New Los Angeles Ordinance Requires Banks And Lenders To Repair Vacant Residential Property

In another blow to residential lenders, the city of Los Angeles has passed an ordinance that will require the person that owns or is in control of certain residential real property to maintain the property in a safe and sanitary condition and in good repair. While one might logically expect that this ordinance would only apply to financial institutions once they have foreclosed upon the property or taken it back via a deed in lieu of foreclosure, the ordinance appears to go farther than that, requiring the financial institution to take responsibility for the condition of the property once a notice of default has been filed.

Effective July 8, the new ordinance requires lenders to register all residential real properties with the city (i) that have been through foreclosure and are now owned by the lender; (ii) that are currently "Properties in Foreclosure," which is defined to mean any property upon which a notice of default has been issued, or (iii) for which a notice of default is issued in the future. An annual registration fee of $155.00 must be paid to the Los Angeles Housing Department at the time of registration. As an alternative, the information required for registration of the property can be provided to the Mortgage Electronic Registration System (MERS), in which case no registration fee will be payable. It is anticipated that this registry will enable inspectors to easily identify owners (or lenders, if foreclosure has yet to occur) if a constituent calls to complain about the condition of a property.

Once a residential real property becomes a Property in Foreclosure, the beneficiary or trustee under the deed of trust on the property is required to inspect it, and reinspect it monthly until the default is remedied. Inspections are required to continue following foreclosure if title to the property is transferred to the beneficiary. The beneficiary/trustee is then required to maintain the property in a safe and sanitary condition and in good repair, in accordance with the requirements set forth in Section 91.8901 of the Los Angeles Municipal Code (although query how the beneficiary/trustee may legally do this if the borrower still owns the property, or how the beneficiary/trustee is supposed to obtain access to the property if the borrower continues to reside in the property pre-foreclosure).

If the property is found to be vacant (which is also defined to include occupied by an unauthorized person), even prior to completion of foreclosure, the beneficiary/trustee is then required to clean, fence and barricade the property. Failure to do so is a strict liability offense. If the property is determined to have been vacant for 30 consecutive calendar days, the owner or person in charge or control of the vacant structure may be liable for an administrative penalty of $1000 per structure per day, not to exceed $100,000 per property per calendar year.

Authored By:

Sherwin F. Root
(213) 617-5465
[email protected]

Neither the content on this blog nor any transmissions between you and Sheppard Mullin through this blog are intended to provide legal or other advice or to create an attorney-client relationship.

In communicating with us through this blog, you should not provide any confidential information to us concerning any potential or actual legal matter you may have. Before providing any such information to us, you must obtain approval to do so from one of our lawyers.

By choosing to communicate with us without such prior approval, you understand and agree that Sheppard Mullin will have no duty to keep confidential any information you provide.
Post A Comment / Question

Remember personal info?

Send To A Friend Use this form to send this entry to a friend via email.