CITY HALL — As foreclosure rates across the region continue to climb, the City Council on Tuesday will consider formalizing a state law that imposes steep penalties on banks and housing speculators that fail to keep vacant properties up to code.
The proposed law would authorize city officials to fine new owners of foreclosed properties $1,000 for every day their property is determined to be dilapidated or blighted. Originally scheduled for a consideration on May 5, the proposed law was pulled off the agenda after the Glendale Assn. of Realtors charged that the resolution did not provide exceptions for occupied residences, said Neighborhood Services Administrator Sam Engel.
State law authorizes cities to fine lenders who fail to correct violations after receiving a 30-day notice. However, owners cannot legally take over the property until the occupants have left, said Armen Avedian, a chairman and past president of the association.
Banks and lenders often hold Realtors financially responsible for maintaining properties, sometimes even when the original homeowner hasn’t moved out of the foreclosed house. Realtors wanted assurances that the notice wouldn’t be mailed until after the house was vacated, or that the banks would have the authority to correct the problem in the interim.
“If the city is going to give a notice and then a fine, we asked them to make sure the banks have permission to enter the property,” he said.
New guidelines provide exceptions for owners of properties illegally occupied by a previous renter or the foreclosed owner. Once in possession, the new owner would have 30 days to fix the violation, which could include everything from pool cleaning and landscape maintenance to major house repairs.
Under the exception, owners would have to provide the city with documentation of the illegal occupancy, as well as paperwork proving that the eviction process has been initiated in good faith and is proceeding with no delays.
While cities are not obligated to impose fines on noncompliant banks and lenders, a rash of foreclosures and complaints compelled Glendale to address the issue head-on, city officials said.
“It’s an extra tool we can use to compel financial institutions to keep foreclosed properties maintained,” City Atty. Scott Howard said. “There’s a whole host of potential evils that come from unchecked and unmaintained neighborhoods.”
A lack of maintenance tips off vandals and thieves, who are often after copper wiring and metals, that no one is home. Other signs of a depressed neighborhood include excess trash, green swimming pools and abandoned pets, officials said.
The proposal to fine lenders comes one month after the U.S. experienced record foreclosure rates, according to RealtyTrac, a private firm that began issuing reports in 2005. One in every 374 households received a foreclosure filing last month, and the number of foreclosures in California jumped 42% from April 2008, according to the firm.
Between March 6 and April 3, Glendale saw 51 properties fall into foreclosure, according to a city report. RealtyTrac identified 251 bank-owned properties in the city dating back to January.
Some homeowners, particularly those who file for bankruptcy before vacating the property, can delay evictions by several months, Avedian said.
All fines collected by the city would be deposited into an account for abating public nuisances. The state law, signed on July 8, applies only to residential property and expires Jan. 1, 2013.
The City Council is scheduled take up the issue at its 6 p.m. meeting Tuesday at City Hall, 613 E. Broadway.