Las Vegas City Council sets hearing on foreclosure proposal

A proposal that could put bankers behind bars for failing to maintain foreclosed homes in Las Vegas probably will advance, albeit with some changes to the wording.

The City Council recommending committee on Tuesday voted to hold another hearing Nov. 15 on the measure, proposed by Ward 6 Councilman Steve Ross, which would make it a misdemeanor offense for lenders to allow distressed houses to fall into disrepair.

The delay will give banking, real estate and other groups more time to press for changes to the proposal, including changes that would lessen penalties.

"Who is going to jail, eventually, if it came to that point?" Mayor Pro Tem Stavros Anthony asked. "Is the president of Bank of America going to jail?"

The proposed ordinance would require lenders to register abandoned and distressed homes on a list with the city at a cost of $200 per house.

It also includes requirements that the lender maintain the property to prevent it from becoming an eyesore or a health and safety hazard.

Penalties for violating the ordinance would be a misdemeanor, punishable with up to a $1,000 fine or six months in jail for each offense.

Val Steed, an attorney for the city, explained why the potential penalty is so harsh.

"You have to put some penalty in there, traditionally what we have is criminal," Steed said. "When corporations are prosecuted criminally, it doesn’t happen much, an officer has the potential to go to jail."

The reasoning behind the proposed ordinance is simple: Las Vegas is home to about 28 percent of the foreclosed homes in Southern Nevada, a national epicenter for the national housing market collapse.

As such, there are about 300 homes becoming vacant and foreclosed each month, according to an August analysis of real estate statistics presented Tuesday.

Although all houses in the city, no matter who owns them, are subject to residential maintenance codes, vacant, distressed properties tend to accumulate more violations than occupied homes.

The result is a plethora of houses burdened by city-attached liens that can complicate future sales.

Proponents of the proposed ordinance say it will prompt banks to act to prevent vacant houses from deteriorating.

"The years it is sitting there and no one is taking care of the property, it goes to crap," Anthony said. "Who is responsible for upkeeping that home? Right now it is the city of Las Vegas, but that is getting old."

Critics, including Bill Uffelman of the Nevada Bankers Association who called the ordinance "not ready for prime time," say it contains vague wording, would apply to commercial property also and puts banks on the hook for maintaining property they don’t own.

Uffelman joined Nevada State Bank attorney Charles Cook and Senior Vice President Harry Hinderliter in identifying potential problems with the ordinance.

They urged the city to change the wording so the registry and maintenance requirements aren’t triggered until the notice of sale, an action that occurs three weeks before an auction and is recorded with the county recorder.

They said the notice of sale is an appropriate trigger because it occurs after mediation and other efforts to prevent foreclosure are exhausted. Earlier triggers, they said, could result in banks being told to maintain properties on which they have no legal right to set foot.

Uffelman also said the penalty for non-compliance is too stiff.

"I don’t think the regional president of a national bank is going to be interested in visiting the lockup here in Clark County," he said. "That one gets people’s attention, but I don’t think it encourages compliance."

Despite the questions raised, recommending committee members appeared poised to push through some sort of vacant property registry and maintenance ordinance.

"I feel we need a couple of weeks to listen to people and find the wording that will make something work," Councilman Bob Coffin said.  

Contact reporter Benjamin Spillman at bspillman@ reviewjournal.com or 702-229-6435.