Dekalb County recently passed “An Ordinance to Amend Chapter 18 of the Code of Dekalb County, Georgia, to Add Article IV, Establishing a Foreclosure Registry for Residential and Commercial Properties and for other Purposes”. The ordinance will be effective October 27, 2010. Similar ordinances, some referred to as “vacant property ordinances”, have been passed by jurisdictions throughout the country. For example, Albany, Georgia has a vacant property registration ordinance that, on its face, at least, is less draconian that that of Dekalb County in terms of registration requirements and fees for violation. Ordinances similarly intended, though differing in details, are under consideration by the Cities of Atlanta and Peachtree City.

The jurisdictions around the country with this type of ordinance differ widely in their approaches. For example, the National Vacant Properties Campaign at http://www.vacantproperties.org/strategies/tools.html, notes that the ordinance of Chula Vista, California, requires weekly inspection of each property by a local company and the posting on the property of the name and 24-hour contact information of the responsible party. Wilmington, Delaware imposes a sliding annual fee scale with the fees increasing the longer the property remains vacant. The ordinance authorizes a maximum fee of $5,000 if the property is vacant 10 years or more. Cincinnati’s ordinance requires general liability insurance with a minimum of $300,000 for residential properties and $1,000,000 for commercial or industrial. The Campaign says of these ordinances:

Regulatory strategies can be effective prevention approaches that reinforce good business practices and require minimal staff. Registration ordinances require owners of properties that have become vacant or abandoned for a certain length of time to register formally with the local government. They provide a point of contact in case the property becomes a public nuisance, and may encourage the owner to devise a timely rehabilitation plan by imposing fees to help cover the estimated costs for city departments to monitor, inspect, and re-inspect the property routinely. Registration ordinances can play an important role in a comprehensive vacant property strategy but work best where there is accurate information and effective code enforcement capacity. As a response to the foreclosure crises, many cities struggling with new inventories of vacant homes are creating ordinances as a way to help mitigate the damage to communities and recover costs incurred.

http://www.vacantproperties.org/strategies/tools.html.

The Mortgage Bankers Association opposes these initiatives:

[Vacant Property Ordinances] will further deteriorate the mortgage market by placing unreasonable requirements upon servicers. Mortgage market participants will have no choice but to respond to these unreasonable requirements by significantly reducing their current business or ceasing to make further investments in the communities with unreasonable registration ordinances. Mortgage Bankers Association (MBA) continues to oppose a patchwork of onerous ordinances requiring such things as database registration fees, capital improvements, securing doors and windows with steel, supplying electricity to vacant buildings which increases fire and break-in risk, and installing security systems that historically get stolen and do not stop illegal activity.

MBA, along with a large coalition of financial service companies and property preservation companies is committed to ensuring vacant properties are safe and secure. Our members perform monthly inspections and maintain vacant properties. MBA members cut the grass, secure doors and windows, take efforts to avoid new damage to the property, winterize (when necessary), shut off utilities to avoid hazardous conditions and address certain other safety conditions. Servicers, however, are financially unable to make capital improvements to properties damaged or substantially altered by homeowners or vandals. The industry’s goal is to quickly move these properties into the hands of owners who can repair or rehab these properties. Servicers also post contact information on these secured properties in the event problems arise.

http://www.mbaa.org/VacantPropertyRegistration.htm. The MBA proceeds to suggest utilization of the Mortgage Electronic Registration System (MERS®) database (http://www.mersinc.org/) as an alternative to state registration systems.

These ordinances appear to have originated in California, where they continue the most prolific. California recently passed a bill that states as its purposes to (a) require a governmental entity, prior to imposing a fine or penalty for failure to maintain a foreclosed vacant property, to notify the property owner of the violation and provide an opportunity to correct the violation, subject to an exception for threats to public health or safety, (b) provide that the costs of nuisance abatement measures taken by a governmental entity with regard to foreclosed property shall not exceed the actual and reasonable costs of nuisance abatement and (c) prohibit a governmental entity from imposing an assessment or lien for the costs of nuisance abatement prior to the adoption of those costs at a public hearing. This bill suggests certain irregularities or abuses under some of the local vacant property registries.

The Dekalb County ordinance requires that any person or entity to whom is owed payment or performance of a debt or obligation (i.e., a “creditor”), or that holds or receives a real property security instrument (i.e., a “mortgagee”), secured by or encumbering real property in unincorporated Dekalb County, and who obtains that real property by a foreclosure sale or proceeding, must pay to the County a registration fee of $175 for each foreclosed real property and register with the County the following information:

a. its official contact information, including a name, title, street address, telephone number and email address;

b. the official contact information (including name, title, street address, phone number and email address) of a property agent within Clayton, Dekalb, Fulton, Gwinnett, Henry or Rockdale County, provided that if the creditor or mortgagee is within one of those counties, it can designate itself as the local property agent; and

c. the address, including parcel identification number of the foreclosed property.

The property agent must be empowered to secure and maintain the foreclosed real property; comply with code enforcement orders of the County; provide access to the property as required by any law enforcement officer, building official, fire inspector or code enforcement officer employed by or working on behalf of the County; conduct inspections, accept rental payments from tenants, if no management company is employed; and serve as agent for service of process for governmental actions.

The ordinance goes on to require any creditor or mortgagee who forecloses on real property and then transfers the foreclosed real property,within thirty days after the transfer, to pay a registration fee of $175 and report the contact information for the transferee.

Finally, the ordinance imposes for violation of the registration requirements a penalty of $1,000 per day per property, up to $100,000 per property, per year.

Dekalb County has attempted to answer some of the questions raised by the ordinance by adding a list of “Frequently Asked Questions” to its website. Questions remain. Expect legal and legislative responses and challenges.