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.
I’m sure that many building inspectors don’t give themselves enough credit for the important job that they do, making sure that structures meet the standards of the building code. Because of this important task, homeowners don’t think much about the safety of their homes. A couple in Southborough, MA weren’t so fortunate. The Metrowest Daily Newspaper reports that after buying their dream house they discovered that:
The garage was too small to fit their car. Weeks later, water began flooding the basement. Over time, doors couldn’t be shut, and floors started creaking. The Culleys didn’t know it, but their house was shifting.
Now the couple and their lawyer, Michael McLaughlin of Boston, say the house was built illegally on top of poor-quality fill material, and because the soil is shifting unpredictably, the structure is sinking into itself. To make matters worse, a retaining wall they say used to run in a straight line along the rear of the property is failing, slithering across the edges in serpentine fashion.
The builder didn’t even own the land when he took the couples’ deposit. The couple contended there were never any real building plans. The state Department of Public Safety’s Board of Building Regulations and Standards, found 22 building code violations. A temporary certificate of occupancy was obtained fraudulently. The engineer who signed a statement which said that the house had been built properly reportedly received $100 to do so but had nothing else to do with the project. There was no permit for the retaining wall. In a deposition, the building inspector admitted that he didn’t issue a cease and desist order when he discovered work had been done without a permit and he admitted he was never given any building detail design data. While a jury awarded the couple $1 million in damages, the judgment was set aside by the judge. It appears that the couple will be appealing.
The Chicago Tribune has a very good article about how vacant properties (due to the foreclosure crisis) are decimating poor communities because of the increase in crime. This is something that I speak about at length when I teach my class on the relationship between law enforcement and code enforcement. These vacant buildings are crime magnets and can’t be torn down quickly enough. Vandals steal everything and anything from these buildings so people who might want to invest in and rehab them walk away in frustration. The remaining residents live in fear as the neighborhood gets even worse. It’s a pretty depressing tale but important to know about.
Building officials are constantly trying to get people to get permits for structures built without them. This becomes tricky when the construction occurred decades ago. In Austin recently there was a crackdown on illegal carports. Many of the owners didn’t own the properties at the time the illegal work was done. This is always a problem because when the construction occurred years ago, the statute of limitations has run and the current owners can’t be charged with working without a permit. If a structure was built contrary to the building code, there might be the possibility of charging the owner with occupying a structure without a certificate of occupancy. Most towns try to get voluntary compliance, even waiving fees. The goal is to make sure the structures are safe and code compliant. But, when there is a widespread enforcement action, local officials should expect forceful opposition from homeowners. When I encounter a problem like this, I like to do an education campaign first. My recommendation is to notify the owners of the problem but explain why compliance is important for their sake. I’ve found that this approach often gets compliance for 90% of the illegal structures. It shows the court that you’re reasonable and that you’ve tried everything before starting enforcement action. You’ll always end up with some people who don’t believe anyone can tell them what to do to their property but, thankfully, they are in the minority.
This story is too delightful not to post. Bank of America filed a foreclosure lawsuit against a homeowner despite the fact that the homeowner bought his house in cash and had no mortgage. The lawsuit was dismissed but Bank of America was ordered to pay his legal fees. After waiting awhile for the check, the homeowner decided to use one of the remedies available to creditors, having the Sheriff seize the debtor’s property. The Sheriff went to a local office of Bank of America in Naples, Florida to seize furniture, etc. but the bank manager managed to come up with the money owed the homeowner. You can find the story at news-press.com.
What if an unlicensed contractor does work and then the homeowner decides not to pay the entire bill? How do the courts treat such a situation? If you’re in Hawaii, the courts won’t help you. Hawaii state law provides that:
§ 444-22 Civil action. The failure of any person to comply with any provision of this chapter shall prevent such person from recovering for work done, or materials or supplies furnished, or both on a contract or on the basis of the reasonable value thereof, in a civil action, if such person failed to obtain a license under this chapter prior to contracting for such work.
In Jones v. Phillipson, 92 Hawai”i 117, 987 P.2d 1015(1999) the court decided that while the unlicensed contractor could not sue a homeowner, the homeowner could sue the contractor for breach of contract. Consequently, it’s foolhardy to risk being unlicensed because in addition to getting charged by the local jurisdiction, the contractor may not be able to seek court help in enforcing a contract.
