I live in a HDFC co-op and I just found out that the city is foreclosing on my building. What does this mean, and what can I do?

“We’re beginning to see a widespread trend of the city foreclosing on HDFC co-op buildings, claiming they are distressed properties,” says Sam Himmelstein, a lawyer who represents residential and commercial tenants and tenant associations, and co-op shareholders. “They don’t give any real notice, so shareholders don’t always know it’s happening.”

First, a little background: HDFC co-ops, or Housing Development Fund Corporation buildings, were first created in the 1970s and '80s, and began as rental buildings that the city took over from delinquent landlords.

“If tenants were able to properly manage the building, the city converted it to tenant-owned co-ops, and allowed tenants to buy their apartments, usually for very little money,” explains Serge Joseph, a partner with HMGDJ Law. “The idea was that the city did not want to be responsible for managing these properties, and this was the best way to prevent abandonment, dilapidation, and, at the same time, provide tenants with the opportunity to own, which further stabilizes neighborhoods. There’s a lot of good that comes out of it.”

But now, the city has begun foreclosing on many of these buildings, claiming that they are “distressed,” based on issues like taxes that are past due, or unpaid fees for utilities.

“Ordinarily, with a regular building, the city would turn these back charges into liens against the property and sell the liens to investors, which would be enforced by bringing regular foreclosure proceedings,” Joseph says. “But if the property is considered distressed, then the city can bring in rem foreclosure proceedings.”

The difference with in rem foreclosure proceedings is that they wipe out all the building’s equity, he adds. The building’s deed is transferred to new owner, to whom residents are told that they must now pay rent. in other words, they’re no longer considered co-op shareholders but tenants.

Another difference is that under an ordinary foreclosure action, residents and all interested parties are served with a summons and complaint. But in these HDFC cases, it’s more difficult for them to get information.

“What we’re finding is tenants-shareholders find out about the existence of these proceedings months or years after they’re initiated, because the notice is only required to be posted in certain places throughout the city, and published in newspapers, including the New York Law Journal, rather than personally served to tenants,” Himmelstein says. “It’s clearly a due process issue.”

Joseph is now working on a case in which residents of a Bronx HDFC co-op building didn’t find out they were being foreclosed upon until years after proceedings began.

“The deed has been transferred already, so we have to go back and convince the court to vacate the deed, undo the judgment, and restore to us the ability to defend, and come up with the outstanding charges, if any,” Himmelstein says.

If you should find yourself in this position—or you suspect your own HDFC building might be at risk for foreclosure—keep an eye out for notices. You should also update the building’s registration information with the city, such as where property tax, water and sewer bills are sent, and, in particular, the in rem card, which should be filed with the city.

“Don’t disregard notices that your building is in arrears,” Joseph says. “In Rem Foreclosure law permits the city to start cases if an HDFC building is in arrears for three years, and if it is ‘distressed’ or has violations.”

However, the city also permits relief: If your building is in arrears, you can apply for a waiver or sign up for an installment agreement to address outstanding fees.

Also make sure to speak to your fellow residents and get legal help.

“If you get any notice or warning the building is in arrears and faces a lien or foreclosure, take it seriously and contact an attorney. These proceedings are not like normal proceedings,” Joseph says.


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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam or call (212) 349-3000.

Alanna Schubach

Contributing writer

Contributing editor Alanna Schubach has over a decade of experience as a New York City-based freelance journalist.

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