Download: Notes on Divorce Law and Mitchell-Lama Housing [docx]. See also: Beginner’s Guide to Mitchell-Lama Housing in New York State

Some basic background research on the lack of information I found on equitable distribution of Mitchell-Lama housing in New York divorces, in case it’s useful.

Notes on Divorce Law and Mitchell-Lama Housing
-Determining and distributing value
-Potentially Relevant Case Law and its Application
—–Who has the right to the apartment?
—–What counts as “permanently vacating?”
—–When does a spouse forfeit their right to equitable distribution of the financial benefit?
-Cases

Notes on Divorce Law and Mitchell-Lama Housing

Determining and distributing value

The apparent value of a Mitchell-Lama unit does not tell the whole story.

A rental unit would be apparently without property value to be divided. A coop would have a readily determinable value: the redemption fee owed to the owner if the owner sold it back to housing company. That amount is calculated according to regulation and based on the (generally quite low) initial investment plus a portion of the overall amortization.

But the true value of a Mitchell-Lama unit may be much greater:

“A tenancy in a Mitchell-Lama development is of enormous value both because rent, being regulated, is far below rents for comparable available apartments, and because where the apartment is a cooperative, or to become a cooperative, the occupant of such apartment may have an opportunity for a sizeable capital gain should the building elect to disengage from the Mitchell-Lama program.” (MATTER OF THOMAS v. DHPD, 12 Misc. 3d 547 – NY: Supreme Court 2006 NY County)

If both spouses are listed on the lease/deed or if the unlisted spouse has been in residence and listed on the yearly financial reports for at least two years, then a couple may come to any agreement they like about who should have possession of their Mitchell-Lama residence because the remaining spouse has the right to succession after the leaving spouse “permanently vacates”.

However, what if the spouses disagree on who should leave or how the financial value of the residence should be accounted for the distribution of property? There is little guidance from the courts: There is no published case law about the treatment of Mitchell-Lama housing in the equitable distribution of property for a divorce.  It is even unclear whether a spouse who leaves before a divorce, who has forfeited his right to return, has also forfeited his right to a share of the financial benefit.

To some extent, however, Mitchell-Lama housing can be analogized to other forms of regulated housing such as rent-stabilization and rent-control. As in those situations, the leaving spouse gives up the security and cost-benefits of the regulation, and potentially the profit opportunity if the unit is privatized, and must return to the competitive and expensive housing free market where their likelihood of finding a comparable situation is far from guaranteed or, in the case of rent-controlled apartments, zero. There is some case law regarding other forms of regulated housing and divorce.

Potentially Relevant Case Law and its Application

Who has the right to the unit?

In two cases (Elkon v. Elkon 1969 and Klotz v Klotz 1989), the breadwinner spouse who earned a significant income had to cede the rent-controlled apartment to the homemaker spouse. Since the nature of Mitchell-Lama regulation, such that the income of both spouses combined must be below a certain level to qualify and retain eligibility, it is unlikely that it will be as clear as in those two cases that there is one spouse who really needs the benefit and one spouse who really does not. If there were such a disparity and the higher-earning spouse leaves, the couple/court would have to make sure that the lower-earning spouse is still earning enough (through whatever combination of alimony and employment) to continue to meet the minimum-income requirement for their unit.

What counts as “permanently vacating?”

There are two cases (Manolovici v. 136 E. 64th St. Assocs., 1987 and Weinstein v. Hohenstein 1986) to show that whether or not a spouse who moves out during/because of divorce but continued to pay for the rent of the apartment for his wife/kids depends on the specific legislation pertaining to that form of regulated housing.

According to Mitchell-Lama regulations, a tenant must maintain the Mitchell-Lama unit as their primary residence, not using any other address for any other purpose (such as voter registration or driver’s license) and spend at least 183 days out of the calendar year there (barring military deployment). [)3-2 (n)(4) and (n)(6)]

There are two contradictory cases (MATTER OF CUDAR v. O’Shea, 2010 and NSA FLATBUSH ASSOCS v. Mackie, 1995) about the question of whether moving out due to a court order counts as abandoning residency or not.

Mitchell-Lama regulations specify that the residency of a tenant (not listed on the deed/lease) is not interrupted by absence from the residence due to a court order unrelated to Mitchell-Lama regulations [3-02 (p)(5)(iii)]. That specification is not made for the person who is the named lessor or coop owner, but it may possibly be inferred.

When does a spouse forfeit their right to equitable distribution of the financial benefit?

There is one case (Chew v. Chew, 1992) that held that even where the wife left the rent stabilized home and had no tenancy rights, she would still be entitled to a share of a windfall privatization conversion if the husband bought the apartment for preferential rates and resold it for a profit within five years of the divorce. In that case, however, the building had already been privatized.

It is plausible that Mitchell-Lama spouses  who leave as a result of divorce may continue to have some rights to future economic benefits of the unit they have left, but there is no clear precedent.

Cases