Sure would be nice if someone would at least take care of that lawn. To get that done, you have a couple of choices:
(a) You can call the bank that has the mortgage and ask them to take care of the lawn. Assuming you can find the right person to talk to at the bank -- not a very safe assumption -- it’s not very likely they’ll take care of it by the time of your showing, if they take care of it at all. Banks are in the business of lending money, not landscaping.
(b) You can call the village and ask them to take care of it. They might take care of it . . . eventually. Not by this afternoon, though. And when they do take care of it, you’ll think that’s pretty neighborly of them . . . until you realize that you and your neighbors have to pay for that service with property taxes.
(c) You can do it yourself. But you have to leave for work, drop the kids off at school, run some errands -- do something other than take care of that lawn down the street -- so there’s not enough time. And why should you have to take care of someone else’s lawn?
(d) You can hope the potential buyers don’t notice.
Out of necessity, you opt for (d). The potential buyers, though, will notice, and even if they make you an offer on your house, it will be lower than you wanted -- all because of that abandoned house down the street.
Recently, the clinic team working with the Institute for Housing Studies (IHS) was researching real property liens and prioritization of liens. IHS was interested in understanding liens for several reasons; one of those was the possibility that a municipality might be able to use liens to acquire blighted properties. Ultimately, though, our conclusion was that liens were a poor tool for acquiring blighted properties, in part because the foreclosure process is so slow. In Illinois, foreclosure is estimated to take almost two years.
Earlier this year, the Illinois General Assembly recognized how slow the process was, as well as the damage blighted property can do to a municipality, and passed legislation to speed up the foreclosure process for abandoned residential property.
A lien represents a debt owed to the lien holder, and this lien is secured by property owned by the person who owes the debt. In effect, the property serves as collateral for the debt. To collect on this debt, a lien holder can institute foreclosure proceedings against the property. The end result of these proceedings is that the property is sold at auction, and the debt owed to the lien holder is paid out of the proceeds, if any, of that sale. In the case of one category of blighted property, abandoned residential housing, the additional advantage for a municipality is that the vacant house moves back onto the market.
For abandoned housing, the current owner is no longer taking care of the property, and the costs for keeping up the property -- clearing weeds, boarding it up to keep children or other people out, and otherwise ensuring the property doesn’t present a danger to the community -- fall on the municipality, which means it falls on the residents of the municipality by way of taxes. By moving the property back on the market, the abandoned housing now has a new owner who can take care of it and, more importantly, pay for its upkeep.
A municipality derives a further benefit by getting the abandoned property resold to an owner who will regularly pay property taxes. A municipality relies on property taxes for a large part of its revenue, and those taxes are based on the value of property within the municipality. Neglect of an abandoned property not only decreases its own value, it also has a negative impact on other property in the area, so property values go down, and when property values go down, so do tax revenues. The longer a property remains vacant, the more harm it does to property values, and the sooner the property moves back into the hands of an owner, the sooner it stops losing value and harming the value of near-by properties.
To help alleviate this problem, the Illinois General Assembly amended act 735, section 5 of chapter 735 of the Illinois Compiled Statutes to provide for fast-track foreclosure. To take advantage of this, a lender (the mortgagee) must file a motion requesting an expedited foreclosure process, and the court must establish that the property is abandoned.
Characteristics of abandoned property are set out in the statute, and the property must meet at least two of these. These characteristics include “doors are smashed through, broken off, unhinged, or continuously unlocked,” “law enforcement officials have received at least one report of trespassing or vandalism or other illegal acts being committed at the property in the last 6 months,” and “the property has been stripped of copper or other materials, or interior fixtures to the property have been removed.” There are also exceptions to ensure the property is truly abandoned including the posting of bona fide “for sale” signs, and the building is secure and “in substantial compliance with all applicable ordinances, codes, regulations, and laws” as evidence the home isn’t abandoned.
If the court grants this motion for an expedited foreclosure, the process is potentially reduced from almost two years to 90 to 180 days.
To further aid municipalities, the General Assembly also enacted a fee schedule for foreclosures. This schedule charges a foreclosure filing fee based on the number of foreclosures a lender files in a calendar year, and a percentage of these fees go to municipalities to help defray the cost of maintaining abandoned housing, with the rest going to housing counseling programs in the state.
Some estimates report that 18,000 homeowners a year might benefit from the housing counseling, and being able to expedite the foreclosure process could save lenders $43,000 to $89,000 per property.
All-in-all, these new statutes provide a good incentive to lenders for quickly dealing with abandoned properties and helping municipalities alleviate some of problems that arose after the mortgage crisis.
The author is a current student in the DePaul Housing and Community Development Legal Clinic. These are the opinions of the author and do not represent the opinion of the law school or University.