Tackling vacant property challenges

While the worst of the foreclosure crisis is behind us, many communities continue to grapple with foreclosure filings and the myriad problems posed by vacant and abandoned properties. Vacant properties pose health and safety risks, threaten the value of adjacent properties, destabilize neighborhoods, and frustrate local economic recovery efforts. There are a number of strategies that municipalities can use to get vacant property problems under control, outlined below.

Vacant building ordinances (VBOs)

VBOs help to quickly identify who is responsible for problem properties. In addition, new fees and fines for noncompliance get the attention of responsible parties and help problems get resolved more quickly. Most VBOs have similar requirements:

They require owners to register vacant buildings with the municipality and provide contact information for someone responsible for the property. Many also require financial institutions with a legal interest in the property to register if the owner cannot be found. This helps local governments identify who is responsible for a vacant property and contact them quickly when necessary.
Most require registrants to pay a fee, which helps local governments offset the substantial costs they incur when dealing with vacant property challenges.
Many also require registrants to maintain, secure, and insure vacant properties as well as to prepare and implement plans to demolish them or return them to productive use.

Priority liens for securing and maintaining abandoned residential property

Illinois law provides an option for municipalities to recover the costs of specified work they undertake on abandoned residential property. The law applies to any type of permanent dwelling unit that has been unoccupied for at least 90 days and for which the municipality attempted to contact the owner(s) or the owner’s agent(s) but was unable to reach anyone. It covers the removal of weeds, trees, bushes, grass, garbage, debris, or graffiti, and securing or enclosing the property. (65 ILSC 5/11-20- 15.1). Liens obtained under this law are superior to all other liens, except taxes.

The demolition statute

The Illinois Municipal Code allows municipalities to obtain court authorization to demolish, repair, enclose, or remove garbage, debris, and other hazardous or unhealthy material from buildings that are “dangerous and unsafe” or “uncompleted and abandoned.” (65 ILCS 5/11-31-1(a)). If the court grants a request to demolish a building, the municipality has the legal authority to demolish it, but isn’t required to do so. Instead, it can use the court authorization to repair a building, secure it, or remove garbage or debris. Once a municipality has the legal authority to take such action, responsible parties will often bring a property into compliance. If a municipality acts to clean up a property using the demolition statute, it has the legal right to recover the costs of doing the work, including court costs, attorneys’ fees, and other related enforcement costs. Those costs can become a lien on the property. If the municipality follows the proper procedures to “perfect” the demolition lien, it takes priority over all other liens, except for tax liens.

Fast track demolition

State law also provides a process by which municipalities can demolish, repair, enclose, or remediate smaller properties without seeking court authorization. Fast-track demolition is available for buildings no larger than three stories tall. It requires that the top local building code official make a determination that a building is “open and vacant and an immediate and continuing hazard to the community,” (65 ILCS 5/11-31-1(e)) and that the demolition or repair “is necessary to remedy the immediate and continuing hazard.” Once the official makes such a determination, the municipality—after proper notice has been given and no one with a legal interest in the property has objected—may demolish or repair the building at any time without going to court. However, if the municipality wants to be reimbursed for demolition costs, it must follow the same process to “perfect” a demolition lien as under the court-authorized demolition procedure.

Declaration of abandonment

Sometimes a municipality prefers to take ownership of a troubled property so that it can control how it is ultimately used. Like demolition, the threat of asking the court for a declaration of abandonment can be an effective way to motivate a responsible party to take corrective action. A property can be declared abandoned if

It has been tax delinquent or has outstanding water bills for two or more years and
It is not legally occupied, and
It contains a dangerous or unsafe building. (65 ILSC 5/11-31-1(d)).

When a municipality files for abandonment, the property owner has 30 days from the date of the notice to file an appearance and prove he does not intend to abandon the property. During that time, anyone with an interest in the property can file a request to demolish or repair the property. If no party appears or takes action to demolish or repair the property within the required time, the municipality may petition the court for a judicial deed to the property. The judicial deed extinguishes all ownership interests and liens relating to the property, including tax liens and the rights of holders of a certificate of purchase of the property for delinquent taxes. That means the municipality owns the property and can demolish it, fix it up, or transfer it to a new owner entirely free of any debt or questions about who owns it. The Village of Lansing has been using abandonment petitions to gain control of vacant properties, reduce strain on municipal resources, and attract investment.

Land banking

Land banks are governmental entities or nonprofit corporations that focus on the conversion of vacant, abandoned, and tax-delinquent properties into productive use. Land banks have also been a useful tool to help reinvent and revitalize neighborhoods. Most vacant and abandoned properties have many legal and financial barriers, such as years of back taxes and clouded title that make it difficult to attract investors. Land banks have the ability to hold land tax-free and clear title and/or extinguish back taxes, which can be essential when trying to attract buyers and investment. Land banks can work in partnership with municipalities to advance community-based goals. There are two successful examples of land banks in Illinois, in both the south suburbs and Cook County. Other areas of the region struggling with issues of vacancy and blight might consider the use of land banking as a tool in their community.