When Richmond’s code enforcement manager Tim Higares realized his unit was bringing in less money this fiscal year than the last, he was actually happy. He said less money means more clean-up cooperation from property owners—mostly banks—who face steep fines for allowing foreclosed properties to fall into disrepair.
“We need to stabilize these communities,” said Higares. “The drop in penalty fees means that we’re getting compliance.”
Richmond was hit particularly hard by the foreclosure crisis. Higares said code enforcement receives about 3-5 complaints about newly vacant properties a week, many of which are foreclosed. There were approximately 2,300 properties in some state of foreclosure last year, up several hundred from 2009. Since then, those numbers have stagnated at best. Higares said for every property that gets picked up, he sees another go into foreclosure.
Foreclosed properties pull down the prices of surrounding homes, encourage blight, and mean fewer property taxes for the city. Higares said the vacant homes are also a magnet for crime. “If you don’t get them secured, we have homeless people, squatters, that like to get in there. Sometimes we have drug dealers going in there. And these places become full of biohazards,” Higares said in an interview last October.
In late 2008, the Richmond City Council passed an ordinance to address some of these blight issues by requiring property owners to secure and maintain foreclosed homes. When code enforcement officers identify a rundown, foreclosed home—often marked by overgrown yards, heaps of trash, and broken windows—they send the legal owner a notice of violation. The property owner is given a hearing date and 30 days to bring the property into compliance with the city municipal code.
If a property owner fails to rid the foreclosed home of blight in the allotted 30 days, the city begins to levy a fine of $1,000 per day, up to a total fine of $30,000. If the property remains blighted, code enforcement staffers will then get a warrant to enter the property and clean it up—costing the city thousands of dollars.
Higares said that un-blighted properties make for safer neighborhoods. He calls the ordinance an effective tool in dealing with apathetic property owners, oftentimes banks headquartered in other states. “I think in holding the banks accountable, the language they understand is money. And it’s costing them money now to maintain these properties,” Higares said in an interview late last year.
All the money recovered via the fines goes back into the community for blight removal, said Higares. After paying the costs to clean the property and to board broken doors and windows—which can add up to a significant sum, especially if the city has to hire a contractor to clean up a biohazard—leftover funds are used for community programs like the One Block at a Time neighborhood cleanup.
Yet as more of Richmond’s foreclosed properties are being maintained, fine collection has decreased. Last fiscal year, code enforcement collected $600,000 in fines related to the foreclosure ordinance. So far this fiscal year they’re down, having netted about $300,000.
That’s because the total number of blighted foreclosed properties in Richmond has dropped. From April 2009 to November 2010 there were 55 hearings for unkempt foreclosed homes. Most of those hearings were procedural. “Last year, 99 percent of the time, banks didn’t show up at the hearing,” Higares said.
But in recent months there have been fewer hearings, and more importantly, Higares said, the banks—or their representatives—are beginning to show up. Having realized the financial burden of violating the ordinance, banks are starting to contract locally based servicers—like Safeguard—to manage and maintain their properties, Higares said.
But Higares is cautious. He said that while the situation is improving, banks are still “doing lots of shenanigans and playing games. They’re experts at it, and they’re trying to figure out ways to get around our ordinances.” He said banks often fail to report when a property goes into default—the first stage of foreclosure—further delaying the process. Other times banks keep the former property owner’s name on the title, making it difficult to track down exactly who owns the property.
When property owners fail to pay the penalty fees, Higares adds them to a lien list he compiles for the City Council each year. Once approved by the council, the lien is included as a special assessment on the owner’s property taxes. “That’s when we get a lot of phone calls,” said Higares. “It’s tax time and when people get their property taxes and the special assessments are on there, boy, the phone calls we’re getting,” he said.
Higares said that a lot of the calls come from the banks, or servicers and real estate agents working on behalf of the banks. The banks usually want to negotiate down the fines, but Higares said the city doesn’t settle.
Higares has a code enforcement officer working full time to track down each blighted property’s legal owner and provide them with an invoice. The property tax liens allow the city to seek payment for the fines more aggressively. Homes cannot be sold until the tax liens are paid in full.
But sometimes a property gets sold before the lien is implemented and the buyer unwittingly inherits all the unpaid fines. “I can’t even believe someone would purchase something like that without doing a thorough title search,” Higares said. “But they’re still on the hook for it.”
Richmond’s ordinance is part of a statewide push to get tougher on delinquent property owners. Cities in California were urged to adopt a foreclosure ordinance after the state passed a law in mid-2008 to address the adverse effects of the high foreclosure rates. The law requires lenders to explore alternative payment options with homeowners at risk of default and gives renters 60 days notice to move if their property is sold in foreclosure.
The law also allows local jurisdictions to enact ordinances like Richmond’s, which will end in 2013, unless extended by both the state and the city council.
While many Bay Area cities have passed their own version of the ordinance, Higares said few are actually following the process through. No city is the same, but Higares said in order for the ordinance to be effective, “you need to be consistent and you need to follow every step, which means you have to follow through the hearing and ultimately lien the properties.”
Higares said he’s discussed the utility of the ordinance with counterparts in many Bay Area cities. Most recently he talked with Oakland’s economic development director about how that city can better implement its own ordinance.
The continuing challenge for Richmond, he said, is that even if a foreclosed home is boarded up and properly maintained, it’s still blight. “It’s still a vacant property and it’s destabilizing the community,” Higares said. “And we don’t really know the answer for that.”