New York City agrees to $60 million settlement with owners of 64 properties seized over unpaid taxes and debts; Mayor Zohran Mamdani plans to revive controversial TPT program

New York City has agreed to pay $60 million to property owners whose buildings were seized under its controversial Third Party Transfer program, a settlement that comes as Mayor Zohran Mamdani’s administration considers reviving the initiative with changes.The settlement, filed in Manhattan federal court, would compensate owners of 64 properties taken during the program’s 10th round of seizures. The class-action lawsuit, filed in 2019, alleged that the city had taken properties without providing their owners with the compensation required under the Constitution. The settlement is still subject to approval by a federal judge, according to The New York Times.Property owners argued they lost homes worth far more than their debtsUnder New York City’s Third Party Transfer, or TPT, program, the city could seize properties with significant housing-code violations and outstanding taxes or other municipal debts. Ownership could then be transferred to a nonprofit, which would work to find an affordable housing developer to take over the property.The plaintiffs argued that the system sometimes resulted in owners losing properties worth substantially more than the amount they owed the city. Their lawsuit also alleged that some homeowners were not properly notified that their properties were being taken.“They could have been $1,000 behind on a million dollar property, and they could have gotten seized,” attorney Alexander Simkin, who represents the homeowners, said, according to the report.The 10th round covered 64 properties containing about 839 housing units, according to court documents cited by The New York Times. The broader lawsuit involves more than 500 additional properties, according to attorneys for the plaintiffs.McConnell Dorce was among the lead plaintiffsOne of the central plaintiffs was McConnell Dorce, a retired ambulance driver who had owned a Brooklyn property in East Flatbush since 1977.According to the lawsuit, Dorce owned the building outright and had no mortgage on it. After falling behind on water and sewer charges, he entered into a repayment agreement with the city and continued making payments.The lawsuit alleged that the city nevertheless seized the property without notifying him that the transfer had taken place. Dorce died in February, before the settlement was reached.“It’s heartwrenching,” attorney Sara Kane said, adding that it was particularly difficult that Dorce did not live to see the outcome of the case.Kane said the settlement would provide some relief to families who had lost properties through the program.Critics raised concerns about minority communitiesThe lawsuit also alleged that the Third Party Transfer program disproportionately affected Black and Latino homeowners and communities. Critics have raised similar concerns about the program for years.The program was created in 1996 under then-Mayor Rudy Giuliani. Over the decades, the city conducted 10 rounds of property transfers, ultimately transferring more than 590 properties containing more than 7,300 homes, according to the lawsuit.A 2019 City Council investigation also examined whether properties taken through the program met the city's criteria for severe financial or physical distress, according to The New York Times.City maintains it did not violate property owners’ rightsThe city has not admitted wrongdoing as part of the settlement.Andrew Stern, a spokesman for the Department of Housing Preservation and Development, said the city maintains that the property transfers did not violate the former owners’ rights but agreed to settle the longstanding litigation.The TPT program has effectively been paused since 2019. City officials have said any revival would incorporate changes addressing concerns raised by the litigation.The Mamdani administration has nevertheless continued pursuing property transfers through other housing-enforcement mechanisms. In September, the city announced the transfer of three Crown Heights apartment buildings away from their previous owner, saying the properties had nearly 1,000 open code violations and that the new ownership would work with tenants on repairs and maintenance.Mamdani administration considers reviving Third Party TransferThe settlement comes as Mamdani’s housing agenda includes proposals to revive and reform the Third Party Transfer program.The administration’s housing plan calls for changes to the way distressed properties are identified and transferred. A bill concerning reforms to the program is also pending before the City Council.Among the issues under scrutiny is the program’s former “block pickup” provision, which allowed the city to seize additional properties on the same block under certain circumstances.Plaintiffs’ attorneys have argued that proposed reforms do not address what they consider the program’s fundamental problems. The city, meanwhile, says changes would address concerns raised in the lawsuits.The $60 million settlement covers the properties involved in the latest round of seizures, rather than resolving the claims involving every property included in the broader class action. Attorneys representing the homeowners said they hope the remaining cases can eventually reach similar resolutions.Catch the latest World News and Live updates. Download the TOI app.