Cities throughout California are grappling with foreclosed homes and struggling or recalcitrant homeowners whose properties have become eyesores. Now, an increasing number of local authorities are initiating health and safety receiverships, a legal process in which control of the property is temporarily taken from the owner and placed with a court-appointed officer.
“It’s really an emerging field and an emerging resource that cities are turning towards,” said Dean Pucci, director of the receiverships division for the law offices of Jones & Mayer.
Remedies that local agencies typically used during the past decade may no longer be possible, as city code enforcement budgets have been slashed and an increasing number of homes are cited for serious code violations.
Mark Adams, president of the California Receivership Group, said his business has increased 30 to 40 percent in the last year alone.
Receiverships can offer cities a less expensive way to address properties that present health and safety risks.
“Fines and penalties are one thing, but they don’t get the property fixed,” Adams said. “The distinguishing factor of health and safety receiverships, in relation to more traditional tools of code enforcement, is that the project actually gets completely rehabilitated.”
Courtesy of Jones & MayerThis house in Oxnard was recently placed in receivership.
If a city opts to have a property placed in receivership, the receiver borrows money against the property to pay for the cleanup. To make the loan appealing to a commercial lender, loans taken out under a health and safety receivership are given priority status over all other loans that might be against the property, with the exception of tax liens.
Vacant and rundown properties have been an increasing problem for the city of Richmond. Trisha Aljoe, the city prosecutor for Richmond and special counsel to other Bay Area cities, said the houses she has seen placed in receivership were horrific. In Concord, a mother and daughter were living in a house filled with mold and holes in the ceiling. It ultimately had to be gutted.
But whether receivership is the right option for cities depends almost entirely on the value of the property and whether the receiver will be able to get a loan against the property, Aljoe said. She added that Richmond has come close to having properties placed in receivership, but for now is still relying on other tools.
Billy Owens, a code enforcement officer in Bakersfield and president of the California Association of Code Enforcement Officers, estimates code violations in his city have risen 30 to 40 percent in the last four years. Meanwhile, his staff has been cut from 16 to nine. For now, the city has been able to recoup any rehabilitation costs it incurs through tax liens on the property and has not resorted to health and safety receiverships.
Other cities, such as Whittier and Eureka, have been active. Whittier has had roughly 15 properties placed into receivership in the last four to six months, according to Pucci, whose firm serves as the city’s attorney.