The Big Apple has agreed to pay $60 million to property owners whose buildings were seized under a controversial city program that Mayor Zohran Mamdani has vowed to revive.
Under the settlement agreement filed in Manhattan federal court Friday, owners of 64 properties seized by the city over unpaid tax debts will receive the payouts, nearly a decade after the class-action lawsuit was filed.
“We’re grateful to be able to finally give some relief to some of these families,” said Sara Kane, one of the attorneys representing the homeowners.
The plaintiffs argued that the properties were seized without “just compensation,” in violation of their constitutional rights — and alleged the city never notified them that their homes were being seized, according to the suit filed in 2019.
The settlement — one of the largest in the last decade by the city — comes as the Mamdani administration looks to revive the program as part of the mayor’s “Fix the City” housing plan.
Under the “Third Party Transfer” program, ownership of buildings that have racked up housing code violations and owe taxes or other debts to the city can be transferred to a nonprofit. That organization then finds an affordable housing developer to take the property over — for no charge and with the debt forgiven.
But court documents claim that often, the seized real estate was worth well over what the homeowner owed in taxes.
“They could have been $1,000 behind on a million dollar property, and they could have gotten seized,” said Alex Simkin, another attorney repping the homeowners.
One of the lead plaintiffs, retired ambulance driver McConnell Dorce, lost the East Flatbush, Brooklyn apartment building that he’d owned since 1977 to the TPT program due to outstanding water and sewage bills.
Dorce — who owned the building outright “free and clear of any mortgage”– had even entered into a repayment plan with the city over the debt, his attorney said.
The city nonetheless seized his home without notice — even as it continued to receive his payments, according to court documents.
Dorce, whose property was part of the announced settlement, died in February.
“It’s heartwrenching,” said Kane, “and it’s particularly heart wrenching that Mr. Dorce didn’t live to see the outcome of this case.”
While some of the owners were allowed to continue living in their homes as tenants, others — like Dorce — were not permitted to return once the developer took the property over, the plaintiff attorneys said.
The suit also claimed Third Party Transfer unfairly targeted minority communities, a longtime accusation made by critics of the program, launched in 1996 under then-Mayor Rudy Giuliani.
“These are families that were really working towards generational wealth.” Kane said. “It was literally taken out from under them, and they were given nothing for it.”
A City Hall spokesperson said the program — which has effectively been on pause since 2019 — doesn’t evict residents and that they are allowed to remain in their homes at affordable rents.
“The City maintains that the transfer of properties did not violate the former property owners’ rights, but the City is settling to resolve this longstanding litigation,” said Andrew Stern, spokesman for the city’s Department of Housing Preservation and Development.
Stern said that any revival of the TPT program would be conducted “in a way that addresses the concerns outlined in these suits.”
The settlement would cover the most recent group of properties seized in 2019. But more than 500 other properties remain as part of the class-action suit, according to attorneys for the plaintiffs.
“We hope that the court system allows for the rest of the rounds to have a similar result,” Kane said.
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