TPT FAQ's
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| Rehabilitated kitchen in Manhattan |
How is a building chosen for the Third Party Transfer Program?
The Department of Housing Preservation and Development (HPD) targets properties that have substantial tax arrears and are in poor physical condition for the TPT in rem foreclosure process. The majority of buildings are occupied by tenants and are in varying levels of disrepair.
How are owners and tenants notified of this transfer?
After a property is chosen for the TPT program, there is a pre-filing phase where HPD and the Department of Finance notify tax delinquent owners of the impending foreclosure and encourage them to pay all taxes owed to the City and make mandated repairs. If the taxes are not promptly paid, the City files an in rem action against the property owner and a judgment of foreclosure is issued. A mandatory redemption period follows, in which owners are given four months to pay all outstanding taxes and address repair needs. After the expiration of this four-month mandatory redemption period, there is an additional five and a half month discretionary redemption period during which an owner may redeem the property if HPD consents. If no redemption is made (all outstanding taxes are unpaid and mandated repairs are unmade) the property is transferred to Neighborhood Restore. Prior to transfer, a meeting is held with tenants of selected buildings to inform them that their building may soon be entering TPT. At this meeting tenants are given the option to apply for eventual tenant cooperative ownership (if they qualify) with the help of a non-profit sponsor.
How does Neighborhood Restore end up with properties and what does it do with them?
HPD transfers the properties to Neighborhood Restore without ever taking ownership itself. Prior to Neighborhood Restore becoming owner, qualified developers are selected to manage the buildings upon transfer to Neighborhood Restore. The qualified developers continue to manage the buildings during Neighborhood Restore's interim ownership. The TPT program calls for the qualified developers to become the permanent owners of the properties.
How are qualified developers chosen?
Both for-profit and non-profit developers may apply to become qualified developers for the TPT program through a Request for Qualifications (RFQ), which is available here. In order to be considered, developers must demonstrate a good track record in residential development and property management. Selected qualified developers then receive a cluster (or clusters) of properties based on building size, occupancy and geography, among other factors. Specific properties are assigned based upon a number of categories, including residential management and development experience with the type of property being considered for transfer, experience securing rehabilitation financing of the necessary magnitude, as well as geographic proximity to TPT properties.
How does a tenant group apply to become a tenant cooperative?
When tenants are notified that their building is entering the TPT program, they may choose to become a tenant cooperative and apply for eventual ownership of the property as a limited equity cooperative, if the building meets the HPD threshold for the Tenant Petition program. To do so, tenants must contact a qualified not-for-profit developer from among a list provided by HPD who agrees to be the sponsor for the property during the entire TPT process. Eighty percent (80%) of the tenants in the building then must sign a petition identifying the sponsor and requesting to become a cooperative. In addition, only buildings with more than ten units can apply to become a tenant petition cooperative (since the transaction costs for smaller buildings are prohibitive).
How are buildings rehabilitated?
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| Rehabilitated property in Brooklyn |
No permanent rehabilitation takes place during Neighborhood Restore's interim ownership. But property stabilization efforts, including emergency repairs and security, are addressed. During this time, moreover, the qualified developer plans for the future rehabilitation of the building. The qualified developers typically utilize HPD loan programs that offer low interest loan financing, coupled with private loans.
Are there any restrictions on the City's financing?
City financing mandates that developers enter into a regulatory agreement that will keep the property affordable. Before any loan approval takes place, HPD will need to approve all rehabilitation scopes of work, budgets, layout changes and relocation plans. Once the developer secures the HPD loan, the property is transferred to the developer (or cooperative) and rehabilitation work begins.
If I am in a TPT building, will I have to leave my apartment?
Sometimes, depending on the scope of work, tenants may have to be temporarily relocated. However, all tenants will have the right to return to their buildings after rehabilitation–either to their own apartment or to an apartment of equal size. Developers are responsible for the temporary relocation of tenants.
Will rents be raised after renovation is complete?
After construction is completed, rents will typically be raised to pay back the mortgage on the building and cover standard operating costs. Section 8 rental assistance is available for those who qualify, and will pay for all rental costs over 30% of the tenant's income. Even if a tenant does not qualify for Section 8, rents will remain at only 30% of the household's demonstrated income. Developers must work with tenants to complete the necessary income surveys and all required Section 8 documentation.
How long does the TPT process take, and when will ownership transfer to the developer/tenants?
While building stabilization is typically completed in the three months of Neighborhood Restore's ownership, the entire process–from tenant notification until the end of construction–typically takes from two and a half to three years. Title to the properties will transfer to qualified developers concurrent with the closing of a construction loan. The qualified developer will be the permanent owner of all rental properties.
What if my building is to become a cooperative?
Buildings that have petitioned for cooperative ownership may initially remain rentals owned by the non-profit sponsor. However, with the agreement of the private lender and HPD, along with the tenants fulfilling all tenant petition requirements, the tenant cooperative may purchase and own the building.
