Theft of the American Dream: New York City's Third-Party Transfer Program

Authors

Joseph Mottola

Document Type

Note

Abstract

(Excerpt)

On September 5, 2018, Paul Saunders discovered a notice on the front door of his mother’s home: it stated that the property, a Brooklyn brownstone owned by the family for over forty years, now belonged to a company called Bridge Street. His mother, seventy-four-year-old retired nurse Marlene Saunders, had been notified several months earlier that her home, valued at two million dollars, was in danger of being foreclosed because she owed New York City (the “City”) $3,792 in unpaid water charges. Her son had already paid the water bill, but when he contacted the water department, he discovered that the City had failed to record the payment. The water department assured Paul that there were “no problems.”

In spite of these assurances, the City transferred the property to a “qualified sponsor[ ]” under the Third Party Transfer Program (“TPT”). Marlene Saunders was fortunate: after she and her son launched an aggressive advocacy campaign comprising of a “whirlwind” of phone calls and visits with City Council members, the City reversed the transfer and returned her home. Unfortunately, many property owners have not been so lucky.

TPT was enacted in 1996 and granted New York City the authority to utilize the in rem foreclosure process to transfer ownership of abandoned, distressed, and tax-delinquent properties to third-party developers—free of charge. Prior to enacting TPT, the City self-managed properties it acquired through foreclosure, but by the 1990s, the management of thousands of dilapidated buildings had become prohibitively expensive. TPT was conceived as a solution to this crisis— allowing the City to continue addressing abandonment and tax delinquency through in rem foreclosure while transferring the burdens of maintenance and management to private owners.

However, the cure has proven worse than the disease. What started as an anti-abandonment and tax enforcement initiative has devolved into “something far more expansive, far more excessive and far more entangled with America’s treacherous history of race and homeownership.” Under TPT, residential properties that owe nothing in tax arrears and have minimal municipal violations have been transferred to third-party developers for free—while homeowners receive no compensation for the lost value of their homes. This Note will argue that New York City has violated citizens’ constitutional rights through TPT’s administration.

Part I of this Note will discuss the motivating factors and purpose behind the enactment of TPT. Part II will discuss TPT’s statutory framework, legal challenges to the program, and the City’s response to such challenges. Part III will argue that property seizures under TPT are unconstitutional takings because the City fails to provide homeowners with an adequate means to recover the surplus value of their property. Part IV will propose that the City modify the statutory procedures to restrict the transfer of properties with minimal tax liens and compensate owners for surplus equity.