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Property owners call for city housing program to be shut down in ongoing class action lawsuit

July 22, 2019 Kelly Mena
Eagle file photo by Paul Frangipane
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Lawyers representing plaintiffs in a class action lawsuit against an embattled city affordable housing program responded on Thursday to the city’s earlier request that the lawsuit be dismissed, asserting the program is outright illegal.

The plaintiffs asserted that the city — through its Third Party Transfer program — not only deprived homeowners of color their civil rights, but that it also “invented” an illegal “modified in rem” process that snatches properties from owners without due process, according to Thursday’s filing.

Due process is protected under the U.S. Constitution’s 14th Amendment: “… nor shall any State deprive any person of … property, without due process of law.”

Under the TPT program, the city designates “distressed” property to be transferred to qualified sponsors (nonprofit or for-profit developers) to purchase and rehabilitate distressed vacant and occupied multi-family properties.

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As part of the process, the city uses an in rem foreclosure, in which a court passes a judgement on a private residence in a bid to collect unpaid debts against the building, without a payment of equity to the original property owner.

The lead plaintiffs — McConnell Dorce, Cecilia Jones and Sherlivia Thomas-Murchison — asked the court “to find the municipal statute (Local Law 37) under which the Defendants execute their ‘modified in rem process’ unconstitutional on its face and as applied, and otherwise illegal.”

“There is no way to ‘fix’ or ‘modernize’ something that is illegal. The City’s acts are repugnant to the Constitution,” said attorney Yolande Nicholson in a public statement.

The plaintiffs claim that not only were their buildings far from “distressed,” but the properties that were illegally seized represent wealth creation and legacy in traditionally lower-income neighborhoods that was decimated through the program.

“The Complaint clearly alleges that Plaintiffs’ property was deceptively and surreptitiously seized from them with no notice, with no opportunity to be heard, for purposes other than tax collection, and with no compensation or right of redemption, even when the purported tax charges constituted a tiny fraction of the value of the property, and there was no indication that the property owners had abandoned such property or that the property was distressed,” the lawsuit reads.

This filing is in response to the city’s filing back in May to dismiss the initial class action lawsuit complaint.

The city pushed earlier this year to dismiss the lawsuit on two bases: that the federal court didn’t have jurisdiction over a state court matter and that the complaint failed to state a claim of relief that the TPT program is not taking without just compensation.

“The City’s in rem law and process do not violate the 14th Amendment. It is well-settled that there is no requirement that a former owner receive surplus funds following in rem tax foreclosure,” the city argued in May.

The suit names New York City, the Department of Housing Preservation and Development (which runs the TPT program), the public/private entity Neighborhood Restore and the nonprofit Developer Bridge Street among the co-defendants.

The city will have an opportunity to respond back to this filing in the coming months. If successful, the lawsuit could potentially restore over $60 million in wealth among black and Latinx property owners across Central Brooklyn.

“The City’s position is that they can confiscate homes that are the life savings of people of color and pay nothing. We are asking the Court to recognize that TPT is both illegal and unconstitutional and to shut it down,” said attorney Keith Wofford, a partner with Ropes & Gray law firm, in a public statement.

The filing came just days before a June 22 City Council hearing to evaluate the terms of seizure under the program and potentially redefine the parameters of “distressed” — the threshold the city uses to identify properties eligible for the program.

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