THIRD AMENDMENT TO
                                   SECOND AMENDED AND RESTATED AGREEMENT
                                           OF LIMITED PARTNERSHIP
                                                     OF
                                        SYDNEY ENGEL ASSOCIATES L.P.


        This Third  Amendment to the Second  Amended and  Restated  Agreement of
Limited Partnership ("Second Amendment") of SYDNEY ENGEL ASSOCIATES L.P. is made
and entered into as of the 18th day of April, 1997, by and among the undersigned
parties.

        WHEREAS,  as of  June  1,  1990,  THE  ENGEL  GROUP,  INC.,  a New  York
corporation  with an office at 124  Atlantic  Avenue,  Lynbrook,  New York 11563
("Engel"), THE RICHMAN GROUP, INC., a Delaware corporation with an office at 599
West Putnam Avenue,  Greenwich,  Connecticut  06830  ("Richman") and TWIN CASTLE
GROUP INC., a New York  corporation  with an office at 550 Brush Avenue,  Bronx,
New York  10465  ("Twin  Castle")  (Engel,  Richman  and Twin  Castle  sometimes
hereinafter being referred to collectively as the "Original  General  Partners")
and AMERICAN TAX CREDIT PROPERTIES III L.P., a Delaware limited partnership with
an office c/o Richman (the "Limited  Partner")  entered into the Second  Amended
and Restated Agreement of Limited  Partnership (the "Agreement") of Sydney Engel
Associates L.P. (the "Partnership"); and

        WHEREAS,  as of March 24, 1997,  the Original  General  Partners and the
Limited  Partner  entered into a First  Amendment of the Agreement,  which inter
alia,  authorized  the  execution  of a  Certificate  of Adoption of the Revised
Limited  Partnership Act (Article 8-A of the Partnership Law of the State of New
York) (the  "Revised  Act") and an  Amendment  thereto  changing the name of the
Partnership to Sydney Engel Associates L.P.

        WHEREAS,  as of today's date, and immediately  prior to the execution of
this Agreement,  the Original  General  Partners and the Limited Partner entered
into a Second  Amendment of the Agreement,  which,  inter alia,  effectuated the
withdrawal  of Twin  Castle  as a General  Partner  and the  acquisition  of its
interest by the Partnership ;

        WHEREAS,  the parties now desire to enter into this Third  Amendment  to
(i) continue the  Partnership,  (ii) effect the  withdrawal  of Twin Castle as a
General  Partner and the  transfer of its  interest  to the  Partnership,  (iii)
reassign  the  interests of the  Partners,  and (iv)  authorize  the filing of a
Certificate  with the New York State Department of State reflecting the interest
of Engel as the sole General Partner.

        NOW, THEREFORE, in consideration of the foregoing, of mutual promises of
the parties hereto and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged,  the parties agree to continue the
Partnership  pursuant to the Revised Act, as set forth in this Third  Amendment,
as follows:

        1. All initially  capitalized  terms shall have the meanings ascribed to
them in the Agreement,  unless otherwise provided herein.  This Agreement may be
signed in counterparts.

        2. Upon the execution of the Third Amendment by the parties hereto,  the
Managing  General  Partner  (i.e.,  Engel) shall take all actions  necessary and
appropriate to assure the prompt filing of a Certificate  of Amendment  pursuant
to Section  121-202 of the Revised Act  reflecting the withdrawal of Twin Castle
and  Richman  as  General  Partners.  (This  obviates  the need for  filing  the
Certificate contemplated in the Second Amendment.) All fees for the filing shall
be paid out of the Partnership's assets.

        3.  Selected  definitions  in Article II  ("DEFINED  TERMS") of the  
Agreement  are hereby  amended,
as follows:





<PAGE>

        "Act" means the Uniform  Limited  Partnership  Act of the State,  except
that, as of March 27, 1997,  with the filing of the Certificate of Adoption with
the New York State  Department of State,  the Revised  Limited  Partnership  Act
shall control.

        "Final  Closing"  means the  occurrence of the following:  (i) 
Substantial  Completion and (ii) the
conversion of the Construction Loans to Mortgage Loans as of the date hereof.

        "General  Partners" or "General Partner" means The Engel Group, Inc. and
any other Person admitted as a general partner  pursuant to this Agreement,  and
their respective successors pursuant to this Agreement, including the provisions
of Sections 6.03, 8.01 and 8.13.

        "Partnership" means Sydney Engel Associates L.P.

        "Special  Limited  Partner"  [new]  means  "The  Richman  Group,   Inc."
formerly,  a General Partner),  which may be considered to be a Limited Partner,
except as may be specifically provided in the Agreement.

        4. (a)  Schedule A of the  Agreement  as  referred  to in  Section  5.01
thereof,  is amended to reflect  the  withdrawal  of Twin  Castle and Richman as
General Partners and the addition of Richman as Special Limited Partner:
                

<TABLE>
                <CAPTION>

General Partner                                  Partnership Interest
<S>                                              <C>
The Engel Group, Inc.                                    2/3%

Limited Partner
American Tax Credit Properties III L.P.                  99%

Special Limited Partner
The Richman Group                                        1/3%
                </TABLE>


            (b) The  execution of this Third  Amendment  by the Limited  Partner
constitutes its consent to the conversion  described herein and to the amendment
of the Agreement pursuant to Article XIV thereof.

        5. The withdrawal of Richman as a General  Partner from the  Partnership
does not constitute its disclaimer and renunciation of any further fees, profits
or other  payments  arising out of or pertaining to the  Partnership  and/or the
Project,  including but not limited to fees,  profits or other payments  arising
out of the  Partnership  Administration  Services  Agreement by and among Engel,
Richman and Twin Castle and the Development Agreement by and among Sydney Engel,
Richard P. Richman and Michael  Contillo,  both dated June 1, 1990.  The parties
hereto  acknowledge  and agree that Richman shall continue to enjoy the benefits
and assume the  burdens  under  such  Agreements,  as if it were still a General
Partner.  Similarly,  Richman  may  not  obtain  any of the  aforesaid  payments
otherwise due to General Partners if fees are withheld pursuant to Section 8.12.

        6. Section 11.01(a)  provides that , "to the extent that the Partnership
does not distribute at least $5,000 to the Investment Partnership (from Net Cash
Flow or otherwise) in any year,  the General  Partners...  hereby  covenant that
they (sic) will pay to the Investment Partnership in any year an amount equal to
such shortfall..." It is agreed between the Engel and Richman,  that if Engel is
obligated to make such  payment  that Richman will pay  one-third of such amount
due.

<PAGE>

        7  Section   11.03(a)(iii)  is  amended  to  read:  "...  third,   gain 
in  excess  of  the  amount allocated  under (i) and (ii) shall be  allocated  
50.50% to the General  Partner  and the  Special  Limited Partner in accordance 
with their respective Partnership Interests and 49.50% to the Investment 
Partnership."

        8 (a) Section 11.04(e) is amended to reflect that the sum remaining from
the sale and  liquidation  of  Partnership  Property shall be distributed to the
General  Partners  and the Special  Limited  Partner (in  accordance  with their
respective  Partnership  Interests)  until they have received an amount equal to
their Capital Contributions,  reduced by all cash previously distributed to them
pursuant to Section 11.04.

        8 (b)  Section  11.04(g) is amended and  clarified  to provide  that the
residual proceeds from the sale and liquidation of Partnership  Property and the
net  proceeds  from the  sale of  Partnership  Property  or  refinancing  of the
Apartment  Complex or a Capital  Transaction shall be made 50.50% to the General
Partner and the Special  Limited  Partner in  accordance  with their  respective
Partnership Interests and 49.50% to the Investment Partnership.

        9 Section 16.08 of the Agreement is amended to provide for notices to be
sent to Engel, Richman and the Investment Partnership to the addresses set forth
on the first page of this Agreement.

        Copies of Notices to the Limited Partners shall be sent to:

               Peabody & Brown
               1255 23rd Street, NW
               Washington, D.C.  20037-1170
               Attention:  Herbert F. Stevens, Esq.

        Copies of Notices to Engel shall be sent to:

               Hirschen & Singer
               36 West 44th Street, Suite 712
               New York, N.Y.  10036
               Attention:  Richard C. Singer, Esq.





<PAGE>
<TABLE>
<CAPTION>

        IN WITNESS  WHEREOF,  the parties have affixed their  signatures to this
Third  Amendment  to the  Second  Amended  and  Restated  Agreement  of  Limited
Partnership of Sydney Engel Associates L.P. as of the date first above written.

                                GENERAL PARTNER:
<S>                                              <C>
ATTEST/WITNESS:                                  THE ENGEL GROUP, INC.


                              By: /s/ Sydney Engel
                                                       Sydney Engel, President

                                                 WITHDRAWING GENERAL PARTNER &
                                                 SPECIAL LIMITED PARTNER:


ATTEST/WITNESS:                                  THE RICHMAN GROUP, INC.


/s/ Ann H. McGuire                           By:  /s/ Richard P. Richman
                                        Richard P. Richman, President

                                LIMITED PARTNER:

                          AMERICAN TAX CREDIT PROPERTIES III L.P.

                     By:  Richman  Tax  Credit  Properties  III L.P.,  its
                                 general partner

ATTEST/WITNESS:         By: Richman Housing Credits Inc., its general partner


/s/ Mary K. Holzer                        By:  /s/ David Salzman
                                            David Salzman, Vice President

</TABLE>






<PAGE>
STATE OF NEW YORK                 )
                             )      SS.:
COUNTY OF NEW YORK             )

        On this day of April,  1997,  before me personally came Sydney Engel, to
me known,  who being by me duly  sworn,  did depose and say that he resides at ,
New York;  that he is the President of THE ENGEL GROUP,  INC.,  the  corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the board of directors of said corporation.



                                  Notary Public

STATE OF CONNECTICUT          )
                             )      SS.:  Greenwich
COUNTY OF FAIRFIELD              )

        On this 18th day of April,  1997,  before me personally  came Richard P.
Richman  to me known,  who being by me duly  sworn,  did  depose and say that he
resides at 7 Dwight Lane, Greenwich,  CT, 06831, that he is the President of THE
RICHMAN  GROUP,  INC.,  the  corporation  described  in and which  executed  the
foregoing instrument;  and that he signed his name thereto by order of the board
of directors of said corporation.


                                                   /s/ Mary K. Holzer
                                  Notary Public


STATE OF CONN.                          )
                             )      SS.: Greenwich
COUNTY OF FAIRFIELD              )

        On this  18th day of  April,  1997,  before  me  personally  came  DAVID
SALZMAN,  to me known,  who being by me duly  sworn,  did depose and say that he
resides at 12 Varian Lane,  Scarsdale,  NY, 10583; that he is the Vice-President
of RICHMAN HOUSING CREDITS INC., the corporation described in and which executed
the foregoing  instrument;  which  corporation is the general partner of Richman
Tax Credit  Properties  III L.P.,  the general  partner of  AMERICAN  TAX CREDIT
PROPERTIES  III L.P.,  the limited  partnership  which  executed  the  foregoing
instrument;  that  the  execution  of the  instrument  by  AMERICAN  TAX  CREDIT
PROPERTIES  III L.P. was duly  authorized  according to the Limited  Partnership
Agreement; that RICHMAN HOUSING CREDITS INC., the general partner of its general
partner,  executed the instrument on behalf of the limited partnership  pursuant
to said  authorization and that he signed his name thereto by order of the board
of directors of said corporation.


                                                   /s/ Ann H. McGuire
                                  Notary Public