City Hall is overhauling the rules for lifting deed restrictions on properties — a tacit admission that its bungling allowed a Lower East Side nursing home to be sold and quickly flipped for a $72 million profit.
Newly proposed rules released Friday show the de Blasio administration intends to make sure the kind of transaction that turned a Rivington Street nursing home into luxury housing despite community objections is never repeated.
“The proposed changes address key issues raised by the recent Rivington transaction and will ensure a similar outcome cannot happen again,” says an internal memo outlining the revised regulations.
The memo details how a series of mistakes and layers of bureaucracy allowed the Allure Group to acquire a property that was much more valuable than the city realized and remove it from community use.
Allure persuaded the Department of Citywide Administrative Services to lift the deed restriction on the former AIDS nursing home at 45 Rivington St. last year in exchange for a $16.1 million payment.
The deal was based on an appraisal that valued the property at about half its eventual selling price.
Within months, Allure sold the sprawling building for $116 million to a luxury condo developer.
City Hall noted that current rules on deed restrictions were adopted in 2010, in the Bloomberg administration, and that they called for the city to collect 25 percent of a property’s appraised value to lift them.
In the memo, the city said it would remove deed restrictions “very rarely” in the future and only when it suits city purposes.
Property owners would also have to specify in binding legal language how each property would be disposed, while both the city and an outside agency conduct appraisals.
City officials say they were snookered by Allure, which committed verbally, but not in writing, to keep the nursing home running.
In addition, the Mayor’s Office of Contract Services, which had approved the Rivington deal, was stripped of its authority to make such approvals.
To make amends to the community, the city said the $16.1 million it collected would be earmarked to create more housing for senior citizens.
Mayor de Blasio is also directing the municipal hospital system to explore creating extra nursing-bed capacity on the Lower East Side, which lost 215 beds when the home closed.
Public Advocate Letitia James said independent oversight from the City Council is needed to ensure taxpayers are protected.
“We need real accountability, not simply internal reviews,” James said.