58. Regulating Rental Properties - Legal Principles

As a an owner of a large number of properties in Sharon, PA  has asserted his belief that increasing the renal inspection fee and requiring that rental properties have comprehensive insurance policies in force as being burdensome and subject to challenge in court, I did a little research. Here are some points from an informative law journal article.

The Supreme Court in applying the takings clause of the fifth amendment and the due process clause of the fourteenth amendment when looking at government regulations makes a number of considerations.
    1., Does the regulation amount to a physical confiscation?
    2., Does the regulation leave the property owner with economically viable use of the            property?
    3., Was the regulation enacted to prevent  a noxious use of a property?
    4., Does the regulation unfairly single out some people and force them to bear a burden that should be borne by the public as a whole?
    5., Do the benefits of the regulation outweigh the detriment to the property owner?
    6., Is the regulation necessary to effect a substantial public purpose?

When the Court  has interpreted a state regulation of private property as essentially economic legislation, it will uphold the regulation as log as it is not wholly arbitrary.

Many regulations affecting property constrain an owner’s use of a property. Examples are zoning ordinances and rent control laws. The state can require owners to maintain their property in certain ways. Property owners are required by law to expend resources to purchase smoke detectors and to place them on ceilings. In these examples the government has regulated property by virtue of its police powers.

The due process provisions of the 14th amendment addresses bad law. Is the law overboard, arbitrary, insufficiently justified, economically inefficient or unfair?

Generally, for a government regulation not to exceed permissible bounds and become impermissible, it must promote a legitimate or substantial public purpose through means that are reasonably or closely related to achieving that purpose.

These thoughts are from “Constitutional Protections of Private Property: Decoupling the Takings and the Due Process Clause” by Mark Tunick in Journal of Constitutional Law, Volume 3:3, May, 2001.

57. Municipal Ordinance for Rental Property Inspection Fee Increase

A major element to argue that a municipality has created a taking of private property without due process by its ordinance is to demonstrate that the implementation of the was cavalier, capricious or arbitrary. This came to mind when looking at an exhibit shared with the citizens in attendance at the last Sharon Council meeting. The exhibit was shared with the members of Council by the Code Enforcement Officer. He explained how the partial cost recovery for the increase in rental inspection fee was determined. Comments were made from the citizens in attendance about the proposed increase. The proposed increase was hardly arrived at in a cavalier, capricious or arbitrary manner:

56. Large Property Owner Sharon PA --- Observations

In reviewing the notes I have kept, on October 10, 2014, a meeting to introduce the concept of a structure and land revitalization bank was held. County and municipal elected officials,  employees of the county and the different municipalities, Mercer County Regional Planning Commission employees, Penn-Northwest Development Corporation staff, Community Action Partnership of Mercer County staff, Mercer County Housing Authority senior management, etc. were in attendance. A leading advocate there for a land bank was Assembly Member Mark Longietti. Among the persons presenting was Professor John Kromer and Phyllis Chamberlain, Executive Director of the Housing Alliance of Pennsylvania. The kick off meeting on October 10, 2014,  and subsequent meetings were was moderated by Mr. William Miller. Further meetings were held on  November 10, 2014 and a final meeting in April of 2015.

I believe that I was the only citizen observer, the only home owner at the meetings.

At the April 2015 meeting a large property owner in Sharon, PA,  confidently shared to the group that five and half years ago he began acquiring houses in Sharon, PA. He had begun with ten houses. He as of then had 152 houses and has another on the radar. He was paying some $100,000 a year in real estate taxes. He remembered his boyhood home and neighborhood and his concern about the decline in the community. He bought bad houses in bad neighborhoods. He declared that he took no salary. He believed that he could restore Sharon's housing stock in 20 to 25 years with or without the government. He had made a commitment to his Mother to undertake the project to revitalize Sharon, PA. He was adding investors.

In recent months this large property owner has made public statements about his commitment to revitalization. At one meeting a participant made pointed questions to him about the results of his efforts. Rather than reply to the questions posed to him the owner asked the participant if he was being threatened by the participant.

The owner at a recent meeting expressed concern about the burden an increase to a rental property fee. He believed that it was an unnecessary burden. He expressed the opinion that it would be challenged in court. He believed that such an increase kept investors from considering Sharon.

It is curious that the owner of a large number of rental properties has among them abandoned and blighted properties crying out for abatement, intervention and redemption. Perhaps revitalization is a concept that the owner does not comprehend.

55. Waiting to be Conserved and Sold

The owner of 286 Sherman Avenue (4 L 54) in Sharon, PA has some 140+ houses of record on the Mercer County Tax Parcel Viewer. The house is not habitable. It is abandoned and blighted.

The owner resides at a pleasant country location with five other attractive properties adjacent to a small lake in a rural development NW of Mercer, PA. The attractive and commodious house is not adjacent to an abandoned and blighted property. Nor are there any abandoned and blighted proerties within 2000 feet of the owner's residence. The house is probably in the $200,000 to $250,000 range.

A neighbor adjacent to 286 Sherman shared that his property is likely worthless with the house beside him. He drove a truck for a large trucking company for 29 years before he retired. He is very frustrated with the house and its condition. He is frustrated and annoyed with the owner of the property.

The owner is up to date on real estate taxes and has  crew that reportedly is haphazard in mowing the lawn.

 The blighted condition of the house is most apparent from the alley. But a photograph made throught the front door window at the front porch clearly shows the gutted interior.

The knob and tube wiring has been stripped. The lathing and plaster is stripped and piled knee high on the floor. This is what the interior of an abandoned and blighted property. It harms the real estate values of all properties in Sharon, PA. It is a public nuisance that poses a risk to the health and welfare of persons living in the City of Sharon. It poses a risk for trespass, criminal conduct and is a fire risk. The neighbor believes that water pipes have been removed.

From the alley, well maintained houses are on either side of the abandoned and blighted house. The well maintained houses might have a modest value of $40,000 due to the extent of blighted properties in the City of Sharon, PA

Here is the well maintained streetscape to the north of the abandoned and blighted house.

This is deteriorated paint and rotted wood that shows decades of neglect.

This property is a candidate for a petition to conserve: Pennsylvania Abandoned and Blighted Conservatorship Act

54. Abandoned and Blighted House Fire Harms Whole Community

Severely fire damaged house at 224 Malleable Street, Sharon, PA (4 R 43)

On June 6, 2018 a fire at 224 Malleable Street (4 R 43) caused such damage that the house will be demolished. The property was not insured. The cost of demolition will be born by the City of Sharon. 

The house was abandoned and blighted.

As the property owner has other properties. Pennsylvania law allows for the other properties to have liens attached upon them by the City in order to be reimbursed for the cost. While the tool exists, whether the costs are recovered will remain an open question into the future. 

If an ordinance existed requiring comprehensive property insurance of a landlord its absence could be a basis not to make a building code inspection for an owners other properties. 

Nearby owner occupants of houses were disturbed in their right to an orderly life by the fire as their street was barricaded by fire equipment and the noise of fire fighting. Their homes probably have smoke damage. They might have developed transitory or permanent respiratory problems. They may  have lost the use of their home due evacuation during fire fighting. They may be dealing with fear and anxiety that otherwise would not have happened to them. 

This is an example of how abandoned and blighted property injures a community as a whole as well as the immediate neighborhood.

Front porch of fire gutted house at 224 Malleable St, Sharon, PA

53. Landlord Claims Amount to a Wailing

When a municipality seeks to have rental property owners carry comprehensive property insurance it is a reasonable action to address properties blighted by fire or other means of destruction. Invariably some landlord will argue that doing so is discriminatory and in violation of the Fifth and Fourteenth amendments.

The Takings clause of the Fifth Amendment declares that private property shall not "be taken for public use, without just compensation." The Fifth applies to states by way of the Fourteenth's Due Process Clause.

The courts look at the burden an ordinance has on the property owner. Does it leave the property owner with economically viable use of the property? Does the ordinance mitigate the effects of fire or other destruction upon a property and the community? Do the benefits of an ordinance outweigh the detriment to the property owner? Does the ordinance effect a substantial public purpose?Is the cost of the ordinance a pretext to generate revenue for a municipality or the actual cost of public administration?

At the second reading for an ordinance in June by the City Council of Sharon, PA to require comprehensive property insurance a large property owner asserted that he would would address the ordinance in the County Court of Common Pleas as an unreasonable "taking."

After the meeting the property owner was asked if he based his belief upon Pennsylvania case law? Could he provide references or citations.He provided his card with its email address. To date there has been no reply to the email request to him to provide the requested information.

So, do the assertions amount to nothing more than a plaintive wailing?

52. Two Buck Chuck

A rental property owner with 9 units presented his concerns at the City of Sharon’s Council Meeting on Wednesday, June 20, 2018. He shared that the first 4 months of rental income covered his cost of ownership for comprehensive structure insurance, real estate taxes, sewer fee and waste removal fees for the year. So, the assumption is that the other 8 months rental income represents net income.

From the Mercer County GIS website the purchase price for the properties totaled $111,200.00 or $12,350.00 per unit. Assuming a median rent cost of $600 in Sharon the annual gross rent would be $64,800.00. 8 months or .66 of the gross is $42, 768.00 — nice return.

This rental property owner was concerned about the $2.00 a month increase for the fire department rental inspection fee.

Undeterred, a unanimous vote for the inspection fee increase was made.

Two buck chuck was not pleased.

51. Negligent Ownership - Abandoned and Blighted Property

So, the neighbor asked, "How can a person's real estate be denied their possession and control by the Abandoned and Blighted Property Conservatorship Act? Why can a law do that?" He knew of my interest in that law. 

I explained that the Act declares that abandoned and blighted properties harm all property owners by lowering community property values, creating property that is a public nuisance, and/ or is a risk to health and welfare, and/ or is a fire risk and/ or site for criminal activity. So, as the Act establishes and defines harm, the Act provides a remedy. 

Rehabilitate or demolish. Either the petitioner for conservatorship will remedy the blight OR the owner. The owner simply defends his possession and control by telling the court he will do the rehabilitation or demolition. 

Maybe the law should have been named the "use it or lose it law." 

The owner's defense requires that he file a plan of action, post a performance bond and be under the supervision of the County Court of Common Pleas. And, the owner must reimburse the petitioner for his costs plus 20%. If the owner allows the conservatorship to proceed he has the first right to reimburse the conservator's costs plus 20% upon the sale of the property. If he fails to redeem the property by exercising his right, then the conservatorship sale goes forward. Assuming that the there are no tax arrearages or other government liens; then the conservator is the first lienholder. 

The Act is a remedy for the owner's negligent ownership. After all, the owner always has the right to rehabilitate and redeem his abandoned and blighted property. The Act addresses the owner's control and ownership but does so assuring that the blight will be remedied. It also creates costs created by his negligence.

50. Strange Story of Abandonment and Rehabilitation in Northwest Pennsylvania

An abandoned and neglected house in Venango County was located roughly midway between Titusville, PA and Oil City, PA in the world's first oilfield of the 1860's.

The land in that oilfield was owned by farmers the length of Oil Creek. The Widow McClintock became unexpectedly wealthy from royalties paid to her by oil well owners who leased parts of her farm for sites to explore and drill for oil. Impatient in March of 1863 with the slow wood fire in her cook stove to burn more quickly, she went to a nearby oil well and collected a pail of crude oil. She added it to the wood fire in the cook stove. The resulting flashback killed her. Her adopted son, John W. Steele, inherited the farm and all the oil royalties. He was 20 years old. The estate was under the supervision of a conservator until he became of the then majority age of 21. Shortly thereafter John W. Steele through a series of stresses, not the least of which was the violent death of his stepmother became the object of scorn and ridicule as "Coal Oil Johnny."

The McClintock farm was adjacent to Rynd's farm and across the Oil Creek from what is today Rouseville. Before Colonel Edwin Drakes production of some 5000 barrels of oil from the first oil well near Titusville in 1859 the farmers in the Oil Creek Valley led a self-sufficient and isolated life in a remote section of Northwest, PA. In four years the oil production skyrocketed to over 2 millions barrels a year. The farms  changed drastically.

The 1865 drawing from Frank Leslies Illustrated Newspaper above shows the McClintock farmhouse overlooking the congested oil wells on the farm. The house was no longer part of a farm. The roads were near useless mired with a mixture of leaked oil and rainwater creating deep ruts as seen in the right foreground.

Steele had a number of life stressors. He saw the complete destruction of a farm valley, he saw the loss of life and injuries caused by the Rouse well fire that happened across the valley in 1861, he lost his stepmother in a violent flare and flashback explosion in 1863. About 1865 his young wife and their child visited her family in Philadelphia. As planned, they went ahead as Steele took care of business affairs in the Oil Creek Valley. When he arrived in Philadelphia his child was seriously ill and the family was in quarantine. That set in motion Steele's drinking and mania. From drinks on the house to buying a traveling minstrel show to chasing a train in a chartered steam locomotive the yellow press created "Coal Oil Johnny." Subsequently, he managed to sort out his life and was employed as a yardmaster for the Union Pacific Railroad in Nebraska.

The house became abandoned and blighted.

In the early morning summer with creek fog, the house looked like this in 1991:

Rear of Coal oil Johnny House, 1991

The forlorn house was saved in 2000 when it was decided by the local tourist groups to move the house to an accessible place for appreciation by the general public. It was the only surviving house in the Oil Creek Valley that was much as it was before the boom in the world's first oilfield in the 1860's. It had a significant story due to the notoriety of Coal Oil Johnny, a.k.a Jone W. Steele. But, it was located on a township road with bridge load limits that a tour bus would overwhelm. 

The house was moved less than a mile to Rynd Farm station on the Oil Creek and Titusville Railroad just north of Rouseville, PA.

Here it is today in its restored condition with the Oil Creek and Titusville Railroad passenger station in the. background:

A very strange story of rehabilitation and restoration for an abandoned and blighted house! 

The farmhouse has hints of the Greek Revival style now handsomely shown.