Ordinance would punish banks for letting foreclosed homes fall into disrepair

Banks could be facing misdemeanor charges for letting foreclosed homes in Las Vegas fall into disrepair if a proposed city ordinance goes into effect.

Ward 6 Councilman Steve Ross is calling for the ordinance, saying the city needs to crack down on banks to reduce the number of blighted houses.

“You can drive through any neighborhood and just pick out the foreclosures. The grass is dead, the trees are dead, sometimes the windows are broken out, and the pools are green,” said Ross, whose northwest ward is home to some of the highest foreclosure rates in the country.

“I’m not trying to be mean to the banks, I’m trying to get their attention to help us with this problem.”

The ordinance calls for banks to register empty homes with the city for a $200 fee and makes it a misdemeanor for the houses to fall into disrepair.

It is scheduled to go before the City Council recommending committee today and could go before the council Wednesday or later in the month.

The Clark County Commission discussed a similar proposal Oct. 18 but didn’t act on the measure.

The city registration would include the name and address of the “mortgagee” and a contact name and phone number for a property manager. It also calls for landscaping, pools, spas, doors, windows and gates to be properly maintained.

Penalties for violating the ordinance would be a fine of up to $1,000 or up to six months in jail for each day the home is out of compliance.

The proposal is likely to be popular with residents who have grown weary of looking at abandoned properties with tall weeds, broken windows and other problems.

“The whole point of this for me is to try and increase the quality of life for these neighborhoods,” Ross said.

Currently all homes, those in foreclosure and those in good standing, are subject to residential landscaping and maintenance codes. When codes are violated, homeowners can be assessed. If the assessments aren’t paid, then the city can hire companies to drain a foul pool or remove overgrown weeds with the cost passed along to the owner.

If the costs and penalties aren’t paid, the city puts a lien on the house that must be paid or forgiven before someone else can buy it. The City Council regularly hears from would-be homeowners who find a house they like only to learn it has thousands, or tens of thousands, of dollars in liens against it because the previous owners didn’t pay maintenance assessments.

Ross said the ordinance would reduce such instances because the registry would track empty, bank-owned properties and the stiffer penalties would compel banks to care for the houses.

But people in the real estate industry question whether the ordinance would work. For example, real estate broker Samantha Weitzel said, Assembly Bill 284, a state law that recently went into effect, could undermine the ordinance even before it is enacted.

The bill requires banks or other note holders to prove ownership of the property and ensure the county recorder has signed off on appropriate documentation before foreclosing or face penalties.

Weitzel said that means there may be more properties that are abandoned by borrowers but not officially under bank control, meaning the ordinance wouldn’t do anything to spur better maintenance.

“The city probably thinks the banks own them, but the banks haven’t foreclosed on them,” Weirtzel said.

Weirtzel, who specializes in distressed properties, said much of the deterioration that occurs in a doomed property happens in the waning days of the borrower’s time in the home and before the bank takes control.

During that time frame, maintenance is still the responsibility of the borrower.

“The banks are kind of handcuffed in what they can do or what they can’t do to the property,” she said.

Weitzel said banks tend to act swiftly to repair health and safety problems and clean unkempt yards once they take over the property. Many foreclosed homes are “not in the best condition, so that affects the market value,” she said. “It is in the banks’ interest to make sure it is in as good as condition as possible.”

Realtor Don O’Neil said he doesn’t think a registration requirement would do much to reduce blight. He said the city already has the ability to identify whether a house is empty and who owns it through existing records.

“All they are doing is making the banks pay another 200 bucks to list it on a list,” O’Neil said. “All that information is public record.”

Weitzel said it would be more effective for the city to work more closely with water and electricity utilities to track properties. That’s because canceled utilities are one of the first signs a property has been abandoned.

If utilities were able to notify the city and banks that water or power had been shut off, it would be easier to intervene on maintenance before the property became a blight, she said.

“If it is 120 degrees outside and they don’t have power on, then there is a good possibility they are moved out,” she said. “(Banks) generally will secure properties they find to be vacant. They don’t want anyone to damage the house.”