Property rights in NYC

November 3, 2013

One of the subjects we cover in the Global Economy course is property rights. As a rule, it’s helpful to economic performance to be clear about who owns what. In Peru, for example, many poor people don’t have clear title to their homes, which means they can’t get mortgages or otherwise access financial markets. I’ve heard similar stories about India, Mexico, and even Harlem.

In principle this seems simple, but in practice it’s not. Here’s a provocative example from the Times, via Credit Slips, a bankruptcy blog. My lightly edited version:

After her husband died, Mary Veronica Santiago fell behind on her bills and decided to file for bankruptcy. Mrs. Santiago has lived for 50 years in a two-bedroom rent-stabilized apartment near Tompkins Square Park, in a neighborhood where unregulated apartments rent for thousands more a month than Mrs. Santiago’s rent of $703. As her case was nearing conclusion, her landlord offered to buy her rent-stabilized lease and pay off her debt.

The question for the court is whether a rent-controlled apartment is an asset, available to pay creditors, or is exempt, as (for example) social security is. Which would you recommend? I’ll consult my attorneys later and see what they say.

The Times piece adds: “The trustee in Mrs. Santiago’s case has proposed an arrangement in which the landlord would pay her debt and allow Mrs. Santiago to live out her years in her apartment at a similar rent under a non-rent-stabilized lease “with no succession rights” that could otherwise have allowed her to pass the apartment on to her 50-year-old son, a personal trainer who lives with her and helps support her.” As Glenn Okun might say: “Res ipsa loquitur” (yeah, he talks that way sometimes, it’s the law degree).

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