City Faces $66M Class Action Lawsuit On Taking Of Private Property

Mr. Dorce
Mr. McConnell Dorce, a house-owner in East New York received a foreclosure notice on his paid-off property from the City’s Department of Housing and Preservation Development under a non-profit Third Party Transfer program. (Photo by Tsubasa Berg)

Three Brooklyn property owners filed papers in the U.S. Southern District of New York Federal District Court this week seeking certification to pursue a class action lawsuit, which if successful, could cost the city tens of millions of dollars and the return of dozens of property unconstitutionally confiscated.

The lead plaintiffs – McConnell Dorce, Cecilia Jones and Sherlivia Thomas-Murchinson – are among 66 property owners who have all had their property taken without any compensation in the recent round of the city’s Third Party Transfer (TPT) program. 

The suit names New York City, the Department of Housing Preservation and Development (HPD), the public/private entity Neighborhood Restore and the non-profit Developer Bridge Street among the co-defendents.

According to the filing, “During the relevant period, Defendants seized numerous properties pursuant to in rem foreclosure proceedings brought under the Third Party Transfer program. By way of example, in 2017 alone, the City Defendants were awarded in rem title to sixty-six (66) properties in Kings County believed to be worth, in the aggregate, in excess of sixty million dollars ($60,000,000.00).”

Under the program, which KCP has chronicled in a series of stories, the city, through HPD takes properties behind on their taxes, water or sewer bill, and in which the agency labels “distressed.” These properties then get their deeds transferred to Neighborhood Restore, who in turn wipes out any property taxes or water bills owed and sells it to a favored non-profit or for profit developer for a nominal price to redevelop into “affordable housing” for a fee.

The filing notes the history of the TPT program in that it was developed after New York City experienced urban property blight in the 1970s and 1980s. During this period, and in a significant number of instances, owners of large multiple dwelling residential buildings simply walked away from their buildings, after falling behind on their tax obligations to the City, and after neglecting property maintenance as well as health and safety issues at the buildings.

“In other words, these owners abandoned their buildings, leaving behind unpaid real property taxes that were owed to the City, leaving behind tenants without any building-wide property, maintenance, health and safety services, and leaving behind buildings that were experiencing and at risk of continuing to experience physical decline,” the filing states.

However, the filing notes that with gentrification these properties are now worth millions of dollars and are now being taken not to keep them on the tax rolls but for perceived public good.

Under eminent domain laws,  government has the power to take over private property if it’s determined that it’s for the public good. However, most laws require that the government give the property owner “just compensation” for the trouble, a missing component of the TPT Program.

“On or about January 10, 2019, Mayor Bill de Blasio doubled down on his affordable housing initiative, and stated that he intends to expand the Third Party Transfer program to seize upwards of 40 additional dwellings annually, in order to transition them to “responsible, mission driven ownership,” according to the filing.

“The Mayor stated: ‘We will seize their buildings, and we will put them in the hands of a community nonprofit that will treat tenants with the respect they deserve,” continues the filing. “Mayor De Blasio has made it clear in public statements that he intends to expand the application and reach of the Third Party Transfer Program.”

The documents allege the City of violating the homeowners rights in the seizing of their homes.

“The Third Party Transfer Program amounts to an unconstitutional “taking” because it seizes private property for a public purpose (affordable housing), and does not provide “just compensation” to the owners of the property seized,” the filing states.

The court filing also charges “the City Defendants improperly engaged in acts and transactions that intended to, or that resulted in, a redistribution of property ownership and wealth away from individuals that are of African-American and/or Hispanic American descent, or buildings that are owned predominantly by individuals that of African-American or Hispanic American descent, to private companies and partners of the City defendants” in a manner that violates the equal protection laws of the United States.

The suit was filed on March 11 and if certified by the court could set in motion proceedings that could eventually return over 60 properties and their equity back to longtime homeowners.

The Case number is:  1:19-cv-02216 – filed in the Southern District of New York, U.S. District Court.