MUNICIPAL SOLUTIONS FOR DEALING WITH FORECLOSURES OR ABANDONED PROPERTIES Illinois Municipal League 97 th Annual Conference Arthur L. Janura Nancy S. Harbottle Hal R. Morris 1
Introduction Not all foreclosures lead to vacant/ abandoned property Not all vacant/abandoned property results from foreclosure Federal Reserve Bank of Boston 2
Introduction (cont d) United States Conference of Mayors Vacant and abandoned properties, whether residential or commercial, create costly problems for cities problems which have been exacerbated by the mortgage foreclosure crisis. These properties are a drain on city budgets. They detract from the quality of life, as well as the economic opportunities, of those living around them. They are an impediment to individual neighborhood redevelopment and, ultimately, to achievement of city-wide economic development goals. 3
I. Impacts of Foreclosure/Abandonment Loss to Homeowner Neighborhood Blight Decreased Valuation of Property Increased Supply Increased Mobility Increased Police, Fire and Enforcement Activity 4
II. Municipal Enforcement Tools Illinois Municipal Code Statutes Maintenance performed by Municipality neglected weeds, grass, tress & bushes (65 ILCS 5/11-20-7) garbage, debris (65 ILCS 5/11-20-13) Demolition or repair of dangerous, unsafe buildings 65 ILCS 5/11-31-1 et seq.) International Property Maintenance Code (adopted in some form by most municipalities) 301.3 Vacant structures and land. All vacant structures and premises thereof or vacant land shall be maintained in a clean, safe, secure and sanitary condition as provided herein so as not to cause a blighting problem or adversely affect the public health or safety. 5
III. Municipal Cost Recovery Property Maintenance Liens Weed Liens (65 ILCS 5/11-20-7) Garbage Liens (65 ILCS 5/11-20-13) Junior to Mortgages Usually Eliminated in Foreclosure Proceedings Leaving Municipality with No Recovered Costs Administrative Adjudication Code Violations Home Rule (65 ILCS 5/1-2.1-8) Administrative Adjudication Non Home Rule -Code Department Hearing Officer confirmation of findings, decision and order (65 ILCS 5/1-2.2-55) Priority Liens (New Legislation PA 96-856) Only Tax Liens have priority Impact of Foreclosure Proceedings Can include all property maintenance performed by municipality 6
Priority Lien Legislation (P.A. 96-856) This Legislation authorizes Municipalities to create liens superior to all other liens and encumbrances, except tax liens (65 ILCS 5/11-20-15.1(a)) 7
Process of Perfecting Priority Lien Municipality has 1 year from incurred costs to record lien (can include all outstanding liens in the priority lien) Notice of lien must contain: Description sufficiently identifying abandoned, vacant residential property Cost of maintenance performed by municipality Dates of such maintenance Statutory authority for maintenance (garbage, cutting of weeds, grasses) 8
Enforcement Requires Municipality to Maintain Records Required Records (65 ILCS 11-20-15.1(c)) 1. Dated statement of a finding of abandoned residential property i. first observed date that property was known to be unoccupied by lawful occupants ii. description of actions taken to contact legal owners iii. statement that no contacts were made 2. Dated certification by an official of the necessary work to be performed 3. Copy of agreement with entity performing work, including rates and estimates of total cost of work 4. Detailed invoices and payments for all work 5. Statement classifying work as competitive bid, if so, then copies of all proposed bids 9
IV. Local Ordinance - Example An Ordinance Establishing Regulations Governing the Registration, Maintenance, Security and Monitoring of Vacant Properties by Their Owners (City Of Waukegan) Home Rule municipalities /Non Home Rule municipalities - public nuisance health, safety and welfare criminal activities property tax base Registration of all vacant property by owner Owner - defined broadly 10
Local Ordinance (cont d) Vacant Lacking habitual presence of human beings (with legal right to be on premises) for 90 consecutive days, or Substantially all lawful business or construction activity or residential occupancy has ceased, or Substantially devoid of contents. Multi-family (more than 10) when 90% of dwelling units unoccupied 11
Local Ordinance, cont d Enforcement Authority Building Commissioner Zoning Officer Code Enforcement Officer Obligations of Owner register property certificate 6 months with extensions reasonable fee inspection period for municipality bring vacant structure into compliance within 10 days removal of combustible materials; interior trash, exterior trash, weeds 12
Local Ordinance, cont d Vacant Structure Registration Certificate Statement of intent including plan for regular maintenance Vacant Structure Maintenance Standards Extensive and specific Liability Insurance Co-operative Banks, Lenders Some Bank of America But not all code enforcement and fines Walk away - City of Chicago Village of Bartlett Foreclosure Database Foreclosure Team Communication with lenders and service companies Linked to Village s GIS Innovation Showcase Saturday morning Session 2 13
V. Prevention Difficult as abandoned properties and foreclosures increase and municipal budgets decrease Counseling Not for profits Federal Government - HUD Hope Now www.hopenow.com Affordable counseling Bar Associations Banking initiatives Service companies Locally funded programs 14
Conclusion Foreclosures/Abandoned Properties are escalating municipal problem in many communities Costs to Municipality and Other Taxing Districts are increasing Need coordinated efforts between municipal departments (building, code, fire and police) Need coordinated efforts between levels of government, state and municipal Fewer municipal workers due to budget cuts Unfunded mandate Acknowledgments to Julie Tappendorf, Ancel Glink Anne Linn, Attorney, City of Waukegan 15