Third Party Transfer Program Challenged

David Goldsmith

All Powerful Moderator
Staff member
The NYC TPT program has been controversial for a few years now. The program allows for properties which are behind on their Real Estate Taxes utility bills to nonprofit caretakers or for-profit developers.

"To be considered for the program, properties must meet specific criteria. The parcel must have a debt-to-value ratio at or greater than 15 percent, and meet at least one of the following criteria: have five or more hazardous building violations or be subject to a tax lien of $1,000 or more.

But a City Council investigation found that 210 of the 420 properties recently reviewed by the city for inclusion on average only had a 3 percent debt-to-value ratio. The bundle of buildings were worth some $152 million, with just $4.5 million in debt, the probe’s findings show."

In addition, the process of foreclosure and transfer might not be 100% legal. The TPT program has been holding mass foreclosures against large numbers of unrelated debtors/properties in one action. Debtors attorneys have claimed this to be extralegal.

The news is that 3 Brooklyn homeowners have gotten the green light to commence a civil rights lawsuit to recover their wealth lost through the program.

“Our clients, working families, had their only generational wealth, their homes, snatched from them by the City of New York under its Third Party Transfer Program. They were not given any compensation for these illegal and unconstitutional takings and even though the City tried to get our lawsuit tossed, the Court has now acknowledged that our suit should continue to move forward,” said Matthew L. Berman, one of the plaintiffs’ attorneys with the law firm Valli Kane & Vagnini LLP.

The City conducted the seizures under the Department of Housing, Preservation and Development’s (HPD) TPT program. The program confiscates the entire property value of a home from the owner, even if the homeowner only owed the City a few thousand dollars in taxes or water and sewer charges.


HPD would then hand the houses, and that excess value, for free or a nominal fee to development organizations of his administration’s choosing. Two of these not-for-profit entities, Neighborhood Restore Housing Development Fund and BSDC Kings Covenant Housing Development Fund Company, are defendants in the suit.

The three plaintiff homeowners are McConnell Dorce, Cecilia Jones and Sherlivia Thomas-Murchinson.


“We have definitely been cheated and targeted through this program. The TPT program has affected my family in many ways. My family and our neighbors who should have remained shareholders in the building have lost real, personal and future assets and value in the millions of dollars, not even measuring the value of having a home for the long term. My now deceased mother worked, for close to 25 years, to ensure that our family would have long-term residency in an already-existing affordable housing co-op. The City took that away with the stroke of a pen,” said Thomas-Murchison.

The plaintiffs aim to represent a class of property owners in the five boroughs who have lost their properties to the city without receiving compensation for their lost equity.


The plaintiffs had to go to the U.S. Court of Appeals after the city challenged the plaintiffs’ right to file a class-action lawsuit, arguing the matter should be one of state court jurisdiction. But the Plaintiffs successfully argued it is a federal issue as the taking of their property falls under the Fifth Amendment of the U.S. Constitution requiring just compensation for the taking of a person’s property.

The properties seized by the City in its most recent batch of TPT transfers were collectively valued at more than $66 million at the time the suit was filed, and now are worth much more. Additionally, the suit seeks to recover the equity value of hundreds of additional properties seized by the City dating back to the early 1990s, with values potentially estimated in the hundreds of millions.

A city Law Department spokesperson noted the ruling was procedural on a jurisdictional issue and the merits have not been heard.

“The City believes the case is meritless and should be dismissed,” the spokesperson said.

 

David Goldsmith

All Powerful Moderator
Staff member

One year later, city hasn’t renewed or fixed lien sale​

Adams administration still pondering solution for delinquent properties

Glen Wolyner knew he was way behind on his property taxes. The debt had snowballed after a perfect storm that included a cancer diagnosis and a steep drop in his consulting work during the pandemic.
But he did not realize that the city sold his debt in 2021 and that the buyer was moving to take over his Soho loft.

Then Wolyner received a notice last month: “YOU ARE IN DANGER OF LOSING YOUR HOME.” He owed nearly $300,000 and would need to pay 18 percent interest to avoid foreclosure on his apartment at 505 Greenwich Street.
“I think the mob charges less,” Wolyner joked.

His condo, which he bought for $2 million in 2010, was one of more than 360 properties in the city’s December 2021 lien sale.
When an owner fails to pay property taxes, the city sells the debt to an investment trust, which begins charging hefty interest. If the trust cannot collect the balance, it takes the property. The city began selling liens to the private sector during the Giuliani administration rather than foreclosing on properties itself.
Wolyner thought he had avoided the lien sale by entering a payment plan with the city, but the Department of Finance found no record of such a plan, a spokesperson for the city agency said.
Now Wolyner is trying to avert foreclosure and get a loan to pay his tax bill. He doesn’t deny responsibility — “I am not trying to dodge taxes or anything,” he said — but takes issue with the system.
“The whole process has been very, very opaque,” Wolyner said. “I can’t get an answer out of anybody.”

The lien sale, which includes properties that have long-overdue property taxes, water and sewer bills, typically yields tens of millions of dollars for the city. That’s a tiny fraction of its property tax revenue, but more than it would collect by merely mailing bills to those delinquent owners.
But the lien sale was unpopular with many politicians and was suspended during the pandemic, first by the city and then the state. The City Council reluctantly renewed the sale for one year — instead of the usual four — in January 2021, and exempted some properties. The sale that December has been the only one since then.
The Council also mandated that a 12-person task force make recommendations for reform. In November 2021 the group suggested the city stop selling liens on co-op and condo units and on one- to three-family buildings.

The task force also proposed creating a land bank that would collect debts and still use “outside servicing agents and securitized bonding as needed,” but have flexibility to work with delinquent owners.

Under another option, the city would forgive debt on a property transferred to a community land trust. The owner would then sign a ground lease with the trust, as well as a long-term agreement to keep the property affordable. The Abolish the Tax Lien Sale Coalition, a group of community land trusts, nonprofit developers and advocates, has pushed for such a framework.
By selling liens, “the city surrendered its leverage to move tax-delinquent properties into affordable housing programs or achieve other public policy goals,” a February report by the coalition stated. “The lien sale disproportionately harmed low-income homeowners and communities of color, contributing to predatory lending, foreclosures and the erosion of Black and brown wealth for decades.”
The city has not authorized another lien sale since 2021, nor has it adopted any of the reforms recommended by the task force. The Adams administration is still forming a plan.
“The administration is working to overhaul property tax enforcement to protect vulnerable homeowners and communities while ensuring that everyone fulfills their legal obligation,” a City Hall spokesperson said in a statement.
Wolyner is in a better position than some owners; even if he loses his luxury Soho loft, he has another home in Connecticut. But his case highlights a perennial complaint about the lien sale: That owners are not adequately notified before their property’s liens are sold and are sometimes confused about how to avoid foreclosure.

The Department of Finance mails repeated warnings, but sometimes it falls to individuals to rescue property owners.
Mariya Markh, a Brooklyn district leader and long-time City Council staffer, is known in some circles as the “Queen of Liens.” She estimates that she has helped more than 500 properties escape the lien sale since 2010.
Owners who reach out are often in financial trouble, she said, though some end up facing the lien sale because of a clerical error. Some think they are safe because they applied for a payment plan with the city and even sent a payment. They do not realize that extra steps are involved.
“I have run into folks who have said, ‘I think I’m on a payment plan,’ and then we look, and, “No, you’re not,” she said.
“That is the scariest thing about the lien sale for the average person,” she said. “When you are thinking there is no problem at all.”

 

David Goldsmith

All Powerful Moderator
Staff member

NYC property seizures imperiled by Supreme Court decision​

Ruling boosts owners suing third-party transfer program
A 94-year-old’s fight in Minnesota may change a property seizure program in New York City.
The U.S. Supreme Court on Thursday ruled unanimously that Hennepin County wrongfully pocketed the excess proceeds from the sale of Geraldine Tyler’s condo unit. Tyler owed the county $15,000, a sum that ballooned from $2,311 in unpaid property taxes.

To settle the debt, the county sold her condo unit for $40,000 — and kept all of it. The court agreed that this violated the Fifth Amendment’s takings clause, reversing the Eighth Circuit’s decision in the county’s favor.
“A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” Chief Justice John Roberts wrote. “The taxpayer must render unto Caesar what is Caesar’s, but no more.”

The court found that Minnesota law does not provide property owners sufficient opportunity to recoup any surplus when their property is seized by the government to satisfy a debt. Roberts dismissed the county’s argument that Tyler could have sold her property to pay her debt, saying that does not qualify as an opportunity to claim equity.
New York City officials surely took notice.
In the city’s lien sale, debt from overdue taxes, water bills and the like is sold to an investment trust that can foreclose on the property if it cannot collect what is owed. Property owners have a chance to recoup any surplus in state court, but sometimes don’t.
In a 1956 decision, the Supreme Court ruled in favor of New York City over a property owner who waited too long to claim excess proceeds. New York and other states have pointed to that decision to justify their tax enforcement programs.

But the city’s third party transfer program functions differently. The city seizes distressed properties from indebted owners and transfers them to developers, who provide tenants with rent-stabilized leases and agree to rent the apartments out at below market value.

That program is the subject of a 2019 class-action lawsuit. Brooklyn homeowners allege, among other things, that their properties were wrongfully seized. City officials have argued that owners are given ample notice and opportunity to pay their debt and can even “demand additional time to sell property and pay the liens from proceeds, retaining surplus, if any.”
Yolande Nicholson, one of the attorneys representing the property owners in the suit, said Thursday’s Supreme Court decision supports the claim that her clients were “subject to an unconstitutional action, having their private property illegally snatched by their own city government.”
“The US Supreme Court now makes it very clear! The City’s TPT Program is fundamentally unconstitutional!” she said in a statement.
“For African-American families like Ms. Tyler especially, the Supreme Court’s decision heralds that their property rights matter to the same extent as it does for Americans who were afforded those rights from the Declaration of Independence,” she said.
A representative for the city’s Department of Housing Preservation and Development indicated that the agency was reviewing Thursday’s decision.

The ruling could have implications beyond the third party transfer program. According to the Pacific Legal Foundation, at least 12 states have laws that allow localities to keep the surplus value from seized property.

 
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