Forming a Co-op Through "Third-Party Transfer": Will the Residents Succeed?
Aug. 23, 2012 — Erected in 1905, the rental building at 34 Jefferson Avenue in Brooklyn, where the Clinton Hill and Bedford-Stuyvesant neighborhoods meet, has a tangled history. Tenants took the landlord to court in 1979 and won permission to move toward becoming a limited-equity Housing Development Fund Corporation (HDFC) co-op.
But after three years, virtually no steps had been taken toward converting the 66-unit building. In 2001, some residents came up with a strategy. If the building stopped paying its real estate taxes, it would eventually become delinquent and would then qualify for New York City's "Third Party Transfer" (TPT) program.
TPT was created in 1996 to allow the city's Department of Housing Preservation and Development (HPD) to get government grants for the rehabilitation of troubled buildings and then transfer the rehabbed building to a responsible new owner. The new owners of the foreclosed property, according to this strategy, would be the shareholders of the newly formed cooperative corporation.
PACC It In
And in 2008, following a lawsuit by one resident who objected to the maneuver, the property entered TPT. Neighborhood Restore HDFC would hold the building's deed during the conversion process, and the nonprofit Pratt Area Community Council (PACC) would be the developer, supervising physical improvements. The residents formed a tenants' association and elected a new board, with Nancy Russell, the resident who'd sued, as president.
"I started pursuing how to become a co-op," says Russell, whose jobs have included running homeless shelters, working for a social services union and, presently, serving as a grievance consultant for the Organization of Staff Analysts. "I learned the city codes, I made sure taxes were getting paid, I did audits. We made it into a corporation."
Unfortunately, the developer wasn't doing much developing. "PACC's plans were hazy," recalls Linda Marston-Reid, who moved into the building in 2008. "Once you begin not doing what you said you were going to do, people lose faith. And the tenants were losing faith in PACC. Someone suggested we find another developer."
CATCH of the Day
In 2010, the board fired PACC and the residents voted to bring in a new sponsor/developer, the nonprofit Community Assisted Tenant Controlled Housing (CATCH). Its executive director, Carlton Collier, made a persuasive presentation, promising that CATCH "will acquire, manage, and rehabilitate the building with the intention of sponsoring the tenant organization to eventually own this property, as a limited-equity cooperative."
Russell was already busy. The building needed work because, as she puts it, "you've got to attract the right people if you want to be a successful co-op." The board hired architect Carlos Mieles to give the building a complete physical, from roof to basement.
Mieles came up with an elaborate plan that included combining two lines of studio apartments to create larger one-bedroom apartments on all six floors; enlarging the century-old bathrooms and making them handicapped-accessible; replacing all wiring and plumbing lines; renovating all kitchens; renovating the heating system and common areas; and replacing the boiler, roof, windows, and doors. To pay for the work, CATCH negotiated an $8 million loan from HPD and the Community Preservation Corporation.
But Russell and the new developer were soon clashing. Marston-Reid believes Collier had a "vendetta" against Russell. According to meeting minutes from last summer, Collier accused Russell of being "dictatorial" and treating the other board members as her personal "puppets." Something had to give.
Wray of Hope
Late last year, after the construction work was under way, Russell persuaded the other members of the tenants' association to fire Collier. He was replaced by Ken Wray, who had helped establish CATCH in 1991 and is now its executive director. Residents say Wray's "more thoughtful" and "less hostile" demeanor has been a major improvement.
But that doesn't mean that the sailing is always smooth or that the outcome is set. "It's not guaranteed the building will become a co-op," says Wray, noting that the renovation work will run through next year and the determination of the building's future — as rental property or co-op — probably won't come until 2014. "The city has high standards that must be met. They want to know that the people are serious about being a co-op and that it's going to succeed."
For starters, at least 80 percent of the residents must choose to join the co-op. And when CATCH contracts with the Urban Homesteading Assistance Board to run classes to teach residents how to run a co-op, the city expects regular attendance by at least two-thirds of the people in the building.
The city will also review whether tenants were cooperative during construction and whether rent payments are up-to-date. If these criteria are not met to the city's satisfaction, CATCH would retain ownership of the building, it would remain a rental property, and a tenant board would run it — an outcome just about nobody wants.
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