New York City has agreed to pay $60 million to property owners whose buildings were seized under the Third Party Transfer program, according to a settlement filed in Manhattan federal court on September 11. The payout covers 64 properties taken by the city over unpaid tax debts, even as Mayor Zohran Mamdani's administration prepares to bring a reformed version of the same program back to life.
The settlement, first reported by the New York Post, resolves a class-action lawsuit filed nearly a decade ago by owners who said the city never notified them their homes were being taken. Court documents cited in that report claimed the seized real estate was often worth far more than the debt attached to it, and plaintiffs argued the transfers amounted to seizure without just compensation, violating their constitutional rights. Federal court filings from August show the deal specifically covers claims tied to Round 10 of the program, the batch of properties transferred in 2019, according to PJ Media. A federal judge still must grant final approval.
The scale of the underlying case is far larger than the current payout. The lawsuit originally sought to represent an estimated 700 New York City homeowners who lost properties under the program, per BKReader. The Post reports more than 500 properties remain part of the class-action suit beyond the 64 now being settled.
A Lifelong Home Lost Over a Water Bill
Lead plaintiff McConnell Dorce had owned an apartment building in East Flatbush, Brooklyn since 1977, free and clear of any mortgage, according to the Post's reporting. The city transferred ownership of his building over outstanding water and sewage charges even though Dorce had entered into a repayment plan with the city over the debt, the Post reports. BKReader's earlier reporting put a finer point on the numbers, noting Dorce bought the four-unit property mortgage-free in 1975 for $25,000, yet lost it in 2015 over roughly $15,000 in water charges despite his ongoing payments to the city.
Dorce died in February 2026, according to the Post, before seeing the settlement reach this stage. Attorney Sara Kane, representing the plaintiffs, told the paper, “We're grateful to be able to finally give some relief to some of these families.” Kane said she hopes the remaining rounds of the case will produce a similar result.
Attorney Alex Simkin, also quoted by the Post, illustrated how steep the disparity between debt and loss could get under the program, saying a homeowner could be $1,000 behind on a million-dollar property and have it seized entirely. Under the program's structure, city officials transfer buildings with housing code violations and outstanding debts to a nonprofit at no charge, with the debt forgiven, and that nonprofit then finds an affordable housing developer to take over the property, per the Post's account. Some former owners were allowed to remain in their homes as tenants, while others were not permitted to return once a developer took over.
City Says No One Was Evicted, Plaintiffs Disagree
A City Hall spokesperson maintained that the Third Party Transfer program does not evict residents and allows people to remain in their homes at affordable rents, according to the Post's reporting. City attorney Andrew Stern said the city is settling to resolve longstanding litigation while continuing to maintain that the property transfers did not violate former owners' rights, the Post reports. Stern added that any revival of the program would address the concerns raised in the lawsuits. The city has not conceded that the transfers were unconstitutional as part of the settlement.
The program dates back to 1996, launched under Mayor Rudy Giuliani as a tool to force fixes on distressed, tax-delinquent buildings, according to the Bronx Times. It has effectively been on pause since 2019, after it was accused of disproportionately targeting minority communities and stripping generational wealth from Black and Latino homeowners, the outlet notes. Following that freeze, the city convened a Third Party Transfer Working Group, which released a final report in November 2021 recommending stricter owner notification, longer redemption periods, and more targeted property selection criteria, according to NYC Council Member Pierina Sanchez's office.
A National Ruling Reshapes the Legal Landscape
The legal terrain shifted nationally in May 2023, when the U.S. Supreme Court unanimously ruled in Tyler v. Hennepin County that local governments violate the Fifth Amendment's Takings Clause when they seize real estate over unpaid taxes and keep the surplus equity above the debt owed. New York State responded by amending its Real Property Tax Law in 2024 to give property owners a statutory path to recover surplus funds from tax foreclosure sales, according to Phillips Lytle LLP.
Against that backdrop, Sanchez introduced Int. 0657, known as the SAFER Homes Act, in March 2026. The bill aims to overhaul the Third Party Transfer program by targeting only the most severely distressed buildings, while eliminating the controversial “block pick-up” rule that once allowed the city to sweep up neighboring properties along with a targeted building, as Hoodline reported at the time. Mayor Mamdani has since folded both the SAFER Homes Act and the Community Opportunity to Purchase Act into Chapter Two of his administration's May 2026 Block by Block housing plan, positioning the revived transfer program as one tool among several to expand social housing, according to city housing officials.
The push to revive Third Party Transfer also comes as Mamdani's administration has moved on a separate but related front. In March 2026, the administration paused the city's private tax-lien sales to audit the system, followed in April by the creation of the city's first Office of Deed Theft Prevention with $1 million in baseline funding, Hoodline reported. Whether the rebuilt version of Third Party Transfer can avoid the due-process failures that produced the $60 million settlement remains the central question as the city moves to bring the program back.
