Landlord Attempting to Use Bankruptcy Code to Evict Tenants

This blog has frequently considered the power given to companies who have filed a Chapter 11 bankruptcy petition to revoke real estate leases that still have many months left on the original term. Now a New York City landlord is attempting to reverse the process by using this provision of the code in an attempt to evict tenants from a rent-controlled apartment building to facilitate a sale of the building.

The building is located at 444 East 13th Street and has 16 rent-controlled apartments. Eight tenants in rent-controlled apartments have been withholding rent for several months to protest a range of problems in the building, including lack of heat, failure to make necessary repairs and the presence of rodents. The building also has 68 outstanding violations according to the website maintained by the city’s Department of Housing Preservation and Development; the violations include lead-paint hazards, rat droppings and defective floors.

The identity of the owner is unknown because required corporate documents have not been filed with the New York Secretary of State’s office since 2017. The state’s legal filing in opposition to the bankruptcy petition states that a landlord with a long history of prior violations is the building’s “prior controlling member.”

According to filings in the bankruptcy case, the owner of the building has signed an agreement to sell the building, but the sale cannot be closed because of the number of rent-controlled apartments. The occupants of the rent-controlled apartments cannot be evicted because state law forbids such action in rent-controlled buildings. Thus, the only way the landlord can remove the rent-controlled leases is to attempt to have them declared void under the executory contract provision of the bankruptcy code. Attorneys representing the tenants have described the tactic as “outrageous” and a form of “litigation harassment.”