New London - After receiving high marks from HUD about improved conditions at the Thames River public housing project, the New London Housing Authority is hoping residents will drop a class-action lawsuit.

The attorney representing tenants in the 124-unit Crystal Avenue highrises said he intends to go forward with the four-year-old lawsuit that seeks alternative housing for the roughly 350 people who live there, although he said he would be willing to sit down and talk to the authority to try and reach an amicable resolution.

"As I previously explained to you we have no intention of voluntarily withdrawing this lawsuit, '' Attorney Robert I. Reardon wrote to Attorney Donn A. Swift of New Haven, who represents the authority. "But we have always been willing to try and resolve our differences by arriving at a long-term plan with the Housing Authority to accomplish alternative housing for the residents of the Thames Apartments."

Reardon, who is representing residents at no charge, said the objective of the lawsuit is to find new management for the three federally subsidized apartment buildings. The new management would come up with a long-term plan to find alternative housing and ultimately tear down the buildings.

Swift said Thursday he plans to meet with Reardon before a Nov. 1 hearing in New London Superior Court to discuss the lawsuit.

"Conditions have improved dramatically'' over the past year, Swift said.

In June, officials from the U.S. Department of Housing and Urban Development reviewed the agency's efforts to correct its shortcomings. New accounting procedures have been put in place, the agency has paid down more than $1 million in debt, and a federal inspection at Thames River showed an improvement in living conditions. HUD, which inspects for such items as plumbing issues, damaged windows, missing screens, peeling paint and inoperable appliances, found 119 defects in 2009, compared with 566 in 2008.

He said the issue of tearing down the buildings is not simple and has to include the housing authority, HUD and the state. It will cost millions of dollars to find homes for the tenants, raze the buildings and replace the 124 units. Neither HUD nor the state is part of the lawsuit, and the housing authority does not have money for such a project.

"That's the legal hurdle of the entire case,'' Swift said. "How can we expect to have remedy in the lawsuit when not all the involved parties are part of it?"

Last month, the board of the housing authority decided that it would not seek an outside management company to take over its day-to-day operations, which include 735 units of low- and moderate-income housing in the city.

Last year, HUD had told the agency it would have to seek outside oversight, citing the pending lawsuit and accounting mismanagement that left the authority with about $2.8 million worth of unpaid water, sewer, utility and other bills. The housing authority has been on HUD's list of "troubled agencies" since 1998.

HUD, citing improvements at Thames River, urged the authority to meet with attorneys representing the tenants and "explore a voluntary dismissal of the case."

Despite the housing authority's improvements, Reardon said there are still more than 100 unacceptable living conditions at the high rise.

"While we appreciate the efforts that have been undertaken by the New London Housing Authority and its management to improve conditions at the Thames River Apartments, the three buildings will never meet the standards of safe, habitable housing due to the their age, design and construction,'' Reardon said. "I'd be pleased to try and work out a long range plan to replace structures with habitable houses. A Band-aid approach is not going to work. Our goal in this lawsuit is new housing.''

A management company with expertise in obtaining federal and state grants could find money to "shut down the buildings and provide alternative housing for the residents,'' he said.