As the country continues to suffer the repercussions of the mortgage crisis, one consequence to many cities is a growing number of vacant properties (other cities, like my hometown of Flint, have been dealing with large numbers of vacant buildings for years—the county where Flint is located has set up a renowned landbank to help address the problem).
Vacant Property Registration (VPR) ordinances have become an important tool in combating this rise in vacancies (and the resulting increase in costs as city governments battle blight and vandalism). The basic idea is that a local government enacts a law that requires landowners to pay a fee for registering vacant property and to maintain the property to certain standards. The fee pays for staff to monitor and enforce the maintenance of the property.
Beyond the basics, there are many differences in VPR ordinances nationwide. One distinction is when registration is required: Many cities require registration after a property has been vacant for a certain amount of time; others require registration only after a foreclosure; still others use both approaches. The foreclosure approach is aimed at mortgage lenders, who typically control a property’s maintenance when the property is in the foreclosure process (and often, the theory goes, let maintenance slip). Registration encourages them to hire local companies to maintain the property or risk incurring penalties for noncompliance.
Another way VPR laws vary is in the fine imposed. Some cities impose escalating fees for every year a property is vacant. This type of law focuses on getting rid of vacant buildings altogether. Many of these cities require property owners to submit plans to renovate or demolish buildings on the property. Other cities require a small or even no fee for registration but impose steep penalties for noncompliance with maintenance rules. The purpose of these laws is aimed more at keeping a city clean while it waits for economic recovery. Maintenance rules can be extensive, including guidelines for pools, securing a building, and the exterior of the building (even including paint colors).
The bottom line is that a city looking to manage vacant properties should consider enacting a VPR ordinance (or encouraging the county or even the state to do so), but must also figure out what the primary problems are that it wants to address:
- For city officials facing a swell of foreclosures but confident that homeowners will return, a foreclosure-initiated ordinance (like that enacted in Chula Vista, California), may be the best bet. Those types of programs imposes strict maintenance requirements on mortgage companies when a property goes into foreclosure.
- For cities facing long-term vacancies (like many Midwestern cities facing loss of industry) the best solution might be an aggressive program like that in Wilmington, Delaware, which imposes severely escalating fines for every year a property remains vacant.
- Even better, many cities are adopting a combination of these approaches—targeting both longterm properties and those recently in foreclosure.
Of course, once any law is passed, the key to success is aggressive enforcement.
For a database of VPR ordinances, check out Safeguard Properties or Mortgage Contracting Services. But be aware that both these websites are associated with the mortgage industry, which is generally opposed to vacant property registration (calling the requirements unreasonable).
I will do a future post on electronic registries, such as the Federal Property Registration Corporation and Mortgage Electronic Registration Systems (MERS), and their potential pitfalls (especially MERS). For now, I wanted to lay out the basics. To see more, check out my article Vacant Property Registration Ordinances, 39 Real Est. L.J. 6 (2010), or go to the resource page for vacant property registration.