The Rivington House. Image credit: Flickr/edenpictures
The Department of Investigation’s Report found that the City’s deed-modification procedure lacks safeguards required to ensure the removal of restrictions on formerly City-owned property is in the City’s best interest. On July 14, 2016, the Department of Investigation issued a Report finding that the actions and inactions of City officials, specifically within the Department of Citywide Administrative Services (DCAS), the Mayor’s Office of Contract Services (MOCS), the Law Department, and Mayor’s Office, facilitated the sale of the Rivington House, a non-profit nursing home located on the Lower East Side of Manhattan, to private condominium developers. The Report was issued less than one week after Mayor Bill de Blasio proposed several reformations to procedures used in modifying deeds of formerly City-owned property. For CityLand’s previous coverage on the proposed reformations, click here.
The Department of Investigation’s inquiry into the lifting of the deed restrictions on the Rivington House was sparked by DCAS Commissioner Lisette Camilo, who reported to DOI that the sale of the Rivington House was potentially fraudulent. According to Commissioner Camilo, the City sold the Rivington House to VillageCare while the property was encumbered by a two-part deed restriction requiring it to be used by a non-profit organization as a medical residential care facility. VillageCare sold the Rivington House to the Allure Group in 2015 with both parts of the deed restriction intact. Commissioner Camilo further explained that once in the hands of the Allure Group, both deed restrictions were lifted from the property in 2015—allegedly unbeknownst to the Mayor’s Office—which effectuated the later sale of the property to private luxury condominium developers.
In investigating the City’s deed-modification procedure, DOI looked into the roles delegated to the various departments involved in the procedure. The Law Department stated that its role in the deed-modification process is strictly to handle the title closing and all of the administrative functions that come along with formalizing real estate transactions. MOCS stated that its role includes holding a public hearing on the proposed deed modification, after which MOCS prepares the Mayoral Authorization Document (MAD), which provides that the Mayor has authorized DCAS to make modifications to the deed and affirms that the modification of the deed is in the best interest of the City. MOCS described its role as superficial and routine, and it pointed to DCAS as the entity responsible for conducting a diligent review prior to lifting the deed restriction. DCAS, however, described its approach towards deed-modification requests as “agnostic,” noting that it does not consider policy implications in deciding whether to modify a deed.
DOI determined that the Mayor’s Office “knew or should have known” that both parts of the deed restriction were being removed before the property was to be sold. While the Mayor’s Office had no formal role in the deed-modification process, several of its high-level officials knew about the removal of the deed-restriction from the Rivington House months before it was formally removed, but never raised an objection to its removal or took any other measures to ensure the preservation of the property’s ability to serve the community’s needs or even just for a public purpose. For example, First Deputy Mayor Anthony Shorris had been notified on several occasions about the pending release of the two-part deed restriction encumbering the Rivington House. While First Deputy Mayor Shorris claimed to have never read the memos he received on the matter, other City Hall staff members knew about the deed-restriction removal from the Rivington House and did nothing to prevent it from occurring.
Further, DOI found that numerous DCAS employees had actual knowledge that the Allure Group was considering selling the Rivington House to private condominium developers, yet DOI found what appears to be attempted concealment of the details of the sale.
After a thorough investigation, DOI reached several conclusions. DOI’s report states that DCAS, MOCS, and the Law Department each played a role in the release of the two-part deed restriction from the Rivington House property, and all three governmental entities failed to analyze whether the removal of the restriction was in the City’s best interest. DOI ultimately determined that the City had been given the opportunity to protect its interests in the sale of the Rivington House, but failed to do so by acquiescing to the removal of both parts of the deed restriction, even though the Allure Group only needed to remove one part to operate a for-profit nursing home, which was the stated intention for the use of the property.
The Report issued by DOI notes Mayor Bill de Blasio’s proposed reformations to the existing deed-modification procedure, which were released by the Mayor’s Office on July 8th. Since Mayor de Blasio’s proposed reformations had been released less than a week prior to the issuance of the DOI’s Report, they fail to take into consideration the DOI Report’s findings and recommendations. While the DOI agrees with most of the proposed reformations, it recommends additional procedural reformations be made to increase the level of accountability, transparency, and clarity in the deed-modification process.
First, DOI made several recommendations addressed to the Mayor’s Office. DOI recommends that City Hall issue a Mayoral Executive Order, which should clearly state that the amended deed-modification procedures provide for DCAS to be included in analyzing whether modifying a deed is in the “best interest of the City,” and require the approval of a deed-modification by the DCAS Commissioner, as well as the Commissioners of all City agencies consulted in the analysis. Further, DOI recommends that City Hall clarify the purpose of MADs—specifically, DOI recommended that City Hall clearly explain MOCS’ authority to issue MADs and clarify whether a MAD is the equivalent of delegated Mayoral approval.
Second, DOI made several recommendations addressed to DCAS. DOI recommends that DCAS add to its research agenda the current usage and proposed future usage of each property seeking deed-modification, in order to understand the possible outcomes that may stem from lifting a restriction from a deed. Further, DOI recommends that DCAS Internal Audit conduct an audit of all modifications and removals to deed restrictions made within the past 10 years to follow-up on the current use of the properties. Also, DCAS Asset Management should review the restrictive covenants still in effect and flag the properties that have active requests pending to modify or remove restrictions from their deeds. Finally, DOI recommends that DCAS retrospectively conduct its own independent appraisal of the Rivington House to determine the accuracy of the December 2014 appraisal, which formed the basis for the amount owed to the City to modify the Rivington House deed.
Third, DOI made several recommendations addressed to MOCS. DOI recommends that MOCS begin to post notices of all of its upcoming hearings on its website. Further, DOI recommended that the MAD be updated to clearly state the significance of a MAD and clarify whether MOCS or another agency has done its due diligence in deciphering whether each deed-modification is in the City’s best interest.
Fourth, DOI recommended that the Law Department approve all future modifications to deed-restrictions.
To read the full DOI Report, click here.
By: Jessica Soultanian-Braunstein (Jessica is the CityLaw Fellow and a New York Law School Graduate, Class of 2015)
I was a ten-year resident of Rivington House, the property currently undergoing investigation into improprieties in the lifting of the deed restrictions on property. I feel particularly put-out by the shenanigans that resulted in a stellar health care facility being removed from public use in order to line the pockets of unscrupulous developers.