Last week, New York City reached a historic $60 million class action settlement after decades of executing unlawful property seizures under the city’s Third-Party Transfer (TPT) program, which disproportionately impacted Black and Latino homeowners.
The lawsuit was initially filed in March of 2019, and gained momentum after a Supreme Court ruling in 2023. The settlement money will go to 64 homeowners that had their properties seized in 2018, although it’s alleged that thousands more were affected by the TPT program.
“The fundamental problem is that the city took value from homeowners that was far beyond what the city was actually legitimately owed by their statement of the debt,” said Keith Wofford, a partner at White & Case law firm that’s representing the victims. “For the city to take a million value for a $50,000 debt is illegal, unconstitutional, and frankly, stealing.”
History of Theft
During the 1970s and 80s, the city was at the tip of what would be a housing crisis with building owners who abandoned and neglected their properties, largely in response to the rent stabilization laws. Many of these properties were seized under the city’s in rem tax-lien collection law. The TPT program was created in 1996, and is run by the city’s Department of Finance and the Department of Housing Preservation and Development (HPD). The program was supposed to help homeowners or Housing Development Fund Corporation (HFDC) cooperative shareholders resolve a property’s outstanding debts or taxes. If that couldn’t be done then it was subject to foreclosure.
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This was often done without meaningful notice or compensation, said Wofford. And then the home was turned over to a chosen developer and nonprofit, such as Neighborhood Restore Housing Development Fund or BSDC Kings Covenant Housing Development Fund Company Inc. (Bridge Street), to be flipped for “affordable housing.”
The program targeted historically Black and Brown communities in Brooklyn, the Bronx, and Harlem, “unapologetically” stripping working class homeowners of color and their families of their properties under the guise that they were “bad landlords.” In many cases these properties had paid off mortgages as well.
“HPD made a lot of effort, I learned, to tell the city that these were abandoned properties, bad landlords, and distressed properties,” said Yolande I. Nicholson, principal attorney at her own foreclosure prevention practice based in Brooklyn. “But what was revealed is that they misrepresented the character of the property, and the character of the property owner.”
Picture of Cecilia Jones on her former stoop at 1197 Dean Street in Crown Heights. (Photo contributed by Ronnie Sykes-Oliva)
The last time the city used this program to take properties was ‘Round 10’ in 2018 under former Mayor Bill de Blasio, which led to the lawsuit in 2019. Wofford explained that Round 10 was “particularly abusive” because of a procedure called ‘block linkage,’ meaning if a family’s home was on the same block as a deemed “distressed” property then it could be seized regardless of the actual condition of it. He said that most of these properties were family-owned where all the tenants tended to be relatives.
The case was initially dismissed on jurisdictional grounds in 2021, but was reversed by the Court of Appeals for the Second Circuit. In 2023, the Supreme Court reached a unanimous decision in the Tyler v. Hennepin County case that government seizure of surplus home equity is unconstitutional. This opened a pathway for Wofford’s and Nicholson’s legal teams to move forward with the class action lawsuit.
Litigation on homes taken during Round 1 through Round 9, dating back to 1996, is ongoing. Nicholson estimated that roughly 7,000 properties could’ve allegedly been impacted over the course of the TPT program. She added that the settlement payout averages about $937,500 to $1 million per property, but can never make up for losing a home and being mistreated by the city.
Cecilia Jones, 81, is one of the plaintiffs in the class action suit. She migrated from Guyana in 1983 and worked as a home health aide in the city for 26 years. Her home was in an HDFC cooperative apartment in Crown Heights in Brooklyn, where she lived since 1996. Jones was also a shareholder in 585 Nostrand Avenue HDFC. The lawsuit states that her home was transferred to the Neighborhood Restore nonprofit under the TPT Program in 2018 with no notice.
“Losing ownership of her home has been devastating for my mother,” said Michelle Prescott, Jones’ daughter, in a statement. “She was not a landlord. She was the owner of her apartment, a longtime member of her community, and she paid her monthly maintenance. She purchased the shares in her apartment many years ago and never imagined that the home and security she had worked so hard for could simply be taken away. Your home is supposed to be your safe haven, especially as you get older.”
Isabel M. Adon resided at an HDFC cooperative on 1600 Nelson Avenue in Morris Heights in the Bronx. She immigrated to the city from the Dominican Republic in 1978.
“We stayed through the fires, the crack and AIDS epidemics, violence, and abandonment. When buildings around us were empty, we stayed. We cared for our building, beautified it and cared for one another. It was a labor of love,” she said in a statement. “Then, after decades of sacrifice, we learned that our home had been transferred through the City’s Third Party Transfer program. We were devastated. We were not slumlords or bad landlords. We were hardworking people who stayed, invested in our neighborhood, and built a community when others had abandoned it. This was our home, our community, and our equity, built through generations of sacrifice.”
A Potential Revival of TPT
This year, the City Council proposed to revive and reform the historically inequitable third-party transfer program under the SAFER Homes Act, sponsored by City Councilmember Pierina Sanchez.
In her City and State NY op-ed published in March, Sanchez argued that building owners or “bad actors” should be held accountable if they subject their tenants and properties to hazardous living conditions.
“Because the original “Third Party Transfer” program was deeply flawed. A broken system swept up buildings that never should have been included: homes with little debt and few physical problems. Outreach was ineffective, leaving homeowners in the dark until it was too late. After widespread outcry, the city rightly froze that program,” wrote Sanchez. “But we can reinvent this tool. We can repurpose city foreclosure to focus only on the worst of the worst properties.”
This bill would draw from recommendations of the Third Party Transfer Working Group — a group of tenants, co-op shareholders, advocates and experts convened with the city to discuss reforms to the old program. It would also eliminate the block linkage aspect and allow owners to claim “surplus value” on properties taken.
“The City and counsel for all parties involved in Round 10 of a previous iteration of TPT under a previous Administration have reached a settlement,” said a spokesman for HPD. “The Mamdani Administration and the City Council are working together closely to update and strengthen TPT in a way that addresses the concerns outlined in these suits and that better serves New Yorkers and our goal of creating and preserving safe, stable housing for tenants.”
Both Wofford and Nicholson are vehemently opposed to any version of the TPT program being reinstated. Wofford maintained that the program is “abusive” on multiple levels and shouldn’t be allowed to impact communities again.
“They said it was for tax collection, but they collected no taxes when they actually did these handovers. The city never collected any of those delinquent amounts. They just took the property and handed it to their preferred recipients,” he said. “They said it wasn’t racial but they only did it in Black neighborhoods. They said it was for distress, but they took non-distressed properties along with the distressed, and they said it was against landlords and, in fact, used against properties where the tenants owned properties.”
The settlement is currently awaiting preliminary court approval to disperse funds. In the meantime, the legal team said that there have been more families and victims reaching out to them to seek justice.
