March 10-11, 2010
Digest: A judge may not rent an apartment at less than fair market rental value to a litigant currently appearing in the judge’s court so that the litigant can avoid partially liquidating a structured settlement.
Rules: 22 NYCRR 100.2; 100.2(A); 100.3(A); 100.4(D)(1)(a); 100.4(D)(2).
A full-time judge asks whether he/she may rent an apartment to a litigant currently appearing in the judge’s court on a motion requesting approval of a proposed partial liquidation of a structured settlement annuity.1 According to the judge, the litigant is in “desperate circumstances” because he/she must vacate his/her current residence, and cannot afford to rent elsewhere without the proceeds from the settlement. The judge further advises that the litigant is currently attending a course of study that he/she will complete in a few months and that will qualify the litigant for a job. Based on information the judge provided, it appears that the amount of rent the tenant can afford is well below typical market value in the area. The judge proposes to rent the apartment to the litigant at the same rate the litigant currently is paying for a room, rather than advertising for a new tenant at the market rate for similar rental properties.
A judge must avoid impropriety and the appearance of impropriety in all the judge’s activities (see 22 NYCRR 100.2) and must act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary (see 22 NYCRR 100.2[A]). A judge’s judicial duties take precedence over all the judge’s other activities (see 22 NYCRR 100.3[A]). Although a judge may hold and manage his/her own investments, including real estate (see 22 NYCRR 100.4[D]), a judge must not engage in financial and business dealings that may reasonably be perceived as exploiting the judge’s judicial position (see 22 NYCRR 100.4[D][a]).
It appears to the Committee that the judge seeks to protect the litigant from the onerous terms of the proposed partial liquidation of a structured settlement annuity. While certainly well-intentioned, the judge cannot do so by offering to rent an apartment to the litigant at less than fair market value without creating at least an appearance of impropriety (see 22 NYCRR 100.2). Furthermore, the litigant’s adversary could reasonably question the judge’s impartiality (see 22 NYCRR 100.2[A]) and reasonably believe that the judge, as a landlord, is exploiting his/her judicial position (see 22 NYCRR 100.4[D][a]).
Therefore, the inquiring judge may not rent an apartment at less than fair market value to a litigant currently appearing in the judge’s court so that the litigant can avoid the onerous terms proposed to partially liquidate a structured settlement.
1 Under the proposed terms of the arrangement, the litigant would receive a portion of the present value of the annuity immediately. In return for this immediate lump-sum payment, the litigant would, over a 20-year period, repay four times the amount received.