The Daily Dirt: Return of the controversial third-party transfer

New bill would reform program for delinquent properties, but HPD objects

From left: City Council member Pierina Ana Sanchez and HPD's Kim Darga (Getty, Twitter/IRHP)
From left: City Council member Pierina Ana Sanchez and HPD's Kim Darga (Getty, Twitter/IRHP)

Six years after the end of the city’s third party transfer program, the city is looking to return to the controversial practice, which has long faced criticism for disproportionately targeting homeowners of color. 

City Council member Pierina Ana Sanchez, who chairs the Committee on Housing and Buildings, introduced a bill to make several changes to the program, which transfers delinquent properties to a temporary owner who prepares them for sale. The bill comes three years after a working group issued recommendations for revamping the program.

Some of those suggestions appear in the bill. The proposal eliminates the so-called block pickup provision, which allowed properties that owed taxes, but were not necessarily distressed, to be sucked into third-party transfer if another building on their block was distressed. That practice not only meant non-distressed properties were getting roped into the program, but it also exacerbated the fact that transferred properties were concentrated in certain areas of the city. 

Sanchez said the new program would target properties with the highest levels of unpaid debt and the most hazardous violations. 

Buildings would be selected for the program using the following methodology:

— Properties of up to three units with delinquent tax debt greater than three years’ of the owner’s tax liability, or larger rentals and cooperatives with more than one year’s worth of tax debt, are ranked from highest to lowest amount of arrears.

— A separate ranking is made of these buildings by the number of hazardous or immediately hazardous violations issued and open within the past three years.

— The buildings are assigned a score by multiplying the arrears ranking by the hazardous ranking. Only the 500 buildings with the highest scores would be eligible to be transferred to a third party. 

The bill also lays out a path for tenants of a building facing foreclosure to take over the property, including Housing Development Fund Corporation cooperatives (such properties, under the old program, were converted to rentals).  

During a hearing on Monday, Kim Darga, deputy commissioner of development at the Department of Housing Preservation and Development, testified that while the agency is “fully in support” of improving the program, it cannot support the bill as it is written. 

The agency mostly objects to the ramped up requirements for notifying owners that they are facing foreclosure, including more mailings and in-person meetings, which Darga said could be infeasible given the agency’s resources or “could serve to confuse and distress residents whose building may not end up going through the foreclosure process at all.”

Sanchez expressed surprise that HPD was not on board with the bill, citing previous conversations with the agency about it. In June, the City Council revived the tax lien sale. A rental watchlist created as part of the revamped sale could also feed into the list of properties eligible for third-party transfer, though Darga noted that changes may need to be made to help the programs work together. 

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Sanchez’s bill does appear to account for a U.S. Supreme Court decision that requires any property seizure program to return any surplus proceeds to the original owner if the property’s value exceeds the amount of taxes owed. 

What we’re thinking about: Will Mayor Eric Adams step down? Will Gov. Kathy Hochul remove him from office? Send a note to kathryn@therealdeal.com

A thing we’ve learned: Trip Advisor once deemed the Hotel Carter at 250 West 43rd Street the city’s dirtiest hotel. 

Elsewhere in New York…

— The city’s Department of Environmental Protection says a portion of the Delaware Aqueduct near Newburgh will be shut down as workers fix a leak that was discovered in the 1990s, Gothamist reports. Water will be rerouted through a 2.5-mile bypass tunnel, which is why New Yorkers with discerning palates may notice that their tap water tastes different. 

— An attorney for Mayor Eric Adams on Monday filed a motion seeking to dismiss a bribery charge from the five-count indictment unsealed last week. The motion argues that prosecutors failed to spell out specific “official acts” committed by Adams in exchange for benefits provided to Turkish officials. Adams’ attorney Alex Spiro held a press conference on Monday to discuss the case, Politico New York reports. “Courtesies to politicians are not federal crimes… Congressmen get upgrades,” Spiro said. “They get corner suites. They get better tables at restaurants. They get free appetizers. They have their ice tea filled up.” Prosecutors allege Adams’ illegal benefits were worth more than $100,000 and that he returned the favors.

— Sen. J.D. Vance and Minnesota Gov. Tim Walz will face off in NYC Tuesday night in the only vice presidential debate scheduled before the November election. CBS is hosting.  

Closing Time

Residential: The priciest residential sale Monday was for $7.5 million at 1289 Lexington Avenue. The 3,500 square-foot condo is in the Hayworth building on the Upper East Side. Brown Harris Stevens’ Jill Bernard and Alan Shaker had the listing.

Commercial: The largest commercial sale of the day was $25 million at 1382-86 Second Avenue. The mixed-use building in Lenox Hill has four units and six stories.

New to the Market: The highest price for a residential property hitting the market was $25 million at 120 East 78th Street. The Upper East Side townhome is 13,000 square feet. The Corcoran Group’s Meredith Verona has the listing. — Joseph Jungermann

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