Owner Denied Section 8 Payments Due to Unit Defects

Facts: A resident sued the owner and the local housing authority for alleged wrongful termination of her Section 8 subsidy. In August 2008, the resident was notified that her unit failed a Housing Quality Standards (HQS) inspection. When she received this notification, she understood it to mean that if the housing authority stopped paying the Section 8 subsidy, it was due to the repair conditions in her unit. The resident claimed that, after the owner failed the 2008 HQS inspection, it failed to complete repairs.

A stipulation or agreement was signed in court. The resident agreed to withdraw the court proceeding and submit to the housing authority documents and information necessary to certify her continuing eligibility for the Section 8 program. The housing authority agreed to restore her to the Section 8 program if she remains eligible for it. But it was agreed that her restoration to the Section 8 program doesn’t constitute an automatic reinstatement of the Section 8 subsidy payments made by the housing authority to the owner. If the unit passed the housing authority’s inspection for compliance with federal HQS, the housing authority would reinstate the subsidy to the owner effective Jan. 1, 2009.

The owner then asked the court to vacate the agreement and restore the court proceeding. The owner argued that, since entering the stipulation, the housing authority has failed to reinstate monthly subsidy payments, although the resident has been restored to participation in the Section 8 program. According to the owner, the housing authority has engaged in a deliberate course of action to prohibit the owner from collecting the outstanding subsidy due under the agreement by purposefully and maliciously refusing to pass the unit’s HQS inspection.

Ruling: A New York trial court ruled against the owner.

Reasoning: The resident stated in a sworn affidavit that, on or about April 13, 2012, the housing authority again inspected her unit. The inspector told her that the unit failed the inspection for the following reasons: defective and/or missing tiles in the kitchen floor; defective and/or missing tiles in the bathroom floor; her son’s bedroom needed to be fixed–the wood floor panels have gaps and are defective; the walls in the master bedroom must be scraped and painted; the wall in her son’s bedroom is caving in and needs to be repaired, scraped, and painted; the bedroom door needs to be fixed and/or replaced; and the bathroom door needs to be fixed and/or replaced. Because of this, the court found that the owner failed to demonstrate a lack of good faith and fair dealing on the part of the housing authority.

• Delacruz v. NYCHA, October 2012