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Shareholders in an affordable Harlem co-op are bracing to lose their homes over a debt they say they should not have to pay.

At stake are 51 apartments, the future of about 150 tenants and about $2 million owed for construction costs — work that residents say was never completed.

Carlton Burroughs, a tenant since 2001 and a shareholder since 2006, estimates he’s poured about $150,000 of equity into his family’s apartment in the building on St. Nicholas Ave. and W. 157th St., and could lose out on his chance to pass it on to his kids.

“We’d lose our investment,” he said. “We’d miss the opportunity to create generational wealth, to shape the destiny of our children and their children.”

Burroughs, 57, is a shareholder in a housing development fund corporation. HDFCs are a class of buildings created in the 1980s when the fiscally struggling city wanted to offload the massive liability of decrepit buildings it owned.

Carlton Burroughs, a former New York City buildings inspector, shows damage in his apartment.
Carlton Burroughs, a former New York City buildings inspector, shows damage in his apartment. (Luiz C. Ribeiro/for New York Daily News)

Over the years, many HDFCs were transferred by the city Department of Housing Preservation and Development to third parties, which helped manage them independently until they could get on sound financial footing. This has allowed thousands of tenants to become owners as co-op shareholders.

In the case of Burroughs’ building, 936-938 St. Nicholas Ave., the city transferred the property in 2001 to the non-profit Neighborhood Restore, which then transferred it to the Shuhab Housing Development Fund Corp. in 2002, court records show.

That’s when things started getting complicated.

Shuhab took out a $1.65 million loan for renovations on the building in 2006. The outstanding loan was eventually transferred to PENY and Co., which transferred it to the State of New York Mortgage Agency, which then transferred it to 936 Coogan’s Bluff LLC, court papers show.

Now, the investment firm Maverick Real Estate Partners holds the debt through a holding company — about $2 million, including interest and fees — and is moving to foreclose. As part of a third-party transfer process, ownership and everything that goes with it — debt included — is transferred from the third-party, which in this case was Shuhab, to the HDFC.

Yetta Kurland, the lawyer representing Burroughs and the other building shareholders, said the renovation work was never finished and now her clients stand to lose not only their equity stake, but their quality of life, too.

Damage detail inside Carlton Burroughs a former NYC Buildings Inspector retiree apartment.
Damage detail inside Carlton Burroughs a former NYC Buildings Inspector retiree apartment. (Luiz C. Ribeiro/for New York Daily News)

“They would lose ownership in the building and they would be living in a building with a dangerous, faulty elevator and with a roof that’s constantly leaking,” she said.

In court papers filed by Kurland, she and the HDFC argue that the debt can’t be collected for work not completed. A letter from an architect who inspected the building in 2015 supports their contention, citing “glaring” deficiencies in the work.

“After having inspected the site approximately five times in the past year, it is my professional opinion that the original scope of work was overwhelmingly not completed,” architect John Nakrosis wrote.

A Maverick rep declined to comment when asked about that finding and the case in general.

936-938 St. Nicholas Ave
936-938 St. Nicholas Ave (Google Maps)

This co-op is at risk of foreclosure by a private lender for failure to pay their bills,” HPD spokesman Matthew Creegan said. “We offered extensive assistance to help them get on stable ground, but that offer was rejected. We’re now working with the HDFC again to seek ways to assist these owners.”

In 2017, HPD backed a settlement with PENY and Co., which held the HDFC’s debt and had initiated foreclosure at that time. The proposal included about $2 million in financial assistance from the city to cover construction costs, but would not have absolved the HDFC of their debt. The building’s tenants rejected the deal.

Court papers show that, in spite of the HDFC’s claim that it does not owe on the debt, it had been paying off the loan for several years, from 2006 to 2012 — a fact that could be interpreted as undermining that. Kurland said payments stopped in 2012 when residents began to see a pattern of shoddy work.

Her clients are not the only HDFC shareholders fighting to get out from under overwhelming debt.

Carlton Burroughs shows damage in the bathroom of his apartment.
Carlton Burroughs shows damage in the bathroom of his apartment. (Luiz C. Ribeiro/for New York Daily News)

The problem they’re facing is “incredibly common,” said Melissa Shetler, a former community organizer with Justice for Homeowners. The broader concern, she said, is HPD offers little oversight once HDFC buildings are transferred to residents.

“Nobody’s tracking the data,” she said. “There’s a lack of oversight. If you’re not careful and don’t have enough oversight and don’t care enough than these things are going to happen.”

Assemblyman Al Taylor, a resident in the St. Nicholas Ave. HDFC, said he’s working on legislation to address that.

“It’s an issue that’s happened to hundreds, if not thousands of residents under HPD,” he said. “We’re talking about 20 years of lack of oversight.”