Wednesday, July 15, 2009

How Cincinnati could stop the "Slumlord Shuffle"

Any neighborhood or community leader knows the drill. Every few months that problem property is ready to go to court and you find out the case has been dropped because of a property owner change.

The "slumlord shuffle" is a common occurrence and one need only to look at the familiar cast of players to see that out of state 'slumlord' are ahead of the game and the city is losing.

Why you ask? Well it is the city's own fault. The municipal code clearly directs the city to file liens for the cost of barricade work and VBML but the city doesn't do this. Just look at one property in our neighborhood 1861 Knox street. 1861 Knox is a 3 story brick Italianate, well built and structurally sound but has suffered from a series of neglectful owners and problem tenants. The city wants it bulldozed, the neighborhood wants it in the hands of someone who will restore the once graceful brick home.

The downward spiral of this home really started in 2003 when Dion Parker purchased the property. Parker is well known for failing to maintain property with the city and has been the subject of numerous court cases. In 2004 the city first issued orders against the property for repairs for heating , water heater, defective plumbing and bad steps. It took over a year for the case to be closed and the property brought into minimal complacency. It quickly deteriorated though a continuous revolving door of bad tenants.

The property was foreclosed on by Duetsche Bank in 2007. During that time the property was ordered barricaded and deteriorating conditions were noted. The property was sold to Destiny Ventures LLC, an out of state investment group. The case had been going to criminal but now on 3/5/08 they sent orders to the new buyer Destiny Ventures.

The city issues a VBML order to Destiny on 5/5/2008. They also issues a condemn order. Destiny rented two of the three apartments out during this time, in spite of the VBML and Condemn orders. Destiny Ventures continues to keep the city at bay to avoid a hearing all the while renting the property out.

The illegal tenants blames the neighborhood association for their landlords trouble and threatened neighbors to the point one neighbor near the property had to go to court and obtain a restraining order.

The city was close to getting Destiny to court when Destiny "sold' the Properties to TSE Properties for 3500.00. TSE is an out of state "real estate holding company' whose purpose seems to be as a conduit for slumlords to "offload property" facing court cases. I attempted to contact TSE properties for comment but no one would respond. On 6/4/2009 Destiny sold the property to TSE and the city went after TSE getting ready to send notice to them. TSE is active in Cleveland Pittburg and other cities with majot foreclosure and slumlord problems.

According to Hamilton County Auditor records 8 days later TSE 'sells' 1861 Knox to Thor Real Estate LLC of North Hollywood Ca in a 0.00 transaction. The address listed is a mail drop. A search of the LLC records for the State of California reveals that Thors Real Estate LLC actual address of record is 13351 D RIVERSIDE DR 413 SHERMAN OAKS CA . The neighborhood send an email to city inspector Mike Fhen advising him TSE no longer owns the property that Thor Real estate owns it. The city sends out a notice to Thor On July 2/2009 to both addresses. An order was posted on the actual property on the 13th of this month. There has been no response to the city from Thor and there appears to be no phone number for Thor Real estate in the Sherman Oaks telephone directory. The saga continues and the neighborhood awaits.

The property was sold via quit claim in spite of the fact the property had 2166.76 in delinquent real estate taxes and those taxes are unpaid. The same tenants have resided in this building for over a year now in spite of a city ordered vacation/eviction of the property!

So why does this happen you ask. There are several reasons. The city municipal code provides for the authority for the city to place alien against a property for barricade, cutting grass or VBML. The city does not however generally file these liens as they do not want to get 'stuck' with more property. There is nothing that prohibits a property being sold in the state of Ohio with delinquent property taxes owed. The neighborhood does its job and complains, the city inspector does his job and inspects. The problem seems to lie with city legal who doesn't follow through on lien filling as proscribed by the municipal ordinance. There is no fast track housing court to deal with the problem landlords.

So how do we fix this? First city legal needs to follow through. If liens are filed the city has more leverage. Second we need State Level legislative change that requires any delinquent property tax MUST be paid in order for a property to be sold and the transfer recorded. There are Millions of Dollars state wide that could be going to county governments, and eliminating budget shortfalls with this one change and it would greatly curtail the 'slumlord shuffle" if delinquent taxes in order to sell a property. In fact the law should be changed to include any municipal or county lien against a property must be paid in order for deed transfer to occur in the State of Ohio. The city need to set up a land bank to hold these properties and work with neighborhood groups to find good owners for them who will agree to a protective covenant to restore them and provide proof of funds to do so.

Our neighbor Indiana recently enacted new legislation that goes further in helping cities with the issue of bad property owners.

The new law, created by Indianapolis Representatives Mary Ann Sullivan (D) and David Frizzell (R) with Senator Connie Lawson (R-Danville), provides additional weapons to Indianapolis and other cities. It bars property owners from buying up foreclosed homes if they're already facing a court order to clean up an abandoned home. Repeat offenders can be placed on a fast track for further court action, which could include triple damages or a demolition order.

The law also establishes an annual fine of $500 for property owners who leave a home vacant for three months without showing a good-faith effort to repair and maintain it.

Neighborhood and cities in Ohio need to lobby for the same legislation for Ohio.


CityKin said...

Does Indiana have a law that says deeds cannot be transferred until delinquent property tax is paid? I thought we had that here, but obviously not.

Great post. Maybe working with the Cin Preservation Association we could press some of our State Reps to start legislation like this.

Paul Wilham said...

Indiana conducts taxsales every year in august for the prior year and does not wait for several years like ohio does. Therefore there is not as great an issue with delinquent taxes.

Obvuiiously if you are buying witha bank loan or using a title service or want title insurance you are going to have to have those liens cleared prior to closing. Ohio quit claim deeds do not apparently require delinquentr taxes to be paid. Remember we are talking property selling for few hundred to a few thousand dollars, often with several thousand in delinquent taxes. If the landlord rents it for just a few months he's made profit,so what if it goes to taxsale? If you eliminate the loophole you eliminate a BIG part of the problem. with 1.00 anmd 0.00 dollar transferrs because they woudl have to pay those thousands in taxes. there goes the 'profit" in investing in slum realestate.

I like the Indiana Law that prohibits people with uncleared orders from buying more foreclosed property,

Bob said...

Great post, Paul -- once again you've provided insight on a critical issue by explaining it in a clear and logical fashion. Now we've got to find a way to have city + STATE officials listen and make the necessary changes to the law -- before all our neighborhoods crumble to the ground due to this sick & corrupt process.

mitch said...

Great post, great blog. I'm a grad student in historic preservation and am enjoying your blog very much.

Kudos to spear-heading the legislative fix of the tax lien/title transfer loophole. I can't imagine anyone in state government opposing such a revenue mechanism.

I was born in Cincinnati, grew up across the river and always enjoy going back and exploring. Cincinnati is one of America's few (and dwindling) unique cities with unique architecture. (Didn't Winston Churchill comment - Cincinnati was America's prettiest inland city? -- I'm pretty sure he did).

Thanks again, great blog.