Following lawsuits from former property owners and backlash from elected officials, the city Department of Housing Preservation and Development (HPD) on Thursday said that is has put together a task force to modernize its controversial Third Party Transfer program.

The announcement comes ahead of a City Council hearing on Monday about Third Party Transfer, under which HPD and the city’s tax collectors hand apartment buildings’ deeds to nonprofit caretakers in lieu of taking possession for unpaid taxes or water and sewer bills.

“Our working group is going to look at the program overall, we’re going to look at it with fresh eyes and anything is on the table,” recently appointed HPD Commissioner Louise Carroll told THE CITY.

Carroll is teaming up with the program’s most vocal critic in the Council, Robert Cornegy Jr. (D-Brooklyn), to lead a group of nonprofits and housing experts to review the program, which critics say unfairly targets shareholders in low-income co-ops and communities of color.

Cornegy, who chairs the City Council’s Housing and Buildings Committee, had called for a probe into the practice.

“The Third Party Transfer program in and of itself, and in its intention, was a good program that stabilized for people who lived in apartments, give them good-quality, below-market rents and stabilized their quality of life,” he told THE CITY last month.

He declined to comment Thursday on the formation of the task force he will co-chair.

The new group includes several nonprofit developers that work with HPD and the Department of Finance to take over buildings foreclosed through Third Party Transfer, as well as Neighborhood Restore, which serves as an intermediary owner.

It does not, however, include any co-op shareholders or their advocacy organizations.

The HDFC Coalition, a membership group of cooperatives, learned of the task force from THE CITY’s article on the task force, as first posted Thursday afternoon.

“This last-minute creation of a task force of the city’s TPT foreclosure program is a very lame attempt at damage control,” said the coalition’s Glory Anne Hussey Kerstein.

“The HDFC Coalition and its Anti-foreclosure Committee along with the Brooklyn HDFC Coalition has been petitioning the city and HPD for two years to create a working group … to scrutinize and reform these processes that operate in the dark.”

On Friday, Brooklyn Borough President Eric Adams released a statement on the task force, in which he said he seeks to have residents and their advocates participate. “Without the voices of vulnerable homeowners, we will see this cycle of dispossession and anger continue unabated,” he said.

Asked about the absence of resident representation, Carroll responded, “We hear that. We’re open to expanding the group.”

Council Raises Concerns

Preparing to chair Monday’s hearing of the City Council’s Committee on Investigations and Oversight, Councilmember Ritchie Torres (D-Bronx) compiled statistics he says suggest discrimination in the city agencies’ foreclosure actions.

A Council analysis shows that half of the 420 properties initially notified they were subject to the latest round of Third Party Transfer were concentrated in just 11 neighborhoods, mostly in Central Brooklyn and the South Bronx. Of those, 118 were resident-run cooperatives, known as Housing Development Fund Corporations or HDFCs.

Crown Heights North had 32, more than any area of the city.

“It is clear to us that HPD is targeting properties disproportionately,” Torres told THE CITY. “It’s targeting Brooklyn and The Bronx, it’s targeting black and brown neighborhoods, and it’s targeting HDFCs.”

Councilmember Ritchie Torres (D-The Bronx). Credit: Ben Fractenberg/THE CITY

Brooklyn had 192 properties on the list, while The Bronx had 132.

Commissioner Carroll noted that of the 420 properties that were notified, only 62 ended up being transferred. Others paid back taxes they owed or had their local City Council member exercise their power to remove properties from the list.

During Monday’s hearing, where Carroll and other HPD officials will testify, Torres says his committee will examine the purpose of Third Party Transfer, the criteria used to decide which properties are subject to city takeover, the quality of city notification to shareholders and other property owners, and the period during which owners may remove their properties from the takeover list by paying back their debts.

Numerous former shareholders assert that they and their neighbors did not receive advance notice that their buildings were entering Third Party Transfer. Some say they believed that they were in the clear because they had worked out payment plans with the Department of Finance.

Torres also flags as problematic a clause in city law that leads that requires city officials to examine unpaid debts all the properties within the same block when one property is in arrears.

Commissioner Carroll defended the provision. “We treat all property owners in a block fairly,” she said. “We’re not targeting neighborhoods specifically.”

Allegations Due Process Denied

Torres says that regardless, the city’s actions leave strapped property owners at sea.

“It could be that HPD did follow the rules, but the rules are inconsistent,” Councilmember Torres said. “There is a lack of due process in the current version of the program.”

This is the main argument in a class-action lawsuit filed in March by several owners who lost their buildings or shares, who allege the city violated their constitutional right to property.

“The city targeted working families who invested in their buildings and participated in the turnaround of their communities with a cavalier attitude that they are not deserving of their properties,” attorney Yolande Nicholson told THE CITY. “It’s the height of paternalism.”

“That’s one of the responsibilities as a homeowner: you have to be able to keep pace, unfortunately,” Anne-Marie Hendrickson, HPD’s Deputy Commissioner for Asset and Property Management, told THE CITY. “You have to be a partner with us.”

Updated to add reaction from Brooklyn Borough President Eric Adams.

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