NYC homeowners say they lost more than their houses in tax disputes. Now a $60 million settlement could follow

A proposed $60 million settlement could reportedly compensate elderly Black and Hispanic NYC homeowners whose properties were seized over unpaid bills. They say the city also kept the equity they had built up in their homes. The deal could reportedly settle a 2019 federal lawsuit challenging NYC’s Third Party Transfer (TPT) program, pending judicial approval.

According to Atlanta Black Star, the city used TPT to foreclose on properties with overdue taxes, water bills, or housing code violations before transferring them to nonprofit developers at no cost. The lawsuit covers Round 10, which involved 64 properties and 839 housing units seized in 2017 and 2018.

The remaining value represents the property’s surplus equity when it exceeds the outstanding debt. The plaintiffs say the city failed to return that money, violating the Constitution’s requirement for just compensation when the government takes private property for public use.

The homeowners behind the lawsuit

“There’s a clause in the Constitution which says that government shall not take private property for public use without just compensation,” attorney Matthew L. Berman said. Lead plaintiff McConnell Dorce, a retired machinist who moved from Haiti in the 1970s, owned a Brooklyn home with no mortgage, the complaint says. He fell behind on water and sewage bills around 2012 and joined a repayment plan. The lawsuit says he paid every installment on time.

The city still foreclosed on the property in November 2017, reportedly without notice. Dorce owed $45,132, while the city valued the property at $226,000. He received no compensation for the difference. He died in February, months before the settlement.

Co-lead plaintiff Cecelia Jones, a retired home health aide from Guyana, owned shares in a Crown Heights co-op, where she had lived since 1996. The city valued the property at $736,000 and said she owed $160,760. The lawsuit says the 2018 transfer left her “a renter in her own home.” The plaintiffs say the program disproportionately affected older homeowners of color, a concern that has also surfaced in a case involving a black couple who alleged racial discrimination while trying to view an apartment.

In 2018, the city’s housing department expanded the program to include properties with at least $1,000 in unpaid charges. They could qualify if they were on the same block as a distressed property. The policy meant even relatively small debts could put a home at risk, much like a man whose home was auctioned after he fell behind on HOA dues. A 2021 city report found that over half the properties selected for the program showed no severe physical or financial distress.

The plaintiffs argued the defendants owed $89 million in damages and $47 million in prejudgment interest. The defendants estimated their maximum liability at $10.4 million. The proposed $60 million settlement represents about 44% of the plaintiffs’ combined damages-and-interest calculation. Every class member would receive at least $25,000. Many, including 47 people with surplus equity, would receive what the plaintiffs’ memorandum calls a “life-changing” amount. The deal would not return any property titles.

Attorney Yolande Nicholson said many owners were first-time buyers with no mortgage who paid their bills. “I hope that bringing this out and this settlement is a catalyst for change,” she said. TPT has been paused since 2019. Mayor Zohran Mamdani has said he wants to take property from bad landlords and give it to “responsible owners,” and a bill to revamp the program is pending before the City Council. Plaintiffs’ attorney Alexander Simkin said the proposed changes “don’t cure the fundamental defect.”

Judge Jennifer L. Rochon has scheduled a fairness hearing for May 5, 2027. If she grants final approval, a claims administrator will oversee several rounds of payments.