Residents of six Brooklyn apartment buildings were jubilant in late March when a judge tossed out “unconscionable” foreclosures pursued by the city that turned them from homeowners to tenants.
Now city attorneys are challenging that decision, arguing that owners were given plenty of time to pay back taxes.
The ongoing case turns up the heat on the city’s Third Party Transfer program, under which city agencies hand apartment buildings’ deeds to nonprofit caretakers in lieu of foreclosing for unpaid taxes or water and sewer bills.
The program preserves cash-strapped buildings as affordable housing — but at the price of stripping ownership rights to potentially valuable real estate from co-op shareholders and other property holders who fall short on their payments.
In his March 28 ruling, State Supreme Court Judge Mark Partnow had harsh words for the city Department of Housing Preservation and Development and Department of Finance — calling the foreclosure of one Bedford-Stuyvesant building that owed back taxes “unconscionable” and a Bushwick low-income cooperative “a grave injustice.”
“We feel like justice was served,” said Yudy Ventura, the co-op board president at 19 Kingsland Ave. in Bushwick, speaking in Spanish.
She and other former owners in her building received a notice Tuesday from an official at the city Department of Housing Preservation and Development informing them the title to 19 Kingsland Ave. is back in their hands.
But not for long, if city lawyers have their way. In papers submitted last week to the court’s Appellate Division, the Law Department asserts it properly notified owners and gave them adequate opportunity to pay their debts.
City attorneys also point to laws making foreclosure judgments final after four months, and say they’re under no obligation to prove buildings are in bad shape before moving to foreclose.
“We disagree with the decision as a matter of law and on the facts,” Nick Paolucci, a Law Department spokesperson, said in a statement. “Due process was afforded to these owners.”
Foreclosure ‘a Big Surprise’
Ventura, who’s 52 and works as an office assistant, had been living in 19 Kingsland Ave. for more than 30 years in mid-2017 when the building received a foreclosure notice, she said.
The property had fallen behind on its taxes and water bills, the notice read, and would now be under the management of a nonprofit called Neighborhood Restore, until the building was transferred to another developer.
Ventura was stunned. She and the other shareholders had been catching up on their nearly $78,000 in arrears under a payment plan with the city Department of Finance, and believed they were on track to keep possession, she said.
“We’ve done a tremendous effort to make sure our building is up to speed,” another shareholder, 50-year-old Ramona Crespo, said in Spanish. “This was all a big surprise for me.”
Community organizers familiar with Third Party Transfer say city agencies have too often left low-income co-ops to their own devices, setting up shareholders for failure.
“When you put low-income-to-moderate-income tenants in the position to have to maintain a building that goes beyond their means, then it becomes really challenging,” said Stephanie Sosa of the Association for Neighborhood and Housing Development, whose members include nonprofits that took possession of Third Party Transfer buildings.
“It’s like, arrear after arrear after arrear, and there’s no way they can really get out of that debt.”
Mayor Rudolph Giuliani and the City Council created Third Party Transfer in 1996 as a way to preserve as affordable housing in dilapidated apartment buildings that owed taxes, rather than allowing them to fall into the city’s possession.
Calls for Change
HPD identifies properties that have collected over $3,000 per unit in tax and water debt over at least one year and have a significant number of housing code violations as Third Party Transfer candidates. The agency gives rental buildings three years and co-ops six years to get on a payment plan to get off the list of properties slated for sale to nonprofit housing groups.
In its tenth and latest Third Party Transfer round, the Department of Finance and Department of Environmental Protection in 2017 listed 420 apartment buildings with past-due water and sewer bills, leading to foreclosures on 62 properties.
Partnow’s reversal of six of those deed transfers amplified calls from some Brooklyn elected officials to suspend Third Party Transfer foreclosures until the program can be investigated. They’re demanding reforms to ensure that strapped owners have a fair shot at holding on to their real estate even if they fall behind on tax, water and sewer bills.
“We believe the city, state and federal government agencies should be part of a forensic investigation to determine any wrongdoing,” Brooklyn Borough President Eric Adams said at a March 31 press conference after the ruling.
In December, Councilmember Alicka Ampry-Samuel (D-Brooklyn) and then-Councilmember Jumaane Williams (D-Brooklyn) proposed a moratorium on the program. Councilmember Rafael Salamanca (D-Bronx) wants to enhance Council members’ powers to remove properties from the transfer list, by doubling a review period from 45 to 90 days.
And Councilmember Robert Cornegy (D-Brooklyn), who chairs the Housing and Buildings Committee, has called for a task force to investigate the program.
“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 said.
But, he added, an investigation would “make sure the program is working within the confines of its legal structures, the way it was intended.”
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