42. Use / Fix It or Lose It -- Let's Review -- Conservatorship

Use It or Lose It ---- Explanation and Comments - Real Estate Conservatorship 

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

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

The Pennsylvania Abandoned and Blighted Property Conservatorship Act affords such an opportunity. The Act addresses the interests of injured third parties. WHo are injured third parties? Anyone within 2000 feet of an abandeoned and blighted property is an injured third party.

A conservatorship allows injured third parties to seek a custodial role 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. So can a municipality pursue a petiton for conservatorship.
 

A petitioner in their 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 provides 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 having priority to continue ownership and control by paying 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.

Abandoned and blighted properties may or may not be tax delinquent.  Tax delinquency does not control the Act. What is controlling is that the property is both abandoned and blighted. The Act is not dependent upon a Judicial sale.
 

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 and  delinquencies in order to see blighted and abandoned properties rehabilitated or demolished by private initiative. 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. Arguably, not making such an incentive for injured parties use the Act  is absurd.

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 any amount in tax delinquency if delinquent. 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. Thus there might be senior lien holder or nonprofit or a government unit can preempt an individual in making a petition. If they do so,they will be obligated to rehabilitate or demolish.
 

The conservator must demonstrate the competence to develop a preliminary plan. They must be able to take possession and control upon appointment. Appointment 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. The Court may authorize a private or public sale.