Thursday, November 12, 2009

The Loophole in the VBML Ordinance that could cost the city millions of dollars!

The VBML , Vacant Building Maintenance License was hailed originally as a great idea. It would go after the 'worst of the worst' property owners who refused to do anything to their properties. It would help 'shake those properties loose' and get them into good ownership, it would protect first responders by identifying those potentially dangerous and unstable properties. Everyone, except the slumlords, had high hopes for what was viewed as 'groundbreaking' local legislation that would turn Cincinnati's embattled Urban Neighborhoods around.

That was then, but the reality, years later, paints a very different picture of just how "groundbreaking" this ordinance was. The VBML has become a tangled mess, hundreds of properties and not just the 'worst of the worst' but properties that never should have been on the list to start with. Overworked inspectors who "got fed up" with property owners who were working too slowly on repairs to suit them, simply dropped a VBML on them as it meant less work for them. Rather than have to make the repeated inspections and follow ups, by throwing a VBML on a property they only had to maybe follow up once a year when it was up for renewal. The VBML, or more likely, the lack of payment for it made it easier to move the property to nuisance hearing and ultimately demolition thereby solving the overworked inspectors problem once and for all and lightening his caseload.

The subprime mortgage crisis and the overuse of the VBML has actually created more paperwork for the city. The VBML list is huge now, it has become a 'revenue stream' for the city, a "quasi underground tax', as well as a revenue stream for city inspections. Like most ideas with good intentions, it has grown into a huge albatross that many now say has destroyed parts of neighborhoods like Price Hill, Fairmount and OTR. What was designed to protect historic properties and get them back on a path to recovery has become a fastrack to demolition. It has been a "boom" for handfull of demolition contractors in this city, and the city plans on spending over 1.1 million dollars in Federal taxdollars supplied by the CDBG (Communty Development Block Grant fund) to bulldoze hundreds of properties in 2010. To many Historic Preservationists and Urban Community leaders it looks like Cincinnati may become the next Detroit.

Many argue that it has become a dis-incentive to restoration efforts. Few people would buy a property with a VBML against it, one of the reasons much of neighborhoods like OTR have never turned around. Because the city rarely takes civil action for non-payment, properties are often resold and new owners are "blindsided" months or years later by a letter from the city ordering them to pay a liscense fee, obtain costly liability insurance and spend thousands in unessecary permits to go through an inspection process to get the property "off' the list. Often these property owners who bought their historic "dream home" or poorer individuals who just wanted a place to live have just given up and 'walked away", and the property sits for years or far more likely winds up being declared a nuisance and demoed or dumped on the market and sold to an out of state LLC slumlord who milks the propety as rental as long as they can keep the city at bay, continuing the decline of the neighborhood and often bringing crime to neighborhoods that rarely saw it.

Many point to the people who used to be doing restoration in areas like OTR, Price Hill and other Urban neighborhoods who have gone accross the river to Newport and Covington. Their older historic neighborhoods are beginnning to come alive, while the city government continues with a relentless push to make Cincinnati the next Detroit with major Urban demolitions.

Some neighborhood leaders, and some city employees, who originally pushed for the VBML will admit privately that the VBML has cost the city millions in reinvestment and hastened the decay of urban neighborhoods. Oh, there have been attempts to fix it, with a 'waiver program' a program many view as just more hoops to jump through and one more costly step a prospective buyer would go through, IF, they even knew a VBML order was against the property in the first place.

We were "blindsided' with a VBML order some 5 months after we bought our house, out of the blue a letter form the city ordering us to do things. There had been no hearings, no Due Process, just a bunch of paperwork with "vague orders' reffering us to 'bringing the building up to code".
We were told by Ed Cunningham at the city that we could apply for a waiver program, a complicated , and in our view time consuming, costly process that would essentially slow down our restoration to a crawl. To us, this looked like a violation of Due Process, and by applying for waiver we would, in effect, be 'consenting' to the original VBML order which upon research looked like nothing more that an overworked inspector in 2005 taking the easy way out by slapping a VBML on a property whose only fault at the time was a broken window, a kicked in door and people who had just inherited a house after a family members death, and were struggling to figure out what to do with it. Our house, like most on the list, should NEVER have had an VBML order in the first place.

We elected to do, what most people do, we ignored it, continued work and obviously the city inspector was pleased, at least, based on the inspectors notes , we were OK. It was only after my rather vocal criticism of the city demoilition policty and possible abuse of the CDBG process and 106 review last month in my blog, that our property suddenly got "reviewed' by inspections and once again the city is trying to slap us with a VBML or fines or even jail time if we don't pay it.

Were we easily intimidated, we would probably just pay it, but because I have a very strong sense of "right and wrong' it has forced me to read the VBML again, several time in fact. It is what I found, that at least in our circumstance, and for that matter ANYONE else who bought a house that had a VBML on it at some point. There is an "ommision' in the VBML ordinance language that renders VBML enforcement, at least as is applies to any property that was sold or transferred , illegal by city inspections.

You see the ordinance, as written, and in its current state having been amended a couple of times, has no "continuity clause". A "continuity clause" is language in an ordinance, or liscencing requirement, that specifically spells out the right of the ordinance or in this case the VBML liscense to remain "in effect" after the sale or transfer of a property. For city inspection to have the authority to enforce a VBML requirement after a property has been sold against the new buyer, the ordinance would have to have language something like this:

A VBML (Vacant Building Maintence Liscense) shall remain in effect and continue as ordered upon the sale or transfer of a property to a new owner.

The ordinance DOES NOT HAVE that kind of language, and it is that language that would give city inspections that authority to pursue a previously issued VBML against a subsequent property owner without due process.

To all the local law firms who have been fighting the City of Cincinnati on constitutional grounds, hidden and illegal tax grounds, or abuse of power arguments, regarding the VBML. If your client bought a property, that once had a VBML on it, the city inspection department does not have the authority, under the law, as written or currently amended, to continue enforcement of a VBML requirement after a property has been sold or transffered. YOU SHOULD REALLY READ THE ORDINANCE!

Now the city will no doubt try to argue this BUT Courts typically hold that an ordinance must be specific, not overly broad in its nature or scope, and specifically spell out the policy and proceedure. Our VBML ordinance simply does not cover what happens to a VBML if the property is sold or transfered and for that matter does not even contain any language in the actual liscense or renewal section of the code about how the city provides a refund to the previous owner when a property with a paid VBML Liscense is sold "mid term". Technically the seller is entitled to a pro rated refund of the fee. So any of you out there that were able to unload a VBML property when there were still months left on your VBML liscense fee? You might want to call Edward Cunningham over at city inspections and ask where your refund is?

So what does this REALLY this mean? Well the city won't just roll over play dead and actually ADMIT the ordinance is wrong. What will likely have to happen is a property owner points this out to judge, say at the Common Pleas Court Level that the city has no authority to continue a VBML requirement if the property changed hands and the judge reads the ordinance and sees it isn't there, the VBML is done ,at least for those who bought a property that had a VBML order previously against it. Those of you who owned the property when the ordinace started and have not ever changed hands are still stuck with the VBML requirement as written. Oh I guarantee you that the city will appeal but courts are pretty good about ruling about the limitations of an ordinance, If the city council were smart they would save the city hundreds of thousands in legal fees and order the city manager to not proceed with an appeal. A higher court will likely reach the same conclusion. There is a ton of case law on this issue.

So what would that mean you ask? Well Mr Cunningham at city inspections has a big problem. They would have to restart the process on EVERY property that changed hands and they could not restart at the VBML level. First someone would have to actually complain. The city inspector would first have to issue the new owner a repair order and that owner would have to fail to comply with that order and the city would them have to have a pre prosecution hearing and then on to VBML. In other words the new owner has to have the same DUR PROCESS that the prior owner had.

In fact, it likely means the city would have to refund the VBML fees to anyone bought a property, who paid for the VBML liscense to date (perhaps with interest since city obtained the monies outside the scope of the ordinance) We are talking about over a million dollars maybe in refunds? More if some smart attorney decides to go to court to put together a class action and seek punitive damages from a Federal Court.

I have no doubt that the council will quickly move to amend the VBML ordinance and insert a continuity clause, and language to deal with the VBML refund issue when a property is sold, BUT, they can't make it retroactive, so it would only be valid going forward and they still may need to find some way to make a VBML FEE show up on a title search as this ordinance may still violate consumer proptection laws as they apply to home purchases. Ultimately the city may have to file a civil action on every delinquent VBML going forward in order to have it recorded as valid lien. But that is something for city legal, the city council and manager to work out.

What does this mean for Urban Neighborhoods like OTR , Fairmount, Price Hill and others? Well it means a second chance. It means that maybe people will be willing in invest in historic properties, it means that that 91 page list of keep vacant, condemned and VBML list may just get a lot shorter. People who would have put their restoration dollars accross the river in Newport or Covinmgton probably will now take a second look at Cincinnati. It may mean more construction jobs, the 'blight=bulldozer" mentality of the city manager may requre some retooling. Urban neighborhoods may have a fighting chance.

Who knows maybe the council will REALLY look at this ordinance, realize what an albatross it is to Urban neighborhoods scrap the whole thing. Maybe come up with something new, something more thought out. We may very well see.

So I know the big question in your mind? Does city inspections know about this?

Sure they do, I sent an email to Ed Cunningham on Tuesday with the following question:

SHOW ME the VBML 'continuity clause"? In other words where is the language in the ordinance that says: That the VBML shall remain in force upon transfer or sale of the property?

I have looked and looked and I can't seem to find it. Would you perhaps have the city attorney point it out to me?

For SOME reason? He didn't reply? Didn't get an email from the city attorney either?

Oh I am sure after a bunch of meetings with the legal department they will come up with some response, but I've already run the ordinance by some of the best legal minds I know ( and I happen to know quite a few) and they all agree it is a "oops moment" for City of Cincinnati Inspections, and the city manager.

If you would like to read the VBML ordinance it's under Chapter1101-77 of the Municipal code, or you can do a search on VBML , you can read the code at:
http://www.cincinnati-oh.gov/council/pages/-3667-/

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