City of Berea, Ohio, Takes Ordinance To A New Level

City of Berea, Ohio, Takes “Burden The Lender For Abandoned Properties” To A New Level

By Larry R. Rothenberg, Esq.

February 2, 2010

The City of Berea, Ohio, has pushed the envelope to a new level with its recent adoption of a rigorous ordinance impacting mortgage holders.  This continues the disturbing trend of Northeast Ohio cities acting heavy-handedly out of concern for their abandoned and deteriorating houses. 

Beginning in 2006, two suburbs of Cleveland enacted ordinances requiring a foreclosing lender to register the property with the city’s building department and pay a registration fee (read: tax), of $60 or $75.  The idea caught on, and a total of seven cities in Northeast Ohio adopted such ordinances.  In view of the relatively small cost to comply, no lender has challenged the constitutionality of the ordinances. 

In 2009, the City of East Cleveland went a step further by requiring mortgagees to obtain a license for a vacant residential building, regardless of whether a foreclosure has been filed.  The city’s “vacated building maintenance standards” require that the building be well-kept by the mortgagee, and adequately protected from intrusion by trespassers, and from deterioration by weather.  The non-refundable annual registration fee is $500.  The failure to register a vacant house or building or to pay the fees within 30 days after they become due is a first degree misdemeanor punishable by a fine of $500 to $1,000 per violation, and is also punishable by up to six months in jail.  Late fees may be assessed equal to the license or renewal fee, or $1,000, whichever is less. 

The City of Berea, which already had an ordinance requiring registration of foreclosures, now has a new ordinance intensifying the responsibility imposed on the mortgage holder.  Berea’s ordinance applies to all vacant residential properties that are either in foreclosure, or have become REO’s through either a sheriff’s sale or a deed-in-lieu of foreclosure, and applies to junior mortgage holders as well as first mortgagees. The ordinance imposes the following requirements on the foreclosing entity:

• The foreclosing entity must perform an inspection of any residential real property prior to filing a foreclosure action or accepting a deed-in-lieu of foreclosure, or within 10 days after buying the property at a sheriff’s sale
• If the inspection shows that the property is vacant, the foreclosing entity must submit an application to register the property as abandoned within 10 days of the inspection, and pay a registration fee of $50 and an inspection fee of $100
• Once a completed application is submitted and all fees have been paid, the City’s Building Department shall conduct an exterior and interior inspection to ensure compliance with the City’s zoning and maintenance codes, and shall forward a list of violations as well as a timeframe to cure the violations to the foreclosing entity
• If the foreclosing entity’s inspection shows that the property is occupied, the foreclosing entity must perform additional inspections every 30 days to determine whether the property is still occupied, and if the property has become vacant, must register the property as abandoned and pay the registration and inspection fees
• If the property remains vacant for six months, another application and $50 registration fee must be paid
• Real properties required to be registered must be kept free of grass and weeds in excess of six inches, debris or trash, graffiti, etc.
• Doors and windows must be maintained and kept secure
• For properties required to be registered, if the foreclosing entity is “out of the area,” it must arrange for weekly interior and exterior inspections and submit reports to the building department, install a sign indicating the contact information for the foreclosing entity and the property management company, and if the property is not in compliance with the zoning or maintenance codes, cure the violations within 72 hours of notice
• In addition to the standards established by the zoning and maintenance codes, and any other enforcement remedies permitted under the law, the chief building officer may require the foreclosing entity to implement additional maintenance or security measures including but not limited to securing any and all door, window or other openings, installing additional security lighting, increasing on-site inspection frequency, employment of an on-site security guard or other measures as may be reasonably required to arrest the decline of the property
• Violations shall be treated as strict liability offenses regardless of intent, and are subject to a fine of up to $1,000 per offense, with each day the violation occurs or continuing to occur deemed to be a separate offense

While the ordinances enacted by the other cities raise constitutionality concerns, Berea’s ordinance raises an even more pronounced concern.  Cities are understandably troubled about vacant and deteriorating foreclosure properties.  Although property owners are not absolved from their responsibility, the cities are focusing the accountability and the significant costs for building code compliance on the lenders. 

More copycat ordinances can be expected, unless lenders step forward to challenge their constitutionality.  If your organization desires to do so, or if you have any questions regarding this advisory, please contact Larry Rothenberg directly at 216-685-1135 or via e-mail at lrothenberg@weltman.com, to discuss. 

For a complete copy of Berea’s ordinance, go here.

Larry is the partner-in-charge of the Cleveland real estate and foreclosure department of Weltman, Weinberg & Reis Co., L.P.A. He is the author of the Ohio Jurisdictional Section contained within the treatise, “The Law of Distressed Real Estate”, published by The West Group. The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan. Larry can be reached at (216) 685-1135 or via email at lrothenberg@weltman.com.