1. 1 Presented at Johnstown, PA by The Gulotta Group, LLC Dealing with Blighted Property: Tools and Strategies June 9, 2011

2. 2 Dealing with Blighted Property Prevention and Intervention A. What can be done to prevent properties from becoming blighted and/ or to create incentives/ remove disincentives for owners that will discourage properties from becoming blighted? B. What are the different ways to obtain code compliance, ideally at the earliest possible stage, if the owner fails to address the blighted conditions after being cited?

3. 3 Dealing with Blighted Property Effect Of Blight On Neighborhoods Reduces property values/decreases tax base Discourages new investment Increases demand for police/fire services Increases demand for code enforcement services

4. 4 Dealing with Blighted Property If unabated can create chain reaction that leads to progressive levels of neighborhood decline  Decline in owner occupied housing  Increase in absentee landlords  Increase in municipal liens/tax delinquencies  Decline in tax base Much tougher (and more expensive) to tackle decline when it advances, so a proactive approach makes sense

5. Elements of a Comprehensive, Proactive Approach 1. Keep properties from becoming blighted by educating/ encouraging/incentivizing property owners (and tenants) for the upkeep/rehabilitation of properties 2. Use state law to keep property owners who have blighted/tax delinquent properties from acquiring more properties 5

6. Elements of Comprehensive, Proactive Approach (con’t) 3. Use provisions in state law to intervene at the earliest possible stage to obtain correction action from property owners 6

7. Dealing with Blighted Property Prevention and Intervention Tools/Strategies 7

8. 1. Keep Properties from Becoming Blighted Educating owners and tenants  Provide summary of Property Maintenance Code or other appropriate codes at time of purchase (requires monitoring of deeds) unless registration/licensing ordinance in place.  Produce/distribute material in association with landlords reminding tenants about their responsibilities/duties. (newsletter?) If a rental registration/licensing law is in place this could be a routine mailing when the apartment is re-leased. 8

9. 1. Keep Properties from Becoming Blighted (con’t) Encourage/incentivize property owners to make repairs/improve the property Implement a rental rehabilitation loan/grant program with CDBG/HOME or County Housing Trust Funds Implement the phase-in of taxes on improvements to real estate authorized by state law 9

10. 1. Keep Properties from Becoming Blighted (con’t) Encourage/Incentivize Property Owners  Recognize landlords that have done a nice job keeping their properties up (Annual Award)  State law allows owners of tax delinquent properties to donate them to a taxing authority Legal Citation: 72 P.S. Section 5860.303; 5860.309 Act 12 of 2005 53 P.S. Section 7108.1, 7143; Act 18 of 2006 10

11. 2. Use Existing State Laws to Keep Property Owners Who Have Blighted/Tax Delinquent Properties from Acquiring More Properties State law prohibits a landlord whose rental license has been revoked from purchasing more property at a (county) tax sale anywhere in the county Legal Citation: 72 P.S. Section 5860.601; Act 5 of 1998 State law prohibits anyone who is delinquent in paying a local tax or utility charge (more than one year delinquent) from purchasing at a tax sale Note: delinquency must be in same municipality as property being purchased at a tax sale Legal Citation: 72 P.S. 5860.619a; Act 133 of 1998 11

12. 2. Use Existing State Laws to Keep Property Owners Who Have Blighted/Tax Delinquent Properties from Purchasing More Properties (con’t) State law prohibits housing code violators from purchasing a property in the same municipality at a tax sale (municipality may have to up to 15 days after tax sale to petition to void sale). Legal Citation: 72 P.S. 5860.619 12

13. 13 3. Use Provisions in State Law to Intervene at the Earliest Stage Possible to Obtain Compliance Municipal Housing Code Avoidance Law  After the requisite number of housing code convictions (4), the code officer requests prosecution by the assistant DA  At least four convictions for same code violation; code violation remains unabated  Threatens health safety and property  2 nd degree misdemeanor after four (4) summary convictions (1 st degree for five or more summary convictions)

14. 14 3. Use Provisions in State Law to Intervene at the Earliest Stage Possible to Obtain Compliance (con’t) Blighted and Abandoned Property Conservatorship Law-Overview Legal Citation: 68 P.S. Section 1101; Act 135 of 2008 – Allows court appointed third party to take control of a blighted property when the owner dies or refuses to act – Property not legally occupied for a year and not marketed for 60 days – No foreclosure action pending – Ownership longer than 6 months

15. 15 Blighted And Abandoned Property Conservatorship Law (Con’t) A. Who is eligible to petition the court for Conservatorship? What entities are best suited to serve as conservator? Lienholder or other secured creditor A resident of business owner within 500’ of the building A non-profit corporation including a redevelopment authority located in the municipality where the building is located A municipality or school district in which the building is located

16. Blighted and Abandoned Property Conservatorship Law (con’t) B. What properties are eligible for conservatorship? Properties owned by U.S. Government not eligible ▫Also while not statutory drug forfeiture properties (possible title issues because properties may be subject to seizure) Not legally occupied for twelve (12) months ▫Verification: utility records or affidavit other property owners in neighborhood ▫Note: vacant land specifically not eligible 16

17. Conservatorship Law (con’t) Not actively marketed during 60 day period prior to the date of the petition ▫For sale property must be placed on the property and one of the following: 1.Real estate agent engaged to place the property in a MLS or otherwise market the property 2.Weekly or more frequent advertisements in print or electronic media placed 3.Printed advertisements distributed Verification: Photographs of the property with time and date should be taken to show there is no for sale sign. 17

18. Conservatorship Law (con’t) Additional verification issues re actively marketing: ▫Call number on for sale sign ▫Verify that property is listed in the MLS by getting on the www.realtor.com web-site; print results to verify that property has not been listed within 60 days of the filing of the petitionwww.realtor.com ▫Commercial properties are not listed in the MLS so contact local commercial RE agent to determine if the building is listed 18

19. Conservatorship Law (con’t) ▫Verify that no advertising has been placed by reviewing local advertisements and Craigslist ▫Verify with neighbors if any leaf-letting of the property has been done by the owner; obtain affidavit from neighbors 19

20. Conservatorship Law (con’t) The building is not subject to a foreclosure action ▫Consult with local Prothonotary’s office; each has a different method for captioned foreclosure cases (some are indexed by address rather than record owner) ▫To-date the property being listed for tax sale does not bar a petition for conservatorship; but there is some discussion about amending the law to this effect 20

21. Conservatorship Law (con’t) The current owner fails to present sufficient evidence of acquisition of the property within the preceding six (6) months ▫Burden is on owner to demonstrate however, it is best practice to determine whether a title transfer has taken place within the past six months by checking the title at the Recorder of Deeds office or ordering a title report early in the process. 21

22. Conservatorship Law (con’t) In addition to the previous stated property qualifications, the property must meet three of the nine statutory definitions of blight: Building is a public nuisance A public nuisance is a property that, because of the physical condition or use, has been declared by the appropriate official a public nuisance in accordance with the local housing, building, fire or related code or is determined to be a public nuisance by the court 22

23. Conservatorship Law (con’t) The building is in need of substantial rehabilitation and no rehabilitation has taken place the previous twelve (12) months Note: The building must meet one of the following: ▫The cost of repairs, improvements, etc, exceed 15% of the property’s value after completion of repairs ▫More than one major building component is being replaced (roof, walls/floors, ceilings, foundations, plumbing systems, HVAC, electrical systems) Verification: Need to document FMR after improvements, or major system(s) needing to be replaced); should obtain affidavit from nearby property owners that no rehabilitation has occurred within twelve (12) months) 23

24. Conservatorship Law (con’t) Definition of Blight The building is unfit for human habitation, occupancy or use Verification: Condemnation Notice from municipality; photographs, affidavits from nearby owners The condition and vacancy of the building materially increases the risk of fire to the building and to adjacent properties Verification: document code violations such as excessive garbage or flammable materials in the building; photographic documentation 24

25. Conservatorship Law (con’t) Definition of Blight The building is subject to unauthorized entry leading to potential health and safety hazards and one of the following applies: ▫The owner has failed to take reasonable and necessary measures to secure the building ▫The municipality has secured the building in order to prevent such hazards after the owner has failed to do so Verification: Photographs, affidavits from nearby property owners, police reports 25

26. Conservatorship Law(con’t) Definition of Blight The property is an attractive nuisance to children including but not limited to the presence of abandoned wells, shafts, basements, excavations, and unsafe structures Verification: Affidavits, police reports, calls to codes office 26

27. Conservatorship Law (con’t) Definition of Blight The presence of vermin or the accumulation of debris, uncut vegetation, or physical deterioration of the structure or grounds that has created potential health and safety hazards and the owner has failed to take reasonable measures to remove the hazards Verification: code office records, photographs, affidavits 27

28. Conservatorship Law Definition of Blight The dilapidated appearance or other conditions of the building negatively affects the economic well-being of residents and businesses in close proximity to the building, including decreases in property value and loss of business and the owner has failed to take reasonable measures to remedy the condition(s) Verification: sales tax reports, tax assessment records 28

29. Conservatorship Law (con’t) Definition of Blight The property is an attractive nuisance for illicit purposes, including prostitution, drug use, and vagrancy Verification: police reports, affidavits from neighbors 29

30. Blighted Property and Conservatorship Law (con’t) C. Next steps after identifying a property Obtain a title report ▫Pay careful attention to federal, state, and local tax and municipal liens as they cannot be superseded by the Conservator’s lien ▫The title report also contains important information lienholders Take photographs (dated) Obtain officials documents (deed, mortgages, police/code office reports-citations, fire reports) 30

31. Conservatorship Law (con’t) Next Steps (con’t) Consult with neighbors and local community groups Contact the senior lienholder Note: the law requires that the senior lienholder be given the first opportunity to be the conservator and provide financing for the improvements Notify DPW re any liens against the property for medical assistance provided in the last five years of the recipient’s life 31

32. Conservatorship Law (con’t) Next Steps (con’t) Determine whether the owner or lienholder is on Active Duty in the Armed Forces Note: federal law prohibits a court from entering a judgment against a member of the active duty military if the persons does not appear/defend him/herself in court 32

33. Conservatorship Law (con’t) Next Steps (con’t) D. Contents of the Petition Identify a conservator-consider experience in managing and rehabilitating property Develop a preliminary plan ▫Scope of work ▫Preliminary cost estimates ▫Anticipated financing Note: This information is developed without the benefit of inspecting the interior of the property because possession has not been granted by the court yet 33

34. Conservatorship Law (con’t) Next Steps (con’t) Other elements of preliminary plan ▫Map ▫Documentation of blight ▫Document other issues related to eligibility of property 34

35. Conservatorship Law (con’t) E. Serving the petition Conservatorship law provides for mail notice to be provided to the owner, political sub-divisions, and lienholders As a best practice all petitioners should follow the PA Rules of Civil Procedure including the rules related to the service of process on all parties 35

36. Conservatorship Law (con’t) F. Court Hearing The law requires that the Court of Common Please shall act on the petition submitted by holding a public hearing within 120 days of the receipt of the petition The court is required to render a decision within thirty(30) days after the hearing The statute allows any parties in interest to appear in court to offer evidence If the court believes that the petitioner has met the burden under the act the Court will appoint a Conservator to take immediate possession of the property 36

37. Conservatorship Law (con’t) G. Taking possession and developing final plan Obtaining possession allows conservator to develop final plan Conservator has sufficient interest to file plans with public agencies and to seek financing Prior to entering the property, the Court will issue a right of entry so the Conservator has the right to enter the property 37

38. Conservatorship Law (con’t) H. Duties of the Conservator Develop a final plan within 90 days of the appointment The court must hold a public hearing within 30 days after the final plan is submitted The Conservator also should obtain property and liability insurance If necessary, the Conservator should immediately secure the property and seek court approval for emergency repairs, if necessary 38

39. Conservatorship Law Duties of Conservator (con’t) Pay any other obligations such as taxes Final plan may include demolition option, the Conservator must document why this is the best option The plan should include a detailed work write-up and three estimates for the work (required if work in excess of $25K) The final plan should also include how the Conservator will finance the improvements; if borrowing is contemplated, first lienholder must be given first option; note borrowing will be difficult if municipal liens are on the property 39

40. Conservatorship Law (con’t) Duties of Conservator (con’t) Pursue all claims or causes of action on behalf of the owner (e.g. insurance claims in event of fire) Contract for the repair and maintenance of the building Enter into rental contracts and leases for a period not to exceed one year 40

41. Conservatorship Law (con’t) Duties of Conservator (con’t) Engage and pay for legal, accounting, appraisal and other professional services Apply and receive public grants or loans Sell the building, if authorized by the Court in the event the owner does not reimburse the Conservator for all out of pocket costs 41

42. Conservatorship Law (con’t) I. Hearing on the Final Plan Court is required to hold hearing on the final plan within thirty(30) days All parties in interest have opportunity to comment on the plan Within fifteen (15) days of the hearing the Court must approve the plan or require the Conservator to amend the plan 42

43. Conservatorship Law (con’t) J. Reporting to the court/Terminating the Conservatorship The Court will require the Conservator to submit a status report at least annually but will likely require more frequent reports. The status reports must include: a copy of the contract for any improvements, an account of any revenue and expenses, and a description of the proposed actions to be taken in the ensuing six months Legal counsel files an a final accounting with the court when petitioning the court to terminate the Conservatorship 43

44. Conservatorship Case Studies Redevelopment Authority of the County of Butler

45. Current Process 1.Identify the property 2.Inspector write-up 3.Complete a title search 4.File petition for the appointment of a conservator 5.Post notice of filing and hearing on petition for the appointment of a conservator 6.Notice of filing and hearing on petition for the appointment of a conservator 7.File affidavit of investigation and attempts to serve owner 8.Advertise notice of hearings 9.Hearing of the petition for appointment conservator

46. Process (con’t) 10. Final plans for abatement submitted 11. Authority has legal possession of the property 12.Hearing on the final plan 13.File accounting under §1106 (d) 14.File status report under §1106 (b) (5) 15. Dispose of the property by sale under §1109 (b) 16.Conditions that must be met for “free and clear sale” under §1109 (c) 17. Terminate the conservatorship under §1110 46

47. Address: Home School St, Bruin Borough Vacant Property building was demolished and site will be purchased and a Florist Shop will be constructed Current Status: Dispose of Property by Sale Under §1109 (b)

48. Case 2 Address: 121 South Argyle Street, Petrolia Borough Vacant Property home was demolished and being purchased by neighbor as an extension of their lot (green space) Current Status: Dispose of Property by Sale Under §1109 (b)

49. Case 3 Address: 120 Forest Avenue, Petrolia Borough Vacant Property home was demolished and is currently up for sale Current Status: File status report under §1106 (b) (5)

50. Address: Argyle Street, Petrolia Borough Vacant Property home was demolished and being purchased by neighbor as an extension of their lot (green space) Current Status: Dispose of Property by Sale Under §1109 (b)

51. 3. Use Provisions in State Law to Intervene at the Earliest Stage Possible to Obtain Compliance (con’t) Neighborhood Blight Reclamation and Revitalization Act (Act 90) Legal Citation: 53 Pa.C.S Section 6111 Legislation enacted on October 27, 2010 Empowers municipalities to take legal action against owners of deteriorated properties and deny municipal permits in some instances Effective date April 25, 2011 51

52. Neighborhood Blight Reclamation and Revitalization Act (Act 90) Allows municipalities to deny: -Building permits -Zoning permits -Occupancy permits -Variance approvals -Municipal license approval under the following circumstances: 52

53. Neighborhood Blight Reclamation and Revitalization Act (Act 90) 1. The property owner is delinquent in paying taxes, water, sewer, or refuse charges or 2. a) The property owner is in serious violation of a state law or municipal building or property maintenance code, and b) the property owner has taken no substantive steps to correct the violation six (6) months following notification. 53

54. Neighborhood Blight Reclamation and Revitalization Act (Act 90) How is “serious violation” defined? 1. Fines or other penalties or a judgment to abate or correct were imposed by a DJ or municipal court or 2. A judgment at law or in equity was imposed by a court of common pleas 54

55. Neighborhood Blight Reclamation and Revitalization Act (con’t) However a permit may not be denied if: -The permit is necessary to correct a violation of a state or municipal building or property maintenance code, -The court or DJ decision is subject to a stay or appeal, -The non-payment of taxes, water, sewer, or refuse charges are under appeal, or 55

56. Neighborhood Blight Reclamation and Revitalization Act (con’t) -The owner of the property has presented and the appropriate state agency or municipality has accepted a plan to begin remediation of a serious violation of state law or code Note: acceptance of the plan may be contingent on beginning the remediation plan no fewer than 30 days following acceptance of the plan (sooner if mutually agreeable), and completion of the remediation plan no fewer than 90 days following the commencement of the plan (sooner if mutually agreeable) 56

57. Neighborhood Blight Reclamation and Revitalization Act (Act 90) con’t -The new law provides that if the permit is denied the burden is on the property owner to obtain a letter from the municipality or other appropriate agency verifying that there are no delinquent taxes or utilities. -The municipality or other appropriate agency shall provide the letter within 45 days of the request; if the letter is not received within 45 days, the property in question is deemed to be in compliance 57

58. Neighborhood Blight Reclamation and Revitalization Act Other provisions in the new law: -Out of state property owners may be subject to extradition if convicted of code violations under the Crimes Code -The other assets of a property owner may be attached or liened if the property owner does not make corrective repairs for serious code violations with six months; the municipality may obtain a judgment in an amount equal to the penalties and costs 58

59. Neighborhood Blight Reclamation and Revitalization Act (Act 90) Cannot lien property of general partner or trustee, limited partner, shareholder, member, or beneficiary of an association or trust Association or trust is not defined in the act but the Associations Code (15 Pa.C.S.A Section 102) defines association as a corporation, a partnership, a LLC, a business trust, or two or more persons associated in a common enterprise or undertaking 59

60. Neighborhood Blight Reclamation and Revitalization Act However, Act 90 preserves the right of municipalities to hold an officer, agent, or principal owner of an entity who exercises possession and control over a property to be personally liable for code violations Draft model ordinance being developed by Real Property Probate and Trust Law Section of the PA Bar Association 60

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62. 62 Summary Successful redevelopment of blighted properties requires a comprehensive pro-active approach to discourage blighted property owners from continuing the perpetual “dance” Part of that approach should include education and encouragement Municipalities should know the remedies provided under state law and be prepared to use those tools, if necessary

63. 63 Summary The most potent tools are the Conservatorship law, the new Neighborhood Blight Reclamation and Revitalization Act, and an eminent domain action by the municipality or the redevelopment authority when blight can be documented in the strict legal sense of the term

64. Resources Quick Guide: New Tools to Address Blight and Abandonment, published by the Housing Alliance of PA, February 2011http://www.housingalliancepa.org/issues/post_list.php?topic_ id=91 Pennsylvania’s Abandoned Property and Conservatorship Act- Implementation and Best Practice Manual, published by Regional Housing Legal Services, April 2011www.rhls.org/documents/ConservatorshipManual_Final _05102011.pdf Draft Model Ordinance-Implementation of Act 90. Prepared by a working group of the PA Bar Association (5 th draft) 64

65. 65 Christopher Gulotta The Gulotta Group, LLC 448 C Street Carlisle, PA 17013 717-580-0439 gulottagroup@pa.net Website: www.gulottagroup.com