31. Blight to Delight Example

The 1920's had Sears and Roebuck selling pre-cut home packages. Sears was the most famous pre-cut home assembly retailer. There were some large manufacturers whose names have receded into history. Industrial housing, mining camp housing, middle class and upscale house assemblies were shipped in railroad boxcars to destination sidings. These component houses are sometimes referred to by architecture historians as "siding" houses. Sharon, PA has examples of siding houses sprinkled throughout the City. They might be blighted and abandoned or not. That blighted and abandoned house might be a gem in the raw. Should it be rehabilitated? Should it be relocated and rehabilitated? Interior woodwork, pocket doors between living room and dining room, surviving light fixtures, doors and hardware, plumbing fixtures often make old houses appealing. Is there anything more appealing for an interior living space than 9 foot ceilings? The ambience of one foot cannot be overstated! Here is a particular style that has survived and been maintained for 90 years. The same style, sadly, often has not been cared for but awaits rehab. The Pennsylvania Blighted and Abandoned Property Conservatorship Act is an underused avenue for energetic persons to bring properties back to life

30. Another Blight to Delight - Many Twists and Turns

 This four square style house dates from about 1930.  A combination of the 2008 banking crisis together with the collapse of a marriage led to an incomplete ban foreclosure for the mortgage. The ocuupants were evicted but the deed was never transferred by the bank. So, the evicted occupants remained the owner of record. Theoretically, they could have remained in the house until the deed was transferred. The bank though did not let the property to become tax delinquent until 2013. The house was exposed to Upset Tax Sale in 2014 and 2015. In 2016 it went to the County Judicial Tax Sale and an investor family bought the property. However, the legal talent engaged by the County and its Tax Claim Bureau to prepare the title was not diligent in their work. The inadequate legal notice to all parties of interest later was discovered after the family investors had replaced the heating system, water tank, updated the electrical service, restored wall shingles, repainting exterior and interior, repair of gutters, removal of intrusive shrubbery and vines. In late 2016 the house was sold only for the investor family to learn of the title defect when title insurance could not be secured for the mortgage. The responsible attorney was sued and the the title was perfected in 2017. The rehabilitated house was sold in 2018.

29. Successful Rehablilitation

 This 1930 bungalow was abandoned for ten years. It had a failed foundation in rear, deteriorated siding shingles, failed exterior paint, obsolete electrical service, obsolete furnace / water tank, failed 2nd floor wall open to elements. Two large spruce trees were blown into the house causing a roof failure. Owners were progressively cited for building code violations giving them an incentive to find a buyer who brought the house into code compliance. 2013.

In 2014 the house was brought into building code compliance by an entrepreneur. In 2015 the house was sold.

28. Contents - So much content. A road map

Blog Contents

1. Pennsylvania Municipalities   Need to Balance Housing Supply With Demand.
    Many municipalities have too many houses in contrast to population decline.

2. Blight and Abandonment Defined (B & A).
    Here is how blight and abandonment is defined in Pennsylvania law.

3. Some thoughts and notes about real estate delinquency - arrearage.
    The Upset Tax Sale, Repository List, Judicial Sale cycle.

4. An observation about properties on a County repository list.
    Two sentences tell a story.

5. Disadvantage to a municipality as to Judicial Sale results.
    The Judicial Sale changes ownership and control without direction and purpose.

6. Directionless and Judicial Sale results.
     Some thoughts about buyers without purpose or direction.

7. What the repository list says about Sharon, PA and the absence of a LAND BANK as a       
    catalyst.
    Sharon has a disproportionate number of properties on the repository list.

8. What is a LAND BANK?
    Addressing some misconceptions about a LAND BANK.

9. What Tax Revenue Has Been Lost to Tax Zombies.
    Repository list tax delinquency amounts are cumulative and are huge.

10. Making a Market Work
    The real estate market is oversupplied. The oversupply often is blighted and abandoned     affecting real estate values negatively.

11. Every property owner in a municipality is Injured by Blight and Abandonment. B&M.
    The Real Estate Conservatorship law as public policy declares that B&M injures all      
    property owners. Diminished value to all real estate, threats to health and safety, fire             risk, threat to ordered society.

12. What is a lien?
    Property incurs lawful obligations for taxes and private debt such as a mortgage.

13. What is a tax sale?
    The who, and what of tax sales.

14. What an Upset Tax sale.
    The first step in recovering delinquent taxes.

15. What is a Judicial Tax Sale.
    The last attempt to recover something of a tax arrearage.

16. What is Blight?
    Blight described as an objective violation of a municipal building code.

17. How Else might Blight be Characterized?
    A subjective description of blight. It might be something a person knows when they see
    it!

18. What is the Building and Maintenance Code.
    A discussion about the basis for a municipal building and maintenance code.

19. What is a Redevelopment Authority?
     The what and why and how of a Redevelopment Authority in Pennsylvania.

20. How can a Redevelopment Authority address blight?
    It is costly and bureaucratic to address blight solely through a Redevelopment
    Authority.

21. Once again, What is a Land Bank?
    More thoughts and comments about the Land bank tool for municipalities.

22. What is a Real Estate Conservatorship?
    What and how Pennsylvania provides untapped potential for private investment
    to rehabilitate / demolish B&A. Opportunities and risks.

23. General comments about the tools for revitalization.
    Redevelopment Authority, Land Bank, Judicial supervision of Conservatorship.

24. How Blight and Abandonment Injures Citizens.
    B&A harms real estate values. As such it diminishes a major component of household
    wealth. It is a hazard to health and safety. It is a fire risk. It contributes to unlawfulness.

25. Which Way?
    Implementing tools to address A&B.

26. More about the Pennsylvania Real Estate Conservatorship Act - USE IT OR LOSE IT.
    An essay based about Attorney Melanie Lacey’s 2017 article entitled USE IT OR
    LOSE IT.

27,  A sound way to begin a municipal Structure and Land Revitalization Bank - Redevelopment Authority.

27. A sound way to begin a municipal Structure and Land Revitalization Bank - Use an existing Redevelopment Authority

While a Redevelopment Authority achieves it goal(s) by eminent domain and issuing debt, it does so with urban planning and coordination with a regional planning agency. It has a governing body. It is transparent. So, given the resources that are part of a functioning Redevelopment Authority,  some Pennsylvania municipalities have begun a Structure and Land Revitalization Bank using a Redevelopment Authority as the organizational  foundation for the new Structure and Land Revitalization Bank. Doing so creates a basis for inter-government confidence and cooperation. The powers of a Redevelopment Authority may find a complement with the powers provided in law for a Structure and Land Revitalization Bank. And, the Department of Community and Economic Development at the state level has audit authority for a Structure and Land Revitalization Bank.

A Structure and Land Revitalization Bank overcomes the directionless problems inherent to Judicial Sale results. One vision for a Sructure and Land Revitalization Bank might be for the actual sale of properties to be for a nominal amount. But, as the Structure and Land Revitalization Bank  may create by its authority to contract  parameters for rehabilitation or demolition,  the buyer's requirement to demonstrate competence through a plan with a projected calendar for completion, a source of funds for a project, etc. The competition for a property will not be for the highest bidder in this scenario. The competition would be for the better plan, the better calendar for completion, etc. 

The Structure and Land Revitalization Bank can establish priorities. Suppose a first priority is for affordable housing that is owner occupied. Then, for example, suppose a person with limited resources but boundless energy wants to bootstrap a Structure and Land Revitalization Bank property. Sweat equity could be a significant part of the competitive plan document submitted for the sale. Suppose the bootstrapper has the skills for the sweat equity but not the skills in creating a plan document. That's where community volunteers could assist. That's where the skills found in a congregation,for example, or a veterans group etc. might help with a plan and support for the bootstrapper. The plan would be a very useful document for a lender to make decisions about  the abilities, character and capacity of the bootstrapper.

So, a Structure and Land Revitalization Bank would create prioritized direction to acquisition of tax delinquent properties. It would eliminate mindless and directionless acquisitions. It would work to adjust supply and demand in the marketplace where noe now exists. It would by doing so create household wealth where noe existed before.
 

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26. More about the Pennsylvania Real Estate Conservatorship Act - USE IT OR LOSE IT

Use It or Lose It

 “Fix It or Lose It” - Described here are advantages and the potential benefits inherent to the Pennsylvania Blighted Property and Conservatorship Act. 

You live in a municipality with abandoned and blighted properties. Imagine being able to petition the County Court of Common Pleas to take possession, rehabilitate or demolish abandoned and blighted property within 2000 feet of your residence / property.

The Pennsylvania Abandoned and Blighted Property Conservatorship Act afford such an opportunity The Act addresses the interests of injured third parties. Conservatorship allows injured third parties to seek a custodial roles over a nuisance property to rehabilitate it or demolish it. It does so with protected rights to the petitioner for a conservatorship to recover costs and provides a pathway option for the conservator for ownership.

The underlying principle to the Act is that it presumes an injured party to  be a community member with property within 2000 feet of the blighted and abandoned property. Any and all abandoned properties diminish property values, pose safety and fire risks and are a public nuisance. The community member can be an individual property owner in the affected municipality or a non-profit in the municipality. For example a church. Or hospital or a school or veteran group in the municipality can petition for a conservatorship.

A petitioner in the petition to the Court must establish the 2000 foot rule of their property. Once that is done the petitioner will demonstrate that the property is abandoned by showing it has not been lawfully occupied for the last 12 months. The owner has not marketed the property within the last 60 days. There cannot be a foreclosure action being made. The current owner has owned the property for longer than 6 months. The owner is not on active duty in the U.S. Armed Forces. 

Next, the petitioner will establish blighted condition of the property. Any of the three described conditions establish blight: 1., The Property needs substantial rehabilitation and none has been done the last 12 months. 2.,The blighted property by its existence decreased property values or business activity. 3., The blighted property by its existence is a public nuisance. 4., The property is unfit for occupancy. 5., The property is an attractive nuisance. 6., The property is a health or safety hazard. 7., The property is subject to entry and is dangerous. 8., The property increases fire risk. 

The goal of a real estate conservatorship petition is revitalization by the petitioner for conservatorship or by the owner. How? Why? A petition for real estate conservatorship of abandoned and blighted property provided for Judicial regulation for a limited number of parties under particular circumstance. Owners have the right to defend against an action before an appointment by the Court of a conservator by declaring a willingness to remediate. The owner must post a performance bond and repay legal and architectural fees plus 20% to the petitioner. In the event the owner does not defend their right to possession and allows the conservator to proceed, when the conservator sells the property the owner has the priority to retain ownership with their priority to pay the conservator for all expenses (legal, architectural, construction or demolition as the case may be plus 20% of those costs). In either situation, petitioner conservator or owner defense, the Court will supervise rehabilitation or demolition. The injury to the community will be corrected.

In other words, all respondents - petitioner or owner - have the same right to abate, intervene and redeem.

The procedure for conservatorship requires immediate improvement supervised by the Court. Therein lies the advantage to the community over a Judicial sale. A Judicial sale occurs when two previous annual Upset Tax Sales for tax arrearages failed. A property is placed upon a Repository List. Any person assuring a minimum payment of $1000.00 to the County may have a property on the Repository List scheduled for a Judicial Tax Sale. As a Judicial Tax Sale is a public auction, any person may bid. All past tax liens and any mortgage or loan lien are cleared. But, the winning bidder has no future obligation to rehabilitate or demolish. They have a future real estate tax liability. They will have a current obligation to minimally secure the property and minimally meet building code requirement for grass, shrubbery and trees. So, a blighted and abandoned property acquired at a Judicial Tax Sale, unless a petition is filed, can remain blighted and abandoned.

The Act presupposes after completion by the conservator of the rehabilitation or demolition that a sale will occur. All real estate tax liens, municipal sewer liens, municipal water liens are first to be satisfied in a sale. But, then the conservator has the first private lien ahead of all others. Therein lies a risk to the conservator if the contingent government arrearages are not satisfied by a sale. An incentive for petitioners under the Act would be for the affected County, School District, Municipality to waive all arrearages delinquencies in order to see blighted and abandoned properties rehabilitated or demolished. Otherwise, government liens will discourage petitioners. The worse risk for a government is to perpetuate blight and abandonment in the slight, speculative hope of recovering lost revenue as opposed to creating an incentive for petitioners. Not making such an incentive is absurd as the Judicial Tax Sale wipes the government lien and private lien slate clean.

Here is the elegant part of the Act. The County Court of Common Pleas oversees the case from initial petition to termination of the conservatorship. The Court appoints the conservator and the detailed conservator plan. As mentioned, the Court can grant a lien or security interest with priority over all other lies with the exception of government liens. The Court can authorize the conservator to sell the property being clear of all other liens, claims and encumbrances other than the amount in tax delinquency. The Court is authorized to approve the distribution of the proceeds of the sale.

In going to Court, the petitioner as “a person of interest” files a petition showing the property meets the statutory conditions previously discussed with documentation supporting the claims. For example, the Court needs photographs of the property, plot map, identification by street address and property identification number, condition report made from a point of public access by an architect or engineer. The conservator will be identified in the petition. A preliminary plan of rehabilitation or demolition by an architect or engineer will be submitted to the Court.

The Preliminary Plan will describe the petitioner, provide a site plan and map, photographs, inspection report - feasibility data and cost estimate. The Preliminary plan will also provide a structural assessment from public access. Sources of financing based upon the cost estimate will be demonstrated. And, the future conveyance after rehabilitation or demolish will be discussed as to how the conservatorship will be terminated.

These are the steps leading to the first hearing of the petition. All parties with an interest will be notified per the legal principle of lis pendens. The petition will be served upon the parties. At the hearing, the owner can defend his possession and control be committing to rehabilitation or demolition. If there is no defense, then the conservator is appointed and the conservator now controls the property. Again, in either case there is a final plan for the property. The owner must post a performance bond if a defense has been made with a commitment to rehabilitate or demolish by the owner.

Now then, getting it done is the next order of business. The Court appoints the Conservator. The Conservator now has a right of entry. With that, a final plan is created and presented to the Court for its approval and supervision. In the final plan the conservator gives the who, what, when and how of how the plan will be accomplished. The financing will be identified and confirmed. The Court issues an order to begin based upon the final plan.

While what has been discussed has been for a citizen property owner as an injured party of interest to petition for conservatorship, the Act provides a hierarchy of the right to petition. First is the senior lien holder. Second is a nonprofit organization in the community. Third is a governmental unit. Then the individual may petition.

The conservator must demonstrate the competence to develop a preliminary plan. They must be able to take possession and control upon appointment. That requires securing the property by erecting appropriate safeguards and thus controlling the property. Further competence must be demonstrated to implement the final plan and in doing so provide status reports to the Court.

Then ultimately the Court will supervise the disposition of the property. In doing so the Court may authorize a private or public sale.This summary was based upon an article written by Attorney Melanie B. Lacey in the Spring 2017 issue of the Urban Lawyer, American Bar Association entitled, Fix It or Lose IT: The Allure and Untapped Potential of Pennsylvania’s Abandoned Property and Conservatorship Act. 







Abandoned and Blighted Property Conservatorship Act 68 PA. CONS. STAT [section] [section] 1101-1111

25. Which way?

The primary tool to deal with the deteriorated and abandoned house discussed at the City Council meeting during the public comments time on 05-16-18 is a voluntary sale by the owner to the affected neighbor to the property. Should that not happen, then the Code office can move beyond an effort to get voluntary compliance by making formal code citations. 

Pennsylvania law provides for criminal prosecution for ignoring code citations. 

Perhaps the owner can buy his own sawzall and three dozen blades and nibble the house down. He will have to use his own toter for disposal. The house cannot economically be rehabilitated and must be demolished. 

The irony is that the house can be sold to the affected homeowner. He can do a bootstrap demolition, grading and seeding and ignore real estate payments yet control the property. It will go to Upset Sale. It is highly unlikely that it might be sold. Then it will go on the Repository list and become a zombie property. Given the hassle and expenses of a tax appeal, that might be a pragmatic way to proceed? Sadly such a course is within the law but as many things might be legal, theri doing is immoral. This was mentioned only as it might be the pragmatic course!?!

24. Owner of blighted and abandoned properties - some insights and thoughts

Now the fellow who owns the deteriorated and abandoned building discussed at the City of Sharon Council meeting this on 05-16-2018, has on the Tax Parcel webpage ownership of 152 properties in Sharon, Pa. 

When queried the owner was unsure of the number of the properties he owned. In conversation with the owner it was determined that 2/3's roughly were generating rents. So, that would be 100 properties generating rental income. It is likely more as many of the properties have more than one apartment / living unit. 

As the rental company this fellow owns has currently listed 11 rentals averaging $517.00 a month that will be the monthly dollar amount used for these observations. As such 100 X $517 represents a gross rent of $51,700 a month or a $620,400 annual gross income. During the course of the meeting he shared that he pays his maintenance crew employees $10.00 an hour. Let's guess that his costs for maintenance of his rent generating properties and the administrative overhead might total $150,000. 

In an article published in the local newspaper 05-12-2018 it was reported he shared with the writer at the paper that he had quarterly waste disposal costs of $8800 or $35,200 annually. He indicated his annual tax bill was $175,000. His sewer fee was $5,500 a month or $66,000 a year. The total estimate for his annual costs is $276,200. 

$150,000 + $276,200 = estimated total annual costs $426,200.

$620,400 estimated gross rental income - estimated  total annual costs $276,200 = $194,200 estimated total net income.

This owner is concerned about the code inspection fee currently before City Council!

24. How Blight and Abandonment Injures Citizens

At the Sharon City Council meeting on 05-15-2018, a citizen shared that the property beside his home was blighted and abandoned. Coincidentally the owner of the property was in attendance. 

The citizen described that the house was stripped to its studs without function heating system, water supply, elctricla system, etc. Photographs were shown of an exterior with a non-functioning flaked paint, an absence of gutters, non-functioning exterior steps. Photographs were shown of a gutted interior with floors strewn with broken wooden lathing. 

The owner indicated he was unaware of the condition of the house and that he look at it after the meeting. He said he would be happy to sell it to the citizen. 

Examining the Tax Parcel website maintained by the County it was learned that it was sold to the current owner 06-25-2015, for the sale amount of $150.00. (4 L 54). The webpage further showed that the County tax is $204.57, Municipal tax (Sharon) is $643.65 and the School tax is $643.65. 

Given that the amount of the sale was $150.00 the assumption is that the property was acquired at Judicial Sale for the nominal figure. However, the additional administrative costs of the Tax Claim Bureau to conduct the sale would have been met for the sale and are not part of the sale price.

My suggestion to my fellow Sharonite would be to offer the current owner to double his money with $300.00 cash. Then my fellow Sharonite can nibble the building down into three foot pieces over a number of months with a sawzall and three dozen blades. Disposal could be through his toter and any space his neighbors might share with their toters!

23. General comments about the tools for revitalization

    Many communities in Pennsylvania have an inventory of obsolete, blighted and abandoned buildings. 

There are ways to address the inventory. 

Rehabilitation or demolition are principle solutions. 

Demolition is a solution when the structure is beyond an economical rehabilitation. The circumstances determining  for rehabilitation that are first and foremost are the nature of the structure’s deterioration. The structure’s degree of deterioration in light of code compliance and the nature of the building lot on which it is built upon all come together to determine economic practicality for rehabilitation. 

Then, the question of overall obsolescence of the streetscape should be considered. Older neighborhoods are often congested. Narrow streets and narrow lots unless in a city urban environment are often not conducive for an auto based community. So among solutions is demolition to lessen congestion and create off street parking. Or demolition could be a solution simply to revert a block to open space for perhaps gardens / small agriculture. Or, a block with many blighted and vacant houses might be a place to close a street, isolate water and sewer service for savings until such time the land might again be better used for housing. Finally, in some circumstances moving the structure could be an alternative to demolition.

    For some communities historical significance might be a hindrance rather than an aid to addressing blight and abandonment. The reason is simply the scope and scale of the blight and abandonment being faced. There is a place for drawings, photographs and records as opposed to retention of a wrecked, obsolete community streetscape.

    Simply put, the bulk of blighted and abandoned structures are residential; the problem of blight and abandonment is a focus upon residences.

    It is not unusual to visit communities in Pennsylvania where something ( manufacturing or mining or refining or drilling or transporting) used to be done there. Economic change means less employment and less population. Bringing the supply of sought after housing together with demand for sought after housing is the first order and purpose of addressing blighted and abandoned houses.

    Blight and abandonment destroys the base real estate values for an entire community. It fundamentally undermines the the real estate market and as such, household wealth as represented in home ownership is damaged.

    A municipality affected with blight and abandonment often has a real estate market that does not function. Addressing blight and abandonment aids in restoring a functioning real estate market. First, a municipality using available community and economic and planning tools can create an environment for rehabilitation and investment.

   Part of creating the environment an environment for rehabilitation and investment is demolition to lessen the inventory of excess housing stock.

A municipality is faced with decisions. Should an initial demolition be limited to maintaining and strengthening a viable neighborhood similar to excising a cancer to assure neighborhood stability? Or, should it be a candidate for rehabilitation itself. Each house has its own set of circumstances.
A municipality may identify a block that is substantially blighted and abandoned. Should the block be demolished? Might a structure be retained as a future anchor for rebuilding the block?

Might there be a sound structure useless in a sea of abandonment but having residual value if moved?

Most municipalities have just enough, barely enough all too often, to have functioning  police and fire fighting resources, street maintenance, star and sewer services. A municipality faced with depopulation has limited tools to address blight and abandonment.

One tool available in Pennsylvania is a municipality, a township or a county creating a “land bank.” 

Another tool is for a municipality, a township or county creating incentives for citizens to petition the County Court of Common Pleas to authorize a conservatorship to rehabilitate or demolish a blighted and abandoned property. Primarily that might be the waiving of all amounts in real estate tax delinquency as a conservatorship is  pruposeful AND supervised by the County Court of Common Pleas.

Likewise, the waiving of delinquent real estate taxes in Land Bank acquired properties where a Land Bank has similar oversight for rehabilitation or demolition as to the oversight by the County Court of Common Pleas by the Land Bank's ability to contract will result in contributing to a balance of supply and demand for sought after housing.

22. What is a Real Estate Conservatorship?

Under Pennsylvania law there is a process that allows a property owner within a municipality who has property within 2000 feet of their property to seek a conservatorship over an abandoned and blighted property. The underlying principle in the law is that blighted and abandoned property injures all properpty owners with a loss of value to their property. The purpose of the real estate conservatorship is to rehabilitate or demolish the abandoned and blighted property. The whole procedure is subject to the supervision and oversight of a County Court of Common Pleas. 

An architectural / engineering preliminary plan is submitted to the Court leading to a Final Plan. The law provides for the rights of the owner. Subsequent to rehabilitation / demolition the Court may direct the nature and method of sale of the revitalized property. Typical legal and architectural / engineering fees range $3500.00 to $7,500.00. The petition process typically runs from 3 to 6 months. Should the owner assert their right to rehabilitate / demolish; the property owner who made the petition will have his fees plus 20% paid by the owner before the owner rehabilitates  / demolishes. The owner will be subject to the oversight as a conservator would have been supervised. The blighted and abandoned property may or may not be in a delinquent tax status.

21. Once again, What is a Land Bank?

The administrative procedure available to revitalize, restore and rehabilitate deteriorated, blighted properties is called a “land bank.” Pennsylvania’s land bank enabling legislation of 2012 authorized, for the first time, the creation of public entities to organize and confront the problems caused by vacant, abandoned, and tax delinquent properties through the creation of new tool
Advantages of a land bank include the ability to convey real estate without a redevelopment agreement. It may acquire property listed for judicial sale through direct purchase. As such, a land bank has priority to acquire at Judicial Sale over all buyers. The land bank may file quiet title petition and obtain a quiet title judgment within 120 days.
As to tax policy and provisions, there can be collaboration between a land bank and taxing authorities ( municipal, school district, county) to support revitalization and restoration through having tax claims and liens discharged. Acquired property might be held tax free based upon taxing entities’ collaboration. Further collaboration might be made for the land bank to retain 50% of taxes for five years after completion of rehabilitation or demolition as a funding stream for the land bank.
The land bank has the authority to contract. As such, a land bank could create rehabilitation / demolition goals for properties being sold. A land bank could list for public sale properties with nominal dollar amounts, for instance. The contract for the sale would stipulate that the buyer submit a professional architect / engineer rehabilitation plan for the property. With the plan there should beconfirmation of a source of funding. The buyer may be required to post a performance bond. The land bank would have regular completion reports submitted by the buyer in order to assure contractual compliance with the sales contract.
The land bank can establish priorities, for example, affordable home ownership could be a primary purpose and goal of the land bank.
The land bank can design, develop, construct, rehabilitate, lease or otherwise dispose of real property.
(See: http://www.pablightlibrary.com/quick-guide-land-banks-101/. Land Bank Informational Handout - Lancaster County Housing and Redevelopment Authorities (March 2016)

20. How can a Redevelopment Authority address blight?

Condemnation: Condemning Properties Using Blighted Property Review Committee of a Redevelopment Authority.
Under Pennsylvania law, a redevelopment authority may use the power of eminent domain to take individual abandoned properties. Condemnation is a powerful and controversial tool. Fortunately, the threat of condemnation is a powerful motivator, and chronically  unresponsive owners often bring their properties up to code or to sell them during the 12- to 18-month condemnation process.
What does it do?
For a redevelopment authority to acquire a blighted, vacant property under the Urban Redevelopment Law, it must appoint a Blighted Property Review Committee (BPRC) to evaluate whether the property meets the definition of blight, based on the criteria in the statute. If the owner refuses to make corrective repairs on a property identified as blighted, the redevelopment authority may proceed to condemn the property after conferring with the appropriate planning commission and the blighted-property review board. The BPRC, with representation from the county commissioners or city council, the mayor, the planning commission, and the redevelopment authority, is responsible for determining and certifying properties as blighted, making them eligible for redevelopment authority acquisition. The state defines 11 criteria as blight, and a property needs to meet only one condition to qualify as blighted.
Under 35 P.S. § 1712.1(c), a blighted property in Pennsylvania must meet 1 of the following 11 criteria:
Public nuisance
Attractive nuisance to children
Accumulation of trash and debris or haven for vermin
Unfit for human habitation
Fire hazard
Lack of water, gas, or other utilities
Tax delinquent for two years and vacant
Vacant and not code compliant within a year of receiving notice of violations
Abandoned property with municipal liens exceeding 150% of value
Defective or unusual condition of title
Environmentally hazardous conditions or contamination

How Can a Redevelopment Authority Pay For This?
Condemnation can be funded through Community Development Block Grant funds if the acquisition of the property will address a serious public health or safety issue, or through general operating budget funds.
The latter stages of eminent domain are costly. Early hearings and notice to owners are not. But for the tool to be used effectively, the redevelopment authority must be prepared to follow through and to complete the condemnation when the owner fails to take action.
What types of property are covered?
Any property that is blighted under the definition of the Pennsylvania Urban Redevelopment Law (P.L. 991, May 24, 1945).
What challenges will it solve?
This tool allows a redevelopment authority to gain clear title and control of blighted properties where blight negatively affects surrounding communities. Although eminent-domain power should be used sparingly because of its high cost and its relative unpopularity with the public, it has been very effective in motivating the owners of blighted properties to make corrective repairs. The process provides owners with multiple notices of potential condemnation and almost a year to retain their properties by bringing them up to code. When the fear of losing a property is not sufficient incentive to bring a property up to code, the redevelopment authority will pay fair market value for the property based on an appraisal. .
Where does it apply?
Any jurisdiction with a redevelopment authority. State law allows all cities and boroughs with a population of over 10,000 to form a redevelopment authority.
How does it work? What is needed to use this law effectively?
The process to condemn a property takes 12 to 18 months from initial identification. After a municipality decides that a property may meet the definition of blight, it sends a warning letter to the owner. If the owner fails to respond adequately, a notice of determination hearing is sent to the owner. At the hearing, the municipality presents evidence of blight to the blighted property review committee, and the owner may respond. The BPRC then holds a blight determination vote. If the BPRC determines that the property is blighted, a determination order is sent to the owner, saying that a certification hearing will be held within 60 days. At the hearing, the BPRC will vote to decide whether to certify the property as blighted. If the property is declared blighted, a certification order is sent to the owner. Next, the redevelopment authority issues a declaration of taking and a statutory offer to pay a specific amount for the property. The property owner has 20 days to object. If the owner offers no objection, the redevelopment lawyer goes to court to pay the just compensation or the fair market value of the property and is granted a writ of possession. If the owner objects at this point, the case moves to the county court of common pleas. If the owner does not object, the municipality owns the property once the check is sent to the property owner. If the owner objects at this late date, the complaint goes to the board of review, but the owner may dispute only the fair market value of the property.

What policies and practices will increase  Redevelopment Authority’s chances of successfully using this tool?
Provide repeated notice to the owner at each stage in the process so that the owner has every opportunity to come forward and care for the property or transfer it to a responsible owner. In the few cases where it is necessary to complete the condemnation process, it is essential to condemn the property and incur the costs in order to create a clear and consistent threat that will compel other owners to be accountable. Once properties are condemned, they should be transferred to a responsible new owner and rehabilitated or redeveloped.
Acquisition is costly, so condemnation must be deployed strategically.  As an example, Allentown and its redevelopment authority devote priority attention to (1) properties that have been declared unfit for human habitation, (2) properties located in Allentown’s central-city neighborhoods, adjacent to or near downtown, and (3) properties located in areas where city inspectors are conducting inspections (so that redevelopment authority acquisitions can complement the inspection process as needed).What legal documents will be needed?
The redevelopment authority has all legal documents and notices required to condemn a property.
Have municipality’s used the tool?
In Cumberland County, the threat of eminent domain has motivated many owners of blight-certified properties to bring their properties up to code. Between 2000 and 2008, municipalities referred more than 100 vacant properties to the Redevelopment Authority of Cumberland County (RDACC) for condemnation, and only 5 were taken through the entire eminent domain process and condemned. After 2008, the number of eminent domain actions brought by the RDACC decreased dramatically—to approximately 20 between 2008 and 2013. Four of those failed to motivate the owners and went through the eminent domain process. The significant reduction in the use of eminent domain is in large part due to the institution of a new practice that requires municipalities to pay for both RDACC legal fees and just compensation to the owner. Before 2008, the RDACC funded all aspects of the eminent domain process. In addition, before 2008, Cumberland County had in-house counsel, who shepherded the cases through the process. Today the RDACC contracts out for legal services.
How can redevelopment  be combined with other strategies?
This tool should only be used after code enforcement and other less costly tools have failed to bring the properties up to code. Allentown used eminent domain in conjunction with its hall of shame.
(See: http://www.pablightlibrary.com/condemn-properties-using-blighted-property-review-committee/  )

19. What is a Redevelopment Authority?

The municipal authority in Pennsylvania is defined as “a body politic and corporate” created to finance and / or operate specific works projects without tapping the general taxing powers of the municipality. An authority is an alternative vehicle for accomplishing public purposes rather than through the direct taxing authority of a county, municipality or school district.The present Municipality Authorities Act was approved June 9, 2001 (P.L. 287, No. 22) and is codified at 53 C.S. Section 5601 - Section 5622. The Act requires that the public works project must be in the proprietary field of government, must have a public interest and must be self sustaining. Specifically, Redevelopment Authorities are addressed at Urban Redevelopment Law, Act of May 24, 1945 (P.L. 991, No. 385)  35 P.S. § 1701.

“Redevelopment area.” Any area, whether improved or unimproved, which a planning commission may find to be blighted because of the existence of the conditions enumerated in section 2 of the act of May 24, 1945 (P.L. 991, No. 385),4 known as the Urban Redevelopment Law, so as to require redevelopment under the provisions of the Urban Redevelopment Law or this act.

18. What is the Building and Maintenance Code?

Most municipalities in the United States have adopted standards known as the International Building Code.  As such, it addresses both health and safety concerns for buildings based upon prescriptive and performance related requirements. See: https://en.wikipedia.org/wiki/International_Building_Code.

A municipal building and maintenance code is the first line of correction in addressing property deterioration. Repeated refusal of a property owner to comply with a code citation can lead to criminal prosecution. Code enforcement is dependent upon being able to serve code citations upon known owners. Owners living beyond The Commonwealth of Pennsylvania may be in noncompliance with code enforcement with little motivation to comply. Out of state owners subject to criminal prosecution will if arrested and in the Commonwealth, say a traffic stop, potentially will be subject to action based upon the criminal database available to law enforcement.

17. How Else might Blight be Characterized?

A subjective description of blight is a property or group of properties or neighborhood that in its overall condition that substantially impairs or arrests the sound growth of a municipality, retards the provision of housing accommodation, or constitutes an economic and / social liability. As such, it blight is a menace to the public health, safety, morals or welfare. Blight creates the existence of health, safety, or welfare factors requiring high levels of municipal services or substantial physical underutilization or vacancy of sites, building or other improvements.

16. What is Blight?

An objective definition of Blight refers to properties not in compliance with a municipal building code. The first evidence of blight is overgrown grass, weeds, unkempt and ragged shrubbery, trees and shrubbery intruding upon the structure. There are self seeded trees characterized as “urban weed trees, etc. Graffiti on the property is blight. The property lot is a site for trash, rubbish, litter, solid waste, and / or used tires. Unlicensed / non-operational vehicles are on a lot for a month or more and into the indeterminate future. The Structure  walls are without paint or the paint has severely cracked and peeled such that it no longer protects the structure from the elements and deterioration. Masonry mortar is cracked and loose allowing for water infiltration. There are damaged and open windows and doors. Gutters and downspouts are absent or in disrepair allowing for water infiltration to a building foundation. A building foundation is not true and square with evidence of deflection or inward bulge indicating failure. A structure entrance or porch is in disrepair, the steps are in disrepair and pose danger in their use. Roofing material is absent and / or the roof has holes.  If there is access to the structure, all walking surfaces floor and stairs may not be safe or functional. Walls have damaged or absent surfaces. Water and sewer lines are not in repair and full functioning. The electrical system maybe nonfunctioning or insufficient. Natural gas service is nonfunctioning and a threat to the welfare of occupants or surrounding properties. Heating systems  structure heat and water heat, are obsolete and pose a safety or fire risk. Refuse, trash, litter in the structure poses a health, safety or fire risk. Vermin, insect or animal infiltration pose a health and safety risk to occupants and are a source of invasion and infiltration to nearby properties.

15. What is a Judicial Tax Sale?

Properties not sold at two consecutive annual Upset Tax Sales are then placed on a repository list by the Tax Claim Bureau. Some Counties have a procedure to immediately undertake action steps to schedule a Judicial Tax Sale of properties on a repository list. Most often a County Tax Claim Bureau waits for an interested buyer to ask that a property be scheduled for a Judicial Tax Sale. A commitment to minimally pay the administrative costs in preparing the property for a Judicial Tax Sale auction must be made by the interested buyer. The reason is that the provisions of the Pennsylvania Real Estate Tax Sale Act must be met. The principle compliance purpose is to assure that the owner and lien holders are notified of the Judicial Sale. This is an effort under the law to give the parties a way to continue possession and control before a Judicial Sale auction occurs. It is a way to avoid deprivation of property rights without due process.  The Judicial Sale sells the property free and clear of all County, School District, Municipal, tax liens, and private liens.

14. What is an Upset Tax Sale?

The first time a property with a delinquent real estate tax is exposed to tax sale is the Upset Tax Sale. The Upset Tax Sale is held in September of each year. The sale as a public auctioned is held at the County Court House. The minimum bid required is an amount to cover back taxes, current taxes and the administrative costs of the Tax Claim Bureau to conduct the sale. However, the buyer may gain ownership, possession and control but all other liens: municipal sewer fee liens, municipal water fee liens, mortgages, encumbrances / loans remain active. A Tax Claim Bureau cannot make any representations about the property, warranty or guarantee. Properties bought at an Upset Tax Sale are bought at the risk of the buyer or as what is known as “caveat emptor.” Note: often an Upset Tax Sale is confusedly referred to as a Sheriff’s Sale. A Sheriff’s Sale is a public sale of a property but its purpose is not to collect taxes owed. A Sheriff’s Sale is conducted to satisfy a private lien holder. Most often a private lien holder is a mortgagee which is often a bank.

13. What is a tax sale?

A Tax Sale is for properties that have delinquent real estate taxes on them. If a property owner does not pay their real estate taxes, the local tax collector turns them over to the County Tax Claim Bureau for collection. The Tax Claim Bureau follows a Commonwealth mandated process to collect the delinquent tax and if after a period of time the tax is still owed, the Bureau holds a Tax Sale known as an Upset Tax Sale in order to get payment of the back taxes.

12. What is lien?

A lien is a legal claim for the satisfaction of a duty or debt upon real estate property. The first legal claim by law is for a duty is to pay real estate taxes.  Liens upon a property are established by law. Government liens are ahead of privates liens for repayment. A tax lien has first priority for payment in a tax sale.The first private lien is a mortgage. The order of liens refers to the priority of repayment upon sale of a property. Lien priority or rank of a lien is established by law. The process and procedure to sale a property to satisfy a lien is established by law.

11. Every property owner in a municipality is Injured by Blight and Abandonment

How has every property owner in a municipality been injured by blighted and abandoned properties? 

Blighted and abandoned properties depress all property values, they are a health and safety hazard, they are a nuisance and harm an ordered community.

So, as an injured party living in a municipality, what other ways can blight and abandonment be addressed in Pennsylvania?

Another tool for revitalization is available to any person owning a property within a municipality with blighted and abandoned property. The blighted and abandoned property must be within 2000 feet of the person's property. As such, a private person may petition the County Court of Common Pleas to gain control of the blighted and abandoned property in order to rehabilitate or demolish it. This is known as a real estate conservatorship. Detailed action steps are provided by law with ongoing supervision of the process by the Court. The owner has rights which the owner may exercise. As mentioned, the principle underlying the law is that every member in a community is injured by the existence of blighted and abandoned property. As such, a property owner, a municipality, a non-profit within a municipality, church, etc may petition for a conservatorship of blighted and abandoned property.

10. Making a market work

Remarkably, there are people who believe that a land bank would interfere with the market for properties on the Repository List eligible for Judicial Sale. 

The agedness of the listings and the magnitude of the list argues against such a belief. Instead, it argues for an administrative procedure that will effect revitalization and restoration - a catalyst, a “structure and land revitalization bank.”

9. What Tax Revenue Has Been Lost to Tax Zombies

The repository list for Sharon, PA alone represents some $6 million dollars in lost real estate tax revenue. 

As a rule of thumb, the total City, School District and County real estate tax bill is distributed as 50% to the School District and about 25% each for the City and the County. So, the repository list represents $3 million dollars lost to the School District and $1.5 million dollars lost each for the City and the County. 

The oldest repository listing for the City of Sharon is 1970. Most date in the range of 2000 and newer.

Without a catalyst, a “structure and land revitalization bank,” the properties are tax zombies.

8. What is a LAND BANK? Further comments

"Land bank" is a stupid name for a catalyst for revitalization. That's the misleading name applied to a government administrative procedure that can effect community revitalization, reinvigoration, restoration. ( If I were Johnny Cash, I would sing, " And if I ever have a son, I think I'm gonna name him... Bill or George! Anything but Sue.") But, "Land bank" is what the appellation is.

A land bank must conform to the provisions of Act 153 of 2012 (HB 1682), 68 Pa. CS. Sections 2101 et.seq. The authorizing ordinance for a land bank is reviewed by the Department of Community Affairs (DCED). DCED then has an annual audit oversight of a land bank. As the land bank is an entity with the authority to contract, the land bank's name is registered with the Department of State.

A land bank can sue and be sued in its own name and be a party in a civil action, including an action to clear title to a land bank. The land bank can enter into contracts and other instruments necessary, incidental or convenient to the performance of its duties and the exercise of its powers. A land bank can and should and might create a hierarchical ranking of priorities such as owner occupied houses, affordable housing, architectural preservation as part of rehabilitation, open public land, public space, conservation area, etc.

While land bank may borrow and issue bonds, a municipality can bootstrap a land bank. For example, a land bank can begin by purchasing all properties on a repository list by Judicial Sale with the timing, form and substance of the sales price to be set forth in a mutually satisfactory agreement between and among the City, the School district and the County.

In bootstrapping, funding of the land bank would come from sale proceeds or rental income. The City, school district and County could agree forego half of their real estate tax base that is restored through land bank revitalization as a funding stream for the land bank. Such a funding stream can not exceed five years under the law.

Back to the name, perhaps a better descriptive name could be “structure and  land revitalization bank.”

7. What the repository list says about Sharon PA and the absence of a LAND BANK as a catalyst

Sharon’s Properties on the Repository List - A Perspective:

The scale of the repository list for the City of Sharon is remarkable. It has some 600 plus properties. 

In comparison, the City of Altoona has a population 29,554 down from 70,000 in 1950. It, like Sharon had substantial employment loss when the Pennsylvania Railroad shops there converted from steam locomotives to diesel locomotives in the mid  - 1950’s. Labor intensive steam locomotives were replaced by efficient diesel locomotives. Diesel locomotives were bought from outside manufacturers where before some 50% of the steam locomotive fleet had been built by the PRR in Altoona. Virtually all the maintenance and repair components for the steam fleet had been manufactured in Altoona. The economic pressures of highway transportation lessened demand for railroad transport. No more passenger cars were built in Altoona. Fewer freight cars were built. There was less maintenance of both the freight car and passenger car fleet. 

In comparison the decline and disappearance of manufacturing jobs in Sharon happened decades later than for the earlier disappearance in Altoona. Consequently, today Altoona has 1092 vacant residential structures out of housing stock numbering 13,397. The repository list for the City of Altoona is the neighborhood of 140. 

The City of Sharon has an exceptional challenge as it also has 1000 vacant residences according to the Census Bureau. Some may be blighted and abandoned. Some may not be blighted and abandoned. Some may be tax delinquent. Some may be up to date in taxes. The point is that there is a supply and demand imbalance with such a vacant residence statistic.

6. Directionless and Judicial Sale results

While the Judicial Sale is an open and public market, the market results are without direction or purpose. A municipality is not able, beyond the enforcement of the building code, to direct or give purpose to the property. The buyer merely has the cost of acquisition, future tax obligations and the minimal costs of code compliance - grass, shrubs, trees and security. 

BUT, the municipality has the external costs inherent to the property. Any blighted and abandoned property diminishes property values for the citizens owning property in a municipality. A blighted and abandoned property substantially lessens the desirability of any neighborhood. There are the external costs of street maintenance, sewer service, water service, electric utility service, fire and police, etc. In other words, in the case of  blight and abandonment, every property owner in a municipality is injured by blight nnd abandonment. They are injured parties

A solution to creating direction and purpose for properties on the repository list is an administrative procedure in which an entity of a municipality can be created under Pennsylvania law. The administrative entity has the ability to create a public market with all liens cleared PLUS the ability to contract. That is, properties can be sold subject to the buyer committing to rehabilitation or demolition. Performance bonds can be part of the contract. The sale by the municipality will not be complete until the terms and conditions for rehabilitation or demolition are met. Preferences can be established. For example, owner occupancy or adjacent owner control, etc.  First and foremost, affordable home ownership comes to mind as a preference.

The name of the administrative entity is a “land bank.”

Often there is the presumption that the properties on a repository list are abandoned. Surprisingly, this is not always the case. It is possible to have a property on the repository list and continue to occupy the property. In Mercer County, unless an individual seeks for a property to be placed on a Judicial sale, the owner simply continues in a real estate tax free status!

One such glaring circumstance was discovered while examining the respository listings for the City of Sharon. Two rental properties and a residence by the same owner were found. One of the rental properties was placed on the respository list in November of 2008. Its has an accrued arrearage of $22,140.40 (4 G 12). Another rental property by the same owner was placed on the list in December of 2010 and has an arrearage of $20,543 (4 G 10). The residence by the same owner was placed on the list in November of 2007 and has an arrearage of $67, 675 ( 1 P 25). The total is currently at $110,358.44.

Such a remarkable situation could change if a person sought the properties to be listed for Judicial sale. It is assumed that the current owners would not have a right of preemption as they would in an Upset Tax Sale. There, in an Upset tax Sale, as owners, they can prempt, that is, take precedence in repayment of owed taxes over persons interested in doing so prior to an Upset Tax Sale.

Now a Judicial sale would subject the properties to competitive market bidding that the owner may or may not meet and surpass. Should the owners in this example prevail as the highest bidder at Judicial sale they might do so for considerably less than for the actual tax arrearage and at the same time have any and all other liens that might exist cleared, null, expunged. A business practice of nonpayment of real estate taxes would be changed to a new baseline into future as tax lens and other liens would be expunged!

While a repository list is a theoretical market for tax delinquent properties, by itself it is useless without a catalyst. A catalyst is a substance added to the components of a chemical reaction that with the addition of the catalyst makes the chemical reaction happen to form a new substance. No catalyst, nothing happens.

A “land bank” can be the catalyst to create direction and purpose for a property at Judicial Sale.

5. Disadvantages to a municipality as to Judicial Sale results

A major problem with a Judicial Sale is that there is no action required by the municipality, school district or county to rehabilitate or demolish for the winning bidder. There is simply an obligation to pay the real estate taxes into the future. And, there is nothing to compel the winning buyer to pay future taxes beyond the Upset Tax Ales / Judicial Sale cycle.

Of Course,  the winning buyer can be cited under the municipality building code.The property shoulde be in compliance with the municipal building code. So, as such, an abandoned and blighted property must be secured and surrounding grass, trees, shrubbery maintained. Often the buyer is not sophisticated and merely pleased to acquire a "bargain" not understanding the cost to rehabilitate or demolish. Another "zombie" abandoned property is the result. Or, there is a situation where a person of means and capacity just simply buys at Judicial Sale collecting properties almost as if they are exhibiting the psychological disorder of hoarding. More zombie properties.

4. An observation about properties on a County repository list

Not all blighted and abandoned properties are on the Repository List.

Not all properties on the Repository list are blighted and abandoned.

3. Some thoughts and notes about real estate delinquency - arrearage

Many of the  abandoned and blighted housing structures in Sharon, PA are in a tax arrearage status. That is delinquency. Real estate tax arrearage is a two step process. Properties with unpaid real estate taxes for a year are posted on the annual Mercer County Tax Claim Upset T ax Sale. When a property is listed for a consecutive year with unpaid taxes and not sold at the Upset Tax Sale, then the property is placed on the Mercer County Repository list by the Tax Claim Office. Unpaid taxes are a first lien on a property. A mortgage and then other debts may be other liens on a property and they follow the tax lien. In other words, after the tax debt the next debt in the lien order is a mortgage followed by possibly other liens. An Upset Tax sale typically sees the current owner bringing the tax bill up to date.  All other liens continue. Two consecutive years on the Upset Tax Sale list places the property on the Repository List. There it sits until a person requests that the property be scheduled for a Judicial Sale. The person requesting that the property be placed in a Judicial Sale must commit to a minimum $1,000.00 payment. The Judicial sale is open to all bidders. A property sold at Judicial Sale is cleared of all tax liens and all other liens. The winning bidder may or may not proceed with rehabilitation or demolition. Or, they can do nothing.

2. Abandonment and Blight Defined ( A&B)

 Abandoned is a structure unused / unoccupied for six or more months. Occupants of a structure must be authorized to use the structure by the owner of the structure.  If the owner has not given permission for a person or persons to occupy the structure it is still not in use and lawfully occupied.

 Blight is a building not in compliance with building code: Unkempt to bundle like lot. Structure failure - collapsed porch, collapsed foundation wall,  collapsed roof, openings in roof,  nonexistent or damaged doors and windows - openings,  peeled paint no longer providing barrier to elements, nonfunctioning or nonexistent gutters and downspouts, failed / collapsed chimney, obsolete / unsafe electrical system, obsolete / nonfunctioning water and / or natural gas plumbing, obsolete / nonfunctioning heating system,  etc.

1. Pennsylvania Municipalities _ Need to Balance Housing Supply WIth Demand

Many Pennsylvania municipalities have had a population decline. From Blight to Delight. Sharon PA had a 29,000 person census in 1950. The 2016 census estimate by the Census Bureau was 14,040. The principle contribution to the population loss was the end of major employer Westinghouse in the early 1980's. Then Sharon Steel collapsed in 1991 only to be reborn as a shadow of itself as only a rolling mill. The jobs in the melt shop were gone. Along the way there were major changes at the tube mills. The point is that the need for the housing stock for 29,000 people ended. Consequently, Sharon Pennsylvania has a total of 7559 housing units. 6055 are occupied.  There are 1504 vacant housing units.  55.6 % of the housing units were built before 1949. 40% were built earlier than 1939. (Census Bureau data as of 2016). That's the data and reason for blight and abandoned housing structures. The challenge is for the City of Sharon to adjust the supply of housing to better match the supply. How to go from blight to delight is the challenge. Forward Sharon.