Cities and counties handle code violations and liens differently than they did just a few year ago. In the so called “good old days” the revenue these municipalities received from code violations was not a lot of money. The building department was always a profit center for them but code violations were sort of a step-child. Code Violations Lee County
Seldom, if ever, did the code enforcement officers scour neighborhoods to find homeowners, handymen or contractors working without permits. I vividly remember a mayor of a large local city tell me how the city’s legal department felt code liens were only enforceable to the amount of the actual cost of the city’s enforcement effort.
Most offenders are intimidated by fines accruing at $1,000 a day and buckle into getting the repairs done, re-doing the construction, fixing the problem by code or generally doing whatever is needed to avoid huge fines. A simple fine for not mowing the grass for $50 a day can turn into a huge fine of $250,000+ in ten years. How could a fine run for ten years? Simple, the homeowner didn’t cut the grass, maybe he was on vacation, and when he finally did, he didn’t have a code officer come out to check it. This actual case resulted in a $268,000 fine that was subsequently reduced to $168 when I bought the property.
Things have changed dramatically in the past few years. Municipalities are strapped for cash as property values have declined substantially and their tax roll revenues have continued to decline. Creative employees have started hyper-enforcing code violations and collecting fines they would never have bothered with in the past. Code Violations Lee County
In our area there is a city that has so aggressively pursued code violations that they have condemned properties and taken legal action to demolish the structures and legally transfer the land to the city. In retrospect, the homes were in a couple of neighborhoods which have since become redevelopment zones.
The enforcement strategies for various municipalities are broad in their scope and it is safe to say that almost anything is possible. For an investor or a wannabe homeowner contemplating buying a house in a specific city or neighborhood, he needs to do a lien search through his closing agent or call the city and set an appointment to discuss any code issues with the property. This may ignite issues that weren’t known to the city, but that’s better done before the house is purchased.
A growing trend I see is where the municipality with a code violation or lien on a property wants the new buyer to close on the property before they will negotiate an outstanding lien. So, if the property has a $100,000 lien accruing at an additional $100 a day, the buyer will not know if he has to pay $100,000 or $1,000 to close out the lien – until after he owns the property. If his purchase price is $100,000 and the property is worth $150,000 after repairs, the city lien is a deal killer.
Most city officials will explain that they will negotiate the lien to about 5% to 10% of the face amount. However, there is nothing ever given in writing and there is always the lingering fear that they will only reduce it by 50% which is still a deal killer. Code Violations Lee County
Some cities have taken an extremely hard line and these bureaucrats will not reduce the fines at all. In REO (bank owned) properties, it is not uncommon for the property to be neglected before the bank gets the property by foreclosure. When the bank finally owns the property, there may be accruing liens in place.
Before the bank can sell the property the liens should be cured, but many banks are selling the property with the problems. They have the buyer sign a “waiver of rights” that clearly says the buyer is now responsible for anything attached to the property – liens, code violations, utility bills and other title problems.
If you are contemplating buying a property you should only purchase it by doing a complete lien search and getting a title policy issued to you at the time of closing. This will not stop accruing liens or extinguish existing permit problems, the title search will only tell you what problems can be seen in the public record by the title company. A further “lien letter” search from the city should disclose open permits, liens not yet recorded and other problems that you as a buyer will have to face in the future. Code Violations Lee County
In summary, just because you bought the property with something that was done improperly or the city has no violations against a property, doesn’t mean that the addition to the main structure was done up to code or permits were pulled for the work. As the buyer, you have inherited these problems. This transfer of problems to a new buyer is a common occurrence when a quitclaim deed is used to transfer a property from a seller to an unsuspecting buyer. Always do a purchase through a title company and have a title policy issued to protect your purchase.
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