Tenants’ Committee Defeats Lien Motion in Bankruptcy Court

March 18, 2008

Cleary Gottlieb successfully represented the tenants’ committee of 652-656 West 160th Street, New York, New York in a trial before the Bankruptcy Court for the Southern District of New York. The tenants’ committee defeated a motion by the debtor and former landlord, 652 West 160 LLC, which was seeking to impose a lien on the tenant cooperative’s property for the cost of past repairs.

In the first stage of litigation, Cleary Gottlieb successfully convinced the bankruptcy court to lift the automatic stay and permit the debtor’s property, a building in Washington Heights where the tenants lived, to be transferred to a tenant cooperative under New York City’s third party transfer program. Following the transfer of the property, the debtor filed a surcharge claim under section 506(c) of the Bankruptcy Code requesting reimbursement for the cost of structural improvements made at the request of New York City’s Department of Housing Preservation and Development. The debtor sought to recover $47,700 for repairs by imposing a lien on the tenant cooperative’s property. After a trial in September 2007, the court issued a written opinion on March 18, 2008 denying the debtor’s motion and ruling that no lien should be imposed because the repairs did not result in any actual benefit to the property. Agreeing with the testimony of the architect in charge of the current renovation of the property, the court found that the repairs were inadequate and had no value in connection with the broader renovation of the property. The court also ruled that the debtor’s chapter 11 case should be dismissed.