Predatory Investors Target Black Homeowners in Desirable Markets
|Abdul El-Sayed||May 30, 2019|
African American homeowners in gentrifying urban areas are increasingly being targeted by real estate speculators who use a legal tactic to force the sale of inherited properties for far below fair market value, The North Star has learned.
Now, a group of New York City-based lawyers is urging New York state lawmakers to boost protections to the residents whose homes are owned through inheritance by multiple family members. In cities with skyrocketing housing costs, so-called “heirs properties” are often the only way some Black homeowners can afford to remain in neighborhoods whose property values have skyrocketed as they evolve from blighted, redlined districts into white-hipster playgrounds or the next hot neighborhood for yuppie families.
“They’re mostly low-income people or seniors, people on a fixed income who are basically getting priced out of New York City,” Scott Kohanowski, director of homeowner stability at the City Bar Justice Center, told The North Star. “And nobody really cared about these properties for the longest time because there wasn't any value there. You have properties that were worth $35,000 in the ‘70s and ‘80s that are now worth $2 million, and they’re being targeted by investors.”
The legal process known as a “partition action” forces the sale of any property with multiple owners if at least one stakeholder initiates the action. The procedure dates back to English Common Law and was used to force the sale of farmland owned by multiple generations of Black families in the South at steep discounts. Today, real estate investors are scouring for family members of urban heirs properties, using this old law to force the sale of homes in up-and-coming urban markets.
Today, asset-rich, cash-poor tenants often lack the financial means or support to fight procedures which aim to pull homes out from under them through forced sales at much less than fair-market value.
Because family members can be spread out and not always on the best terms with each other, real estate investors can leverage one disgruntled sibling or other cash-strapped family member to buy the home at fire-sale prices. Kohanowski said properties that go through judge-administered sales like this tend to go for about 40 percent less than what the property would sell in the open market, and the residents often lack the means to buy out the investor.
Black homeowners are more likely to be hit with partition actions because they’re far less likely to have wills that clarify ownership of inherited assets. According to the American Bar Association, only about 20 percent of African Americans have wills, making them twice as likely as whites to die in so-called intestacy, or without a will. As a result, a court-appointed administrator will likely compile and distribute assets among beneficiaries, which can often include several people spread out across the country.
In March, local news outlet NY1 profiled several city residents who had been targeted by partition actions. In one instance, Ahamsi Lloyd, an elderly long-time resident of an inherited home in the Corona neighborhood of Queens, was forced to accept $135,000 for his stake in the property after his brothers (with whom he had personal disagreements) sold their shares.
The buyer — a limited liability corporation in Manhasset, Long Island — paid a total of $525,000 for the home, including $30,000 in back property taxes and extra money to pay for some medical bills. Five months later, the LLC rolled the property to a new buyer for $900,000, stripping all three brothers of potentially hundreds of thousands of dollars’ worth of home equity.
In 2010, states began adopting a new law to address the shortcomings of partition actions. The Uniform Partition of Heirs Property Act (UPHPA) aims to bolster protections of heirs property owners, establish fair-market value for the property, and favor physically dividing land rather than selling the land and dividing the proceeds. Eleven states and the US Virgin Islands have adopted the UPHPA, and New York is among 10 states that have introduced the bill for passage.
However, the City Bar Justice Center, which offers pro bono assistance to low-income New Yorkers, said that the law as it’s written is more applicable to rural farmland than to family homes in expensive, densely populated cities that are harder or impossible to physically partition. The group supports the UPHPA but is recommending tweaks to make it work more effectively in urban areas.
The group recommends, among other modifications, a statutorily mandated mediation process to foster negotiations among heirs to try to ameliorate any differences and to ensure that all shareholders of the property are compensated with the real value of the property in the event of a sale. But for now, people living in homes whose ownership was passed on to numerous family members need to be aware of this procedure. They should identify all of the property owners and proactively discuss what each family member wants to do with his or her stake. The primary resident of an heirs property should seek legal counsel (pro bono or otherwise) during the process.
In these situations, Black family members who own homes in gentrifying neighborhoods need to form a united front against predatory real estate investors who seek to leverage intra-family disputes of differing priorities. Keeping it in the family is a far more preferable (and potentially more profitable) alternative than succumbing to real estate vultures.
About the Author
Angelo Young is a NYC-based reporter, editor, and writing coach who enjoys pondering world events and idle chatter on the subway. He has more than a decade of news editing experience with bylines in Newsweek, International Business Times, Salon, Arab News, The Daily Star (of Lebanon), Mexico Business magazine, The News (of Mexico City) and The Oklahoma Daily.