Public and public interest advocates for distressed neighborhoods in the mortgage crisis and representatives from various types of mortgage and REO servicing companies are increasingly finding ways to sustain conversation with each other. This is a very good and important accomplishment. Successful dialogue is hampered by some conceptual and linguistic misunderstandings. Here is one.
I hear members of the servicing industry declare as a given that nuisance abatement obligations and housing maintenance code compliance apply only to those who caused the unlawful condition. They claim that banks and trustees who take title to dangerous or condemned houses are not liable for code violations caused by someone else.
This is a big mistake that causes discord.
The law upon which virtually all local housing, health, fire and safety laws are based, makes the titled holding owner or the person deriving authority from the title holder, legally responsible for the condition of real property it owns. It is status of ownership, not the act causing the damage that compels the repair of harmful real property.
The argument often heard from banks and servicers is that former owners, vandals, accidental fires, weather, or poor economic conditions caused damage to the houses they come to own or control. That’s often undisputable. By blaming others for causing damage, they conclude that they are exempt from the housing, health and safety codes applicable to all homeowners. What’s more, they say, since they are owners for business purposes with no intent to occupy, the laws that apply to homeownership do not apply to them. Their commercial use makes them free to buy, keep and sell, if possible, dilapidated and dangerous houses without any legal obligation to maintain them in accord with local laws. That is just plain wrong. It is unlawful for property owners to allow the condition of their property to harm others.
Officials who enforce laws cannot extend to one class of homeowners a “right to blight.” They must uphold the law and exercise the police power of the state to secure the public health, safety and security for all. Business owners of distressed houses aren’t exempt from code compliance; but there are new ways for them to comply. It just requires communication and cooperation on both sides of the table.
There is good news. New code enforcement methods and programs are being developed that result in better compliance by commercial owners and servicers. At the same time, servicers are engaging more productively with code enforcement officials and with land banks to remove some of the blighted housing they control.