The Chicago Tribune has taken on lenders over the devastation that has befallen neighborhoods while they sit back and let property deteriorate. I’ve noticed a phenomenon in my practice when I’ve researched properties in foreclosure that have code violations. Lately I am seeing more and more foreclosure actions that are stalled after the lender obtains a judgment of foreclosure. No sheriff sale takes place or the sale is canceled. The lender doesn’t take the steps to get the deed and tells the local government that it’s not responsible for the property even though the owner is long gone. The article in the Tribune discusses the consequences of such business practices:
Such legal maneuvers by banks, which in many cases either walk away from properties that aren’t worth selling or let foreclosure proceedings languish in an overwhelmed court system, have left thousands of dilapidated vacant houses in ownership limbo citywide.
At the same time, the financial industry is fighting against proposed legislation in Illinois that would make it responsible for the upkeep of a property once a foreclosure suit has been filed if the property is vacant.
Insurance companies can be allies in the fight for life/safety compliance. They have considerable power over property. If persons insured by the companies don’t live up to the standards of the policy, they may lose their insurance benefits. A judge in Massachusetts has ruled that an insurance company does not have to pay for a fire that occurred at a restaurant because the owner did not properly maintain a fire suppression system. The Insurance Journal reports:
At issue is an exclusion in a commercial lines policy issued to the French King restaurant in Erving, which required the restaurant owner to maintain a fire suppression system. The insurer — Interstate Fire & Casualty Co., a subsidiary of Fireman’s Fund — claimed that the fire-suppression system installed at the restaurant was obsolete, and therefore triggered the exclusion and did not require them to indemnify the restaurant.
The court agreed and ordered the restaurant to pay back the $15,000 advance given to the owner before the investigation was completed. I’ve always wished there was a separate registry of properties and their insurance companies so inspectors could alert the insurance company about dangerous conditions. (I make no comment as to whether this might violate privacy laws in some states). Most owners will act so they don’t lose their insurance unlike the owner in this case. The article said that the owner could have upgraded his system for $3,250. Unfortunately, fire inspectors have to repeatedly try and obtain compliance because of the real threat of fire while some owners only see the extra cost to themselves when asked to comply.
If your building department is investigated by the grand jury, you have big problems. Oakland, California’s building services department was the subject of a a grand jury report that blasted it for deficiencies in the areas of the abatement process; policies, procedures and training; information, communication and data management; due process (notices, liens, fees and fines); contracting; and appeals. Mercury News reported that:
The final report included several examples in which liens were recorded before issuing an abatement notice and before the property owner had a chance to respond or appeal the blight abatement order. The liens ranged from hundreds to tens of thousands of dollars and often had no relation to the actual costs of unpaid fines or abatement work.
The Mayor said that the department is undertrained and understaffed.
This is why continuing education is so important. If people aren’t properly trained, they will eventually violate someone’s constitutional rights thereby subjecting themselves and the municipality to civil rights lawsuits and other charges.
There was a very interesting story on National Public Radio yesterday about the relationship between mold and foreclosures. One realtor interviewed said,
“I have a release form that I use, and if the property has got a lot of mold in it, I don’t even let my own husband go in it without signing this disclosure because I don’t want the liability,” she says. “I had one really interesting [one]. It was the middle of winter. There were icicles coming out of the windows above the garage, no heat, but it was 80 degrees inside of the house because it was self-composting.”
The story said that in some states more than 50% of the foreclosed homes have mold and mildew issues. I’ve seen a few of these usually involving burst pipes during the winter. This story raises the frightening possibility that just by sitting vacant, nature takes over the structure when air conditioning and heating no longer are used.
The creator of Phonehenge, a collection of oddball structures I’ve previously written about, has been sent to jail for disobeying a court order to demolish the buildings which were built in violation of numerous codes. Contempt of court is a useful procedure that is used when a person disobeys a court order. The court usually imposes a fine or jail until the person complies with the order of court. This is probably the most powerful tool that exists to force defendants to comply with the code. While I have filed many petitions for rule to show cause why a defendant should not be held in contempt of court, very few people have failed to comply and a tiny amount have actually been jailed. Just the threat of going to jail is usually sufficient to inspire a defendant to comply. Mr. Fahey, the defendant in the California case, has been defiant, according to the court. Defendants can be jailed for violating court orders even though jail time is not a possibility for the offense itself. Contempt requires a separate procedure from the code violation.
