Home Foreclosures Mean Money For State And Local Governments

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Home Foreclosures mean money for State and Local Governments

As the US economy sinks further into a deep recession there are more news reports of major financial problems facing state and local governments.  These government entities are all facing reduced revenue on sales and income taxes as the economy continues to fall and unemployment is on the rise.  Many State and Local governments are looking toward Washington to help them, but for many of them they are also looking for other ways to generate income.  New state and city laws are being implemented that have a direct impact on preservation contractors.  These new laws deal with licensing of preservation contractors and city ordinances concerning registration of vacant homes.

In the State of Delaware there are a number of cities that require preservation contractors to be licensed by the city to provide any type of work on a vacant property.  A simple grass cut cannot be completed without being properly licensed.  New Castle County in Delaware has such a licensing ordinance.  Preservation contractors must pay $50.00 to make an application and $350.00 to receive a license to perform preservation work in New Castle county.  The county has hired a number of enforcement officers who patrol neighborhoods with high levels of foreclosure activity to detect contractors that are not licensed.  The penalties for violating the ordinance are high.  If a contractor is from out of state they must also obtain a business license to do business in the state of Delaware.  As our economy continues to deteriorate this type of licensing may become more prevalent in other states.

Another area where cities and other local governments have targeted to generate fee income is charging fees for vacant properties in the city.  These fees are charged to the home owners of vacant properties.  Typically the fee schedules will vary by the number of years the home has been vacant.  In Altoona Pa. there is no fee due if the home is vacant less than 1 year.  The fee schedule after 1 year of vacancy is as follows:

  • 1 year         $500.00
  • 2 years     $1,000.00
  • 3-4 year   $2,000.00
  • 5-9 years  $3,500.00
  • 10 years   $5,000.00
  • 10+years   $5,000.00 + $500 for every year over the 10 years

This is an annual vacant home registration.  Within the past six months there have been numerous ordinances of this nature throughout the United States.  Some of the cities that have enacted new laws include: Toledo Ohio, Columbus Ohio, Parma Ohio, Smyrna Delaware, and Dearborn Michigan.  Most of the laws have an escalating fee to the homeowner if the home is vacant over 2 years.  A number of the ordinances require a local contact for the city to call if there is an issue with the property.  If the home is an REO and it’s listed for sale the contact would be the Realtor.  If the home is not for sale the banks and Field Service Companies are requiring the preservation contractors to assume this responsibility.  In addition to becoming the local contact for the property the preservation contractor must provide for specific maintenance requirements set by the ordinance.  Generally the vacant property ordinances require the contractors to provide yard maintenance, debris removal, and securing the property properly including boarding of all broken windows and doors.  Contractors must comply with the City ordinance and any penalties accessed relating to violations will be charged back to the contractors by most Field Service Companies and banks.

In 2009, we can expect many more cities to adopt ordinances of this nature.  Preservation contractors must be aware of the new ordinances in the territories they are working.  Contractor licensing requirements and Vacant Property Ordinances will be a way for local governments to add to the revenue base without impacting their tax paying constituents.  The cities and states will all be looking for every dollar as the recession grows deeper.  It will be interesting to see if the banks change their foreclosure strategies as well given the high fees that the cities are charging the owners of vacant homes.

Article by Ernie Hummer

Vendor Manager – Maxim Enterprises

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