It s All About Clear Title: Acquiring Problem Properties

Transcription

1 It s All About Clear Title: Acquiring Problem Properties Webinar #3 in the Problem Properties Series, Sponsored by the Federal Reserve Bank of Cleveland and Greater Ohio Policy Center August 20, 2013 William Lutz Development Program Manager City of Piqua Joshua Murnen Program Manager Lucas County Land Bank Matt Yourkvitch Attorney at Law Moore Yourkvitch Ltd. 1

2 Dial-In Information Dial-in Information Call-in number: Conference code: To ask a question Ask a live question by pressing *1 on your phone. 2

3 A Tale of Two Properties How a Small Midwestern Community Received Titles to Properties William Lutz Community Development Manager blutz@piquaoh.org 3

4 Guiding Principles City ownership is not always the goal for a parcel. The city is not going to take everything that it is offered. City ownership is strategic. It meets an end need. The city can t always be Owner of Last Resort, though it looks that way. 4

5 The Piqua Memorial Medical Center was built in the 1910 s and added onto many times. It became abandoned in 1998 after the hospital operator consolidated operations and built a new hospital south of town. Piqua Memorial Medical Center 5

6 Piqua Memorial Medical Center (cont.) Since 1998, the hospital has had two separate owners. Owners could not redevelop the property. Last owner attempted to demolish the property. 6

7 Piqua Memorial Medical Center (cont.) The attempted demolition used unsafe practices. Intervention from the Ohio Environmental Protection Agency (OEPA) and the Regional Air Pollution Control Agency stopped demolition and forced emergency measures to stop exposure of public health. Given mounting costs, the property owner decided to work with the city. 7

8 Piqua Memorial Medical Center (cont.) OEPA required a Phase I Environmental Assessment (EA) on the property. City took the assessment and applied to the Clean Ohio Assistance Fund for a Phase II EA. Grant - $199,903 After Phase II was completed, city then applied for Clean Ohio Revitalization Fund (CORF) for cleanup and demolition. Grant - $2,000,000 After CORF Grant was awarded, city took ownership. 8

9 Piqua Memorial Medical Center (cont.) Complete remediation and demolition took 15 months. Over 120 full flat bed trailers of asbestoscontaining materials removed. Site completely remediated and ready for new school construction. 9

10 650 Wood Street 650 Wood Street was former home of a carpet warehouse and retail outlet. Former owner purchased property at a reduced cost of $10,000 and used upper floors for residential rental properties. Property is in a strategic location. Located on the busiest street in town linking the Westside Commercial District to Downtown Residents have complained about the unsightly blight of the property for years. 10

11 650 Wood Street (cont.) City successfully used Community Development Block Grant dollars to purchase property for $16,000 and to perform asbestos survey for $2,000. City has executed contract to demolish property for $24,000 and convert to greenspace. Property could be converted to commercial use at a later time, if market conditions allow. 11

12 Site Control through Tax Foreclosure Problems and Solutions in Commercial Property Acquisition Joshua Murnen Program Manager, Lucas County Land Bank 12

13 Tax Foreclosure Under Ohio Law Ohio law allows for both judicial tax foreclosure and expedited tax foreclosure through the county Board of Revision. Property has clean, marketable title following adjudication. Judicial tax foreclosure Has statutory authority. Allows county to foreclosure on lien for delinquent taxes against any property. Usually results in the property being put up for Sheriff s sale. Failure to sell after two consecutive sales results in the property forfeiting to the State of Ohio. Allows Land Banks to have the authority to acquire any parcel from forfeited land list (statutory authority). 13

14 Tax Foreclosure Under Ohio Law (cont.) Expedited Tax Foreclosure Allows the county the ability to foreclosure on vacant, abandoned, non-productive land (ORC cite) through Board of Revision. Is an administrative, quasi-judicial action. The defendant and interested parties have the ability to move the case to the Court of Common Pleas. Cuts acquisition time to 6-8 months from 9-18 months for judicial cases. Partners Land Bank with treasurer and prosecutor to strategically file BOR cases for direct transfer to Land Bank following judgment. Expedites tax foreclosure through BOR works very well for lower value vacant and abandoned residential structures; however, commercial and industrial structures don t often make it through a BOR case without removal to judicial setting. 14

15 Other Acquisition Tools Acquisition from forfeited land list can be thought of both as a prospective tool and as a clean-up tool. Donation Need title search prior to accepting. Land Bank s acquisition abates taxes (ORC (F), et al). Includes REO, individual owners, receivers. Can potentially use as alternative to tax foreclosure. Purchase Lucas County Land Bank has used to a very limited extent, but this is potentially an option that can be utilized as an alternative to donation. 15

16 Acquisition and Title Issues: Commercial Properties Commercial properties frequently have title issues that make tax foreclosure difficult and time consuming. Common issues include: Bankruptcy, Third party court actions, Interested lienholders, and Taxes current, but property still vacant and blighted. For commercial properties with these issues, a combination of tools may be necessary to gain site control with clean title. 16

17 Case Study: Merchant s Landing and Marine Plaza Two vacant strip retail centers located in North Toledo. Both properties were part of a larger mortgage foreclosure action against the commercial assets of a local investor. Properties were being maintained and marketed by court appointed receiver. Obstacles to Acquisition: Multiple lienholders on each property with competing interests; Over $500,000 in back taxes in which school district wanted to recover revenue, and Potentially difficult redevelopment projects due to long term vacancy. 17

18 Case Study: Merchant s Landing and Marine Plaza (cont.) Properties vacant, abandoned and tax delinquent, but direct transfer was not an option due to lienholders and school district. Solution: Collaborate with Receiver 18

19 Case Study: Merchant s Landing and Marine Plaza (cont.) Merchant s Landing Marine Plaza 19

20 Merchant s Landing Case Study: Merchant s Landing and Marine Plaza (cont.) Receiver had been marketing and maintaining property for two to three years. Receiver and Land Bank came to agreement that if property could be sold to an end user, receiver would recover expected commission. Receiver worked to identify end-user who could restore property. Land Bank worked with prosecutor s office to put property up for sheriff s sale for delinquent taxes, court costs and receiver fees. No bidders after two sales, so property forfeited to state, but end-user was in place to bid if necessary. End-user purchased property from Land Bank, receiver paid at sale. 20

21 Case Study: Merchant s Landing and Marine Plaza (cont.) Marine Plaza: Same acquisition issues as Merchant s Landing. Slower acquisition timeline due to longer interval to work with receiver to line up potential end-users. When end-users identified, set property for Sheriff s sale for delinquent taxes and court costs. Property failed to sell at sale, so Land Bank issued requests for final and bests bids and plans through receiver. Entered into purchase option with most qualified end-user prior to taking title. Land Bank acquired title following forfeiture, sold to end-user. Receiver has been compensated, and rehab is currently under way. 21

22 Case Study: 725 Jefferson Avenue Vacant, tax delinquent historic five story commercial structure located in downtown Toledo. Commercial developer approached Land Bank. Tax foreclosure initiated, but decedent owner s heir declared personal bankruptcy at last minute, placing a stay on the tax foreclosure. Prosecutor must release property from stay. Can accomplish by demonstrating that property has little or no value. In this case, the Land Bank purchased a new market appraisal, as the true value of the property was well below the delinquent taxes. Delayed acquisition time line by nearly six months. Issues with roof prior to closing; delays lead to further deterioration. Must work closely with intended end user to keep them on board with the redevelopment project. 22

23 Redevelopment work on the project is progressing very well. Includes new roof, façade, and cornice repair. Interior work has commenced. Case Study: 725 Jefferson Avenue (cont.) 23

24 Case Study: Signature Park Fifteen parcels held by two different owners. Two held locally, thirteen held by out of state investor. Land Bank had to negotiate with each party separately to assemble project. Local investor negotiated donation in lieu of tax foreclosure. Out of state investor negotiated purchase for nominal consideration. This raised possibility of county collecting delinquent taxes directly from investor under little known ORC provision. When timing is critical to a project, we can be flexible in working to accomplish the project goals. 24

25 Case Study: Signature Park (cont.) On-Site Mixed Use Development Proposed Uptown Signature Park 25

26 Case Study: Arbors of Toledo Vacant long-term care facility located along Cherry Street corridor. Out of state investor was not paying taxes, so property could have been acquired following tax foreclosure. However, there are not sufficient funds available in the community to cover the high demolition costs. Land Bank and city partnered to negotiate a cash donation along with the donation of the property to help cover demolition costs. St. Vincent s hospital is helping to turn the land into a neighborhood park following demolition. 26

27 Case Study: Spitzer and Nicholas Buildings Two historic buildings standing on downtown Toledo s last original hard corner, one is vacant and one mostly vacant. Both were purchased by an out of state speculator who has taken no steps to improve properties, which actually sped the decline. Speculator has affirmatively opposed all steps to take title. Opposition included bankruptcy, delaying mortgage foreclosure, redemption of back taxes by third parties, et cetera. This is a very difficult case, but properties are critically important. Land Bank and our partners are prepared to pull out all the stops, but acquisition is not guaranteed due to: All the major challenges that come with acquiring commercial properties, with the addition of over 100 tenants in one building. 27

28 Case Study: Spitzer and Nicholas Buildings (cont.) Nicholas Building Spitzer Building Source: Lucas County Auditor 28

29 Summary of Acquisition and Title Issues: Commercial Properties If you re willing to attempt to acquire these types of properties, you must be willing to be creative and flexible to accomplish the project goals. Needs to exist strong partnerships within local government, private sector, institutional anchors and community stakeholders. When possible, form partnerships with interested parties. Their goals are not always at odds with the community s goals. Approach every property with a clear development plan, when possible. This will help attract support and can address the why are you dedicating resources to this? question 29

30 Combating Vacant Property The Legal Approach to Nuisance Property Utilizing O.R.C Matt Yourkvitch, Esq. Member, Attorney at Law, Moore Yourkvitch Ltd. 30

31 Look Familiar? 31

32 About Me Research and litigation assistant to clinical professor emeritus Kermit J. Lind Esq. at Cleveland Marshall College of Law. Served on litigation team for: Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., Case No. 1:08-CV- 3003,UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO, 606 F. Supp. 2d 698; 2009 U.S. Dist. LEXIS 29413, March 26, 2009 Cleveland Housing Renewal Project v. Wells Fargo Bank, Case No. 1:08-CV-3011, UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO; Cleveland Municipal Court Division of Housing, Case No. 08-cvh Cleveland Municipal Housing Court Law Fellowship under Honorable Raymond L. Pianka Frequently represent various Cleveland area Community Development Corporations Neighborhood Progress, Detroit Shoreway, Northeast Shores, Fairfax, South Euclid, Cuyahoga County Land Reutilization Corporation. Adjunct professor at Cleveland Marshall College of Law 32

33 O.R.C (A)(2) Public Nuisance means a building that is a menace to the public health, welfare, or safety; that is structurally unsafe, unsanitary, or not provided with adequate safe egress; that constitutes a fire hazard, is otherwise dangerous to human life, or is otherwise no longer fit and habitable; or that in relation to its existing use, constitutes a hazard to the public health, welfare, or safety by reason of inadequate maintenance, dilapidation, obsolescence, or abandonment. 33

34 O.R.C (cont.) (A)(3) Abate or abatement in connection with any building means the removal or correction of any conditions that constitute a public nuisance, and the making of any other improvements that are needed to effect a rehabilitation of the building that is consistent with maintaining safe and habitable conditions over its remaining useful life. Abatement does not include the closing or boarding up of any building that is found to be a public nuisance. 34

35 O.R.C (cont.) Provides the ability to bring a civil action to enforce any local building, housing, air pollution, sanitation, health, fire, zoning, or safety code, ordinance, or regulation applicable to buildings. Civil action may be commenced by A municipal corporation where the building is located. A neighbor or property owner within 500 feet. A tenant of the building. A nonprofit corporation which has as one of its goals the improvement of housing conditions in the county or municipal corporation in which the building involved is located. 35

36 O.R.C (cont.) Provides for relief via judicial order by Injunction, requiring the owner to abate the public nuisance within 30 days; Abatement of the public nuisance by an interested party approved of by court; or Receivership, which is the appointment of a receiver to take possession and control of the building and abate the public nuisance. 36

37 O.R.C (cont.) Key provisions (G) A receiver is not personally liable except for misfeasance, malfeasance, or nonfeasance in the performance of his office. (H)(2)(a) and (b) All approved costs incurred by the receiver and the receiver s fees, is a first lien upon the building and property. The receiver s lien is superior to all prior and subsequent liens or encumbrances, including those for taxes and assessments. 37

38 O.R.C (cont.) If the building or property is sold at Sheriff sale, the distribution of the funds are as follows: 1. Receiver s lien (costs and fees); 2. Delinquent taxes, assessments, charges, penalties, and interest owed to the State or political subdivision of the state; 3. Pre-receivership mortgages, liens or encumbrances, in their order of priority. Typically the receiver s lien is greater than the value of the property and the receiver obtains title to the property at Sheriff sale. 38

39 Why Civil Nuisance Abatement? There are typically two types of action to enforce building and housing codes: Criminal code enforcement, and Administrative (demolition, boarding, repair). Limitations include jurisdiction, remedies, resources. Jurisdiction over person (defendant), not property Fines and/or jail time High volume of distressed properties Shrinking municipal budgets Civil nuisance abatement, under R.C , allows jurisdiction over the person as well as the property and may be filed by neighbor or nonprofit development corporation. 39

40 Advantages of Civil Nuisance Abatement Actions Municipal government, nonprofit corporations, neighbor or tenant may bring a civil action to eliminate public nuisance buildings within their community. Jurisdiction over property in addition to jurisdiction over person are Rehabilitation option, and Targeted demolitions. All expenditures necessary to abate a public nuisance [are] a first priority lien, superior to all prior and subsequent liens including taxes and assessments O.R.C (H)(2)(a) and (b). Title clearing mechanism Mortgagees have displayed a greater willingness to release/disclaim interest once they are apprised of legal action. 40

41 Strategic use of O.R.C Targeted nuisance abatement to support and protect neighborhood assets, such as: Schools, Churches, Residential development projects, Historic buildings, Infrastructure improvements, Business stakeholders, and Business improvement districts 41

42 Historic Revitalization The Sylvia was a 22-unit apartment building, originally constructed in the 1920's. A nuisance abatement action was filed in December of 2008, because the 4 remaining tenants were without utilities and the owner was deceased. It was viewed as being essential to continuing reinvestment in the community and expansion of housing opportunities for low income families. Now, the Sylvia will provide 18 units of high-quality affordable housing for tenants of all generations while retaining its historic integrity and National Register of Historic Places status. 42

43 Mixed-Use Commercial Buildings Building means any building or structure that is used or intended to be used for residential purposes. Building includes, but is not limited to, a building or structure in which any floor is used for [anything]. and in which other floors are used, or designed and intended to be used, for residential purposes. Building does not include any building or structure that is occupied by its owner and that contains three or fewer residential units (Mrs. Murphy Exception). 43

44 Support Commercial and Residential Development projects Determine opportunities for site expansion. Determine opportunities to address surrounding housing conditions. Identify areas that could support private development. Identify opportunities for in-fill housing or mixed-use development. Reach out to responsible property owners, developers, and business owners. 44

45 Lack of awareness statute is underutilized Upfront costs legal fees and costs Capacity to act as receiver Problems and Limitations of Civil Nuisance Abatement Actions Extensive procedural requirements Receivership Foreclosure Litigation timeline months (best case) Perfecting service of process Identifying all parties in interest Unknown heirs and spouses 45

46 Additional Information The Urban Development Law Clinic William Lutz (937) Joshua Murnen (419) Fax: (419) Matthew P. Yourkvitch, Esq. (440)

47 Questions? 47