New York City has agreed to a $60 million settlement with property owners whose buildings were seized through the city’s controversial Third Party Transfer program, putting renewed attention on how the city handles distressed properties.

The settlement covers 64 properties containing roughly 839 housing units that were transferred during the program’s 10th round in 2017 and 2018. The property owners had sued the city, arguing that their buildings were taken without adequate compensation and, in some cases, without proper notice. The settlement still requires approval from a federal judge.

The Third Party Transfer program was created to address properties with serious housing problems and unpaid taxes or other municipal debts. Under the system, the city could transfer ownership to a nonprofit, which would then work with an affordable-housing developer to rehabilitate the property.

Critics argued that some owners lost properties worth substantially more than what they owed the city. The lawsuit also raised concerns about the program’s impact on Black and Latino homeowners and communities. The city, however, has not admitted wrongdoing and maintains that the property transfers did not violate the former owners’ rights.

The settlement is particularly significant because city officials are considering reviving and reforming the Third Party Transfer program after it was effectively paused in 2019. The proposed changes are intended to address concerns raised by previous lawsuits and the program's earlier implementation.

For New York’s real estate market, the issue highlights the difficult balance between protecting property rights and addressing severely distressed housing. A revived program could give the city another tool to intervene when buildings deteriorate under troubled ownership, but the settlement demonstrates the potential legal and financial risks involved.

The $60 million agreement therefore extends beyond the owners involved in the lawsuit. As New York considers how to deal with thousands of aging and distressed properties, the case could influence how future property transfers are structured and how much protection and compensation owners receive.

With the settlement still awaiting court approval and additional claims remaining unresolved, New York’s next approach to distressed properties could be shaped significantly by the lessons from the Third Party Transfer program.