Townships across Michigan are experiencing an increasing number of foreclosures in residential homes. Initially led by the sub-prime loan debacle, home foreclosures are now being further fueled by growing unemployment, in which Michigan leads the country. This condition threatens township financial integrity and quality of life in myriad ways. Here are a few ideas on how to cope with problems caused by the continuing foreclosure crisis.
Although Townships do not have the same resources as federal or state agencies to assist borrowers, there are state and federal programs to which township officials can refer their constituents. A summary of links to information regarding available deferments, exemptions, tax credits and human services programs to help prevent mortgage or tax foreclosures can be found on the MTA website at http://www.michigantownships.org/foreclosure.asp
Steeply Declining Values As mortgage foreclosures continue to mount, there will be further downward pressures on real estate values, and hence on Township property tax revenues. With recent and future cuts in state revenue sharing, property taxes have become the dominant source of township revenues. The "gap" between taxable and assessed values has so far protected most townships from seeing net decreases in their taxable values, but that "gap" is fast disappearing as asssessed values begin to drop below taxable values capped under Proposal A.
Once assessed values drop below the capped values (which is already happening for an increasing portion of township properties), townships will see precipitous declines in their available property tax revenues. In anticipation of this revenue reduction, townships should begin now to reduce their expenses, perhaps even more than might have been previously thought necessary.
Foreclosures, Vacancies and Blight The crisis has also created problems with vacant and abandoned properties. High foreclosure rates have created new vacancy problems and a growing inventory of bank-owned properties. This exerts negative effects not only on the foreclosed properties, but on the surrounding neighborhoods and communities. These impacts include deterioration and loss of value of the foreclosed property, diminished value of nearby properties, increased crime and destabilized neighborhoods. All this is happening at the worst possible time, during townships’ reduced fiscal capacity to combat these problems.
The "feedback loop" between foreclosure, disinvestment, vacancy, and abandonment can potentially turn into a "death spiral" if not checked. When properties are tax foreclosed, townships can put tax-reverted properties back into use and on the tax rolls. In the most serious cases of deterioration, townships can also remove the dilapidated properties for the benefit of surrounding property values.
One approach we currently recommend is to address potential blight associated with vacant and foreclosed homes early by adopting an ordinance to require their registration and monitoring. Earlier this month, the Court of Appeals upheld the validity of such an ordinance in Battle Creek. The ordinance requires owners of abandoned residential structures (in most cases the banks that hold the foreclosed properties) to register foreclosed properties, pay a monthly monitoring fee, and adhere to minimum requirements for securing and maintaining the property. The ordinance’s stated purpose is to overcome the detrimental effects of neighborhood blight, and the court held the general reduction of blight is clearly a legitimate governmental purpose. See the sample ordinance below:
Abandoned Residential Properties Ordinance
The Township of _____ ordains: Section 1 Purpose. It is the purpose and intent of the Township Board, through the adoption of this ordinance, to establish an abandoned residential property registration program as a mechanism to protect residential neighborhoods from becoming blighted through the lack of adequate maintenance and security of abandoned properties. Section 2 Definitions. As used in this ordinance: (a) "Abandoned residential structure" means any building that has been used or was intended for use as a residential dwelling, in whole or in part, including an accessory building, which has become vacant or abandoned for a period of at least twenty-eight consecutive days and which also meets at least one of the following conditions: (1) Open to casual entry or trespass; (2) Fire damaged to an extent which prohibits safe human occupancy; (3) Site of loitering or vagrancy; (4) Demonstrates a lack of property maintenance and upkeep as evidenced by one or more violations of the Township Housing Code or State Construction Code; (5) Under notice for being in violation of Township ordinances; (6) Secured or boarded up for at least twenty-eight days; (7) Taxes in arrears to the Township for a period of time exceeding 365 days; (8) Utilities disconnected or not in use; (9) Under a condemnation notice or legal order to vacate;
(10) Structurally unsound; or
(11) Potential hazard or danger to persons. (b) "Accessory building" means a subordinate structure on the same premises as the main residential structure, the use of which would be naturally and normally incidental to that of the main structure, whether the main structure is an abandoned residential structure or not, such as, but not limited to, a garage, barn or storage shed. (c) "Owner" means any person with a legal or equitable ownership interest in the structure.
(d) "Secured" means a building which has all points of entry into the structure either: (1) Closed by use of windows and doors which are in proper working order, intact, without holes, broken elements, and are locked; or (2) Secured by exterior grade plywood in compliance with this ordinance.
Section 3 Registration. Owners of abandoned residential structures shall register such properties with the Township and pay a monthly administration fee. The duty to register an abandoned residential structure shall not require prior notice to the owner by the Township. Registration of an abandoned residential structure does not preclude the Township from taking appropriate actions to secure the property or to issue orders to repair or abate dangerous, hazardous or unlawful conditions or from acting to eliminate an imminent hazard to public health and safety.
Section 4 Registration Information. (a) For each abandoned residential structure each owner shall register with the Township and provide the following information on an Abandoned Residential Structure Registration Form available from the Township: (1) The address of the abandoned residential structure;
(2) The legal names of all owners of the property and each owner's date of birth; (3) The complete mailing address of all owners; (4) Telephone numbers of each owner, including cell phone and mobile phone numbers;
(5) Proof of identification of each owner; (6) The name, address and telephone number of any local agent or representative authorized by the owner to handle the affairs of the property; (7) The reason for vacancy of the property; (8) The estimated length of time the property is expected to remain vacant; and (9) Any plans for restoration, reuse or removal with an accompanying timeline and work schedule. (b) An owner shall notify the Township and file an amended form within seven days of any change in the registration information required by this section.
Section 5 Registration and Administrative Fee.
(a) An owner of an abandoned residential structure, whether registered or not, shall pay an abandoned residential structure registration fee and a monthly administrative fee, the amounts of which shall be established by Township Board resolution, for the time during which such structure remains an abandoned residential structure.
(b) Fees under this section shall be established to support the services rendered by the Township in the course of its duties related to abandoned residential structures. Failure to register an abandoned residential structure or pay the monthly administrative fee shall be cause for penalties to be assessed and are criminal violations of this ordinance.
(c) The monthly administrative fee shall be paid so that it is received by the Township on or before the seventh day of each month, following each month during which the structure was an abandoned residential structure for fifteen days or more.
(d) A late fee, in an amount to be established by the Township Board, shall also be payable by an owner of an abandoned residential structure when the monthly administrative fee is not timely paid.
Section 6 Recovery of Fees. If all or part of the fees required by this ordinance are not paid or are overdue, the Township may recover such sums by:
(a) Directing the Township Assessor to add the amount due to the next tax roll of the Township as a single lot assessment and collect said sum in the same manner as provided by law for collection of taxes and special assessments;
(b) Filing suit against the owner for entry of civil money judgment; or
(c) Any other means available by law.
Section 7 Securing Structures.
(a) A Township order to secure an abandoned residential property shall be complied with by the owner within seventy-two hours. If the securing has not been completed or does not comply with the requirements for securing the structure under this ordinance, the Township shall secure the structure and the Township shall bill the owner of record for all costs incurred, including service fee and administrative costs. The amount so billed shall constitute a personal debt of the owner and may be recovered in the same manner as permitted for the recovery of fees under this ordinance.
(b) Plywood boarding shall be placed over all points of entry on an abandoned residential structure such that all exterior openings suitable for animal or human entry are secured as follows:
(1) On all first story and ground assessable points of entry, such shall be secured by use of exterior grade plywood or its equivalent, of at least one-half inch thickness, cut to the size of the opening and secured by the use of Phillips headed two-inch long screws; and
(2) On entry points being secured above the first story or were not accessible from ground level, such shall be secured by use of exterior grade plywood or its equivalent of at least one-half inch thickness, cut to the size of the opening and secured by the use of 16 penny common nails.
Section 8 Right of Entry and Inspection. If the owner has failed to secure a property and it has been secured by the Township, the Township may enter or reenter the structure to conduct necessary inspections to insure compliance with the requirements of this ordinance and to determine if there are any emergency or hazardous conditions.
Section 9 Maintenance Requirements.
(a) Properties subject to this ordinance shall be, in comparison to the neighborhood standard, kept free of weeds, dry brush, dead vegetation, trash, junk, debris, building materials, any accumulation of newspapers, circulars, flyers, notices, except those required by federal, state or local law, discarded personal items including but not limited to furniture, clothing, large and small appliances, printed material or any other items that give the appearance that the property is abandoned.
(b) The property shall be maintained free of graffiti, tagging or similar markings by removal or painting over with an exterior grade paint that matches the color of the exterior of the structure.
(c) Visible front and side yards shall be landscaped and maintained to the neighborhood standard at the time registration was required. Landscape includes, but is not limited to, grass, ground covers, bushes, shrubs, hedges or similar plantings, decorative rock or bark or artificial turf/sod designed specifically for residential installation. Landscape does not include weeds, gravel, broken concrete, asphalt, decomposed granite, plastic sheeting, mulch, indoor-outdoor carpet or any similar material.
(d) Maintenance includes but is not limited to regular watering, irrigation, cutting, pruning and mowing of required landscape and removal of all trimmings.
(e) Pools and spas shall be kept in working order so the water remains clear and free of pollutants and debris or drained and kept dry. In either case properties with pools and/or spas must comply with the minimum security fencing requirements of the State of Michigan.
(f) Adherence to this section does not relieve the beneficiary/trustee or property owner of any obligations set forth in any covenants, conditions and restrictions and/or homeowners’ association rules and regulations which may apply to the property.
Section 10 Reuse and Occupancy. No abandoned residential structure shall be reoccupied until inspected and found to be in full compliance with all applicable Township codes and a Certificate of Occupancy is issued by the Township.
Section 11 Responsibility for Violations. All nuisance, housing, building and related code violations will be cited and noticed to the owner of record and shall become the owner's responsibility to bring in compliance. If the owner sells or otherwise disposes of the property to another party, the new owner shall not be entitled to any extension of time to correct or address such violations as existed at the time of sale, transfer or conveyance of the property.
Section 12 Penalty.
(a) A person who violates or fails to comply with the requirements of this ordinance is guilty of a misdemeanor and shall be fined not more than five hundred dollars ($500.00) or imprisoned not more than ninety days, or both, for each offense. (b) In addition to any other penalty provided for in this section, this ordinance may be enforced by suit for injunction, action for damages, or any equitable relief appropriate to the enforcement of this ordinance.
William K. FaheyFahey Schultz Burzych Rhodes PLCYour Township Attorneys 4151 Okemos RoadOkemos MI 48864 517.381.3150 wfahey@fsblawyers.com
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