For the first time in decades, tenants at three Central Harlem apartment buildings started feeling optimistic this winter. The city planned to put an end to leaks, rats, lack of hot water–and years of unpaid taxes and bills–by taking the buildings from their negligent landlord and transferring them to a different, more responsible nonprofit developer, and perhaps to the tenants themselves.

A few weeks ago, however, the owner, the nonprofit West Harlem Community Organization, decided to beat the city at its game–it sold the properties at 411, 417 and 421 Manhattan Avenue to a for-profit realtor, J&M Realty Services Corporation. The reason, says West Harlem: To get rid of its debt. “People weren’t paying rent, so we decided to let the buildings go,” said West Harlem’s director of management, Jo Ednee Copeland. Claiming that West Harlem made no profit on the deal, she said J&R only agreed to pay the nonprofit’s $838,000 debt to the city. J&R did not return calls seeking comment.

Now, the legality of this move is under question. “I can’t believed that happened,” said attorney David Goldstein, a partner with the affordable housing law firm Mallin & Goldstein, commenting generally on West Harlem’s sale. “There’s more than a few things wrong with this legally.”

The state and city laws are plain, he said: A nonprofit must receive approval from the state Supreme Court and the state Attorney General’s office before disposing of its assets. And, he added, because the buildings are Housing Development Fund Corporations, set up by the city as nonprofit property for low-income tenants, West Harlem likely needs the city’s permission too.

At press time, the Department of Housing Preservation and Development had just learned of the sale and was “looking into the facts.”

The city had different plans for the Manhattan Avenue properties. A decade of back taxes and unpaid city fines and water and sewer bills pushed HPD to start planning to take over the troubled buildings in late 2000. By placing them in its third-party transfer program, HPD intended to give them to a nonprofit organization with healthy subsidies to cover rehab costs. Tenants say they were in conversations with one particular group, the Urban Homesteading Assistance Board, to turn their 33 apartments into cooperatives.

Now, residents fear the changes they’ve been waiting for may be lost. Founded 32 years ago, the West Harlem Community Organization was one of the very first New York nonprofit groups to which the city gave tax-foreclosed properties, including the three Manhattan Avenue properties in 1982. Over the next couple of decades, however, West Harlem ran into financial trouble as a property manager, losing other HDFCs to HPD through the third party transfer program.

“Years ago they were OK,” says longtime resident Derrick Jones, “but for the last 15 or so they’ve been slumlords.”

Copeland defends West Harlem, saying the city never gave the group a chance. “The city locked these groups into buildings that were going to fail,” Copeland charges, saying West Harlem received few subsidies to help rehab the building. Their only income, she said, was difficult-to-collect rent, and so little problems became big and small debts multiplied quickly.

Tenants have contacted Legal Aid attorneys to figure out how to contest the sale, which they worry will lead to rising rents. The law may be on their side. So, says Goldstein, are ethics: “To sell it to a for-profit to clear a debt really goes against what’s needed in the community.”