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This article, in slightly different form, originally appeared in the New York Law Journal. Daniel Wise can be reached at [email protected]. ALM is Real Estate Media’s parent organization.

A rule allowing residents in government-owned buildings designated for rehabilitation to be evicted without a statement of reasons or an opportunity to challenge the action is “patently unconstitutional,” a federal judge in Brooklyn ruled recently. Eastern District Judge Frederic Block ordered a hearing on Jan. 28 to determine how much process is due to residents of buildings the US Department of Housing and Urban Development wants cleared.

In Linares v. Jackson (06-CV-876) Judge Block strongly suggested that at a minimum he would require before eviction can proceed a clear statement that the residents’ apartments were in such disrepair as to need “substantial rehabilitation.” He further ruled that, “it seems obvious” that residents should be given an opportunity to challenge that determination in an administrative proceeding before eviction proceedings are commenced in state court.

Robert Nardozo, a spokesman for the US Attorney’s Office in the Eastern District of New York, which defended HUD, said the decision is under review to determine how the government will proceed.The four plaintiffs, three in Brooklyn and one in Manhattan, reside in buildings that had been acquired by HUD after mortgage loans that the agency had guaranteed under §203(k) of the National Housing Act had been foreclosed. Three of the plaintiffs have been served with an eviction notice.

Throughout New York City, according to a document cited in the decision, there are 514 HUD-owned buildings, containing 2,200 units, in need of rehabilitation at an estimated cost of $167 million. The HUD rule, 24 C.F.R. §247.10, which regulates the renovation program, provides that the agency does not have to state a reason when it requires residents of foreclosed buildings to leave. HUD is required to demand that the tenants vacate before starting an eviction proceedings in state court.

HUD further took the position, Block wrote, that in a state court eviction proceeding the residents could not challenge HUD’s finding that their apartments were in disrepair because that determination “is committed to the agency.” That streamlined procedure process was needed, HUD argued, to encourage “the upgrading and sale of HUD’s foreclosure stock” to prospective buyers who would receive federal or city funding to finance the repair work.

Block expressly recognized the “salutary purpose” of the rehabilitation program that is being undertaken by HUD and New York City’s Department of Housing Preservation and Development. But he found “difficult to fathom” HUD’s claim that such a streamlined procedure is justified “in the face” of a “spate of judicial authority,” which is especially strong in the US Court of Appeals for the Second Circuit.

“It is beyond cavil,” he wrote, citing the US Supreme Court’s 1985 decision in Cleveland Board of Education v. Loudermill (470 U.S. 532), that due process bars the taking of property, including poor people’s homes, “without telling them why and without affording them a meaningful opportunity to be heard.”

Block cited a line of Second Circuit precedents as supporting his ruling, the most directly relevant being the circuit’s 1974 ruling in Caramico v. HUD (509 F.2d 694).

In Caramico, Block wrote, the circuit voided a federal rule that required owners who had received federally insured mortgages to clear their buildings–without giving their tenants a chance to object–as a condition of collecting the insurance when they defaulted.

Like Block, the Caramico court recognized that “[i]t is normally preferable to have the mortgagee vacate a property so that it may be programmed for repair and exposed to the sales market in the shortest practical time.”

Nonetheless, the circuit concluded, that, if given the opportunity, “plaintiffs may be able to show that the housing they occupy is fit for continued habitation and that the repairs required in order to make it salable do not require the property to be vacated.”

“Significantly,” Block added, “the [circuit] took note of the consequences of the loss of an abode ‘in deteriorated, low-income neighborhoods where replacement quarters are not readily available at rents the occupants can afford.’”

Block directed that the Jan. 28 hearing focus on the question of what sort of “opportunity to be heard” must be extended to residents. At the outset, he wrote, the residents’ opportunity to object to HUD’s determination that they have to move must be made administratively before the agency rather than in a state court eviction proceeding.

“There is simply no warrant,” he wrote, “for subjecting a faultless tenant to the cost and burden of the summary eviction process applicable to those who have breached their leases as the price to pay for challenging the legitimacy of HUD’s ‘substantial rehabilitation’ decision.”

Due process may not require an evidentiary hearing, Block observed. But, he wrote, residents must be afforded “a meaningful opportunity” to show that HUD’s “substantial rehabilitation determination” is not “arbitrarily being employed as a pretext to evict a tenant from a perfectly decent home in order to sell it to a private developer.”

The residents of the buildings HUD is seeking to clear were represented by Michael L. Weissberg, Jennifer Levy and Nicole Salk of South Brooklyn Legal Services. HUD was represented by Assistant U.S. Attorney Zachary A. Cunha.

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