pay you off, or wait for you to pass away. We have had some clients living in the same rent stabilized apartment for decades that are now paying a fraction of what the apartment would rent for on the open market. They are usually paying around $600 a month for an apartment that would easily rent for over $3000. The landlord is essentially losing $2400 per month or almost $29,000 per year by having our rent stabilized clients in the apartment instead of a regular tenant. It’s easy to see how a rent stabilized apartment could be of real interest to a landlord and sadly to a bankruptcy trustee as well.
When you file Chapter 7 bankruptcy your non-exempt assets become the property of the bankruptcy trustee. If you file a Chapter 7 bankruptcy and have a valuable rent stabilized lease it is possible the trustee and the landlord will try to work out a deal to get you out of the apartment. The landlord and trustee may contact one another, and the trustee will offer to sell your lease back to the landlord so they can rent to a new tenant at a higher rate. Many trustees still find this practice abhorrent, but others have no qualms selling your lease right along with your other non-exempt assets as a way to repay your creditors. Considering trustees earn a commission on bankruptcy estates, protecting your lease should be of extreme concern to anyone considering bankruptcy in a rent stabilized situation. As we have commented in the past if your attorney doesn’t properly account for a rent stabilized lease it could leave you on the street after your bankruptcy.
If you have a rent stabilized lease you can still seek bankruptcy protection and keep your lease, but you may need to file Chapter 13 instead of Chapter 7. Chapter 13 will prevent a trustee from selling your lease and is much easier to have dismissed than a Chapter 7 if the case is filed in good faith. If you were to try to convert your Chapter 7 to a Chapter 13 upon realizing your rent stabilized lease were at risk, you might end up repaying all of your debts in full which would defeat the purpose of bankruptcy in the first place. Filing a Chapter 13 from the beginning on the other hand will provide more options and safer outs than Chapter 7 for clients with rent stabilized apartments. If someone happens to come along offering you a great deal to move out of your apartment like Herbert Sukenik we can dismiss the Chapter 13 case if you decide you would rather take a big payday yourself to move out.
In the end Herbert Sukenik held out for $17 million and was also rented a $2 million luxury apartment for only $1 per month for the rest of his life. The apartment was worth a lot to the landlord, and the new building is now one of the most sought after addresses in New York City. You could have a valuable apartment lease as well, and this could work for or against you if you are considering bankruptcy. If you need affordable bankruptcy assistance and have a rent stabilized lease in New York City please Contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free bankruptcy consultation today. Our law firm maintains a 99% Chapter 7 Bankruptcy discharge record in New York City as of 8/31/16.
**** DISCLAIMER: This article is intended for educational purposes only. By reading no attorney-client relationship has been created. Prior results do not guarantee a similar result for future clients.