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?
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.
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.
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.
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.
(Elkon v. Elkon 59 Misc.2d 725, 300 N.Y.S.2d 259 N.Y.Sup. 1969
Klotz v Klotz 150 A.D.2d 308, 541 N.Y.S.2d 806 N.Y.A.D.,1989)
|Benefit assigned to less-monied spouse||Rent-controlled apartment||Where one spouse is the breadwinner with incredibly significant income and earning potential and the other is a homemaker and stay at home parent, the rent-controlled apartment was awarded to the spouse receiving alimony|
NSA FLATBUSH ASSOCS v. Mackie, 166 Misc. 2d 446 – NY: City Court, Civil Court 1995
|A spouse who left the home b/c of an order of protection may be considered to have permanently vacated||Rent-controlled apartment||Where the husband left the rent-controlled marital home because of an order of protection and subsequent arrest, and the judgment of divorce did not address the issue of who was to have possession of the apartment, the wife’s succession to sole tenancy was valid.|
|A person who temporally leaves his home b/c of a court order (incarceration) may still be considered to be resident in that home during the time of incarceration.||Section 8||In counting the whether the remaining family member had spent a sufficient number of months living with the lease-holder in the residence to qualify as a successor, the lease-holder is considered to have continued to be living in the residence during months that he spent incarceration, since he only left the residence because of a court order and did not change his primary residence.|
Manolovici v. 136 E. 64th St. Assocs., 70 NY 2d 785 – NY: Court of Appeals 1987
Weinstein v. Hohenstein, 122 AD 2d 842 – NY: Appellate Div., 2nd Dept. 1986
|A spouse who left the home during divorce proceedings but continued to pay towards the rent is still considered a tenant in a rent stabilized home||Rent-stabilized
|The husband who had left the marital home maintained a sufficient connection to that rent stabilized apartment to be considered a “tenant in occupancy” during the divorce process by paying the rent for his wife and children, according to the definition of tenancy in rent stabilization laws.|
|A spouse who left the home during divorce proceedings but continued to pay towards the rent (as alimony) is still considered a tenant in a rent stabilized home but not in a rent-controlled home.||Rent-controlled||The husband who had left the rent-controlled home but continued to pay the rental costs as alimony to his wife was not considered to have any tenancy status/rights., according to the definition of tenancy in rent-control law.|
Chew v. Chew, 157 Misc. 2d 322 – NY: Supreme Court 1992
|A spouse who left the home as a result of the divorce may still be entitled to financial windfall of the conversion of a regulated apartment.||Rent-stabilized conversion||The financial windfall from the insider/preferential purchase of converted rent stabilized unit which had been the marital residence may be marital property even if only one spouse has been in possession of the apartment during the divorce. The court ruled that If the husband, who retained possession, chooses to buy the unit at a preferential price and then sell it at a profit w/in five years of the divorce decree, the wife is entitled to half the net profit due to her contributions to value through paying rent and caring for the home.|