Auctions rise as city cracks down on code violations
By By Natalie Sherman and The Baltimore Sun
Jul 21, 2014 at 8:11 PM
Hundreds more problem properties in Baltimore are finding new buyers as the city steps up the use of decades-old law designed to root out negligent owners.
The law, which community groups pioneered in the early 1990s, allows property owners to be sued for code violations and lose their buildings if they fail to make repairs. But until recently, transferring homes to new owners through a court-appointed receiver happened in just a few dozen cases each year.
Now as part of its Vacants to Value initiative, the city is putting more focus on the law, swelling the auction lists.
"The numbers are really extraordinary," said Michael Braverman, Baltimore Housing deputy commissioner for permits and code enforcement.
In the mid-2000s, the organization appointed by the District Court to organize auctions of the forfeited properties handled about 60 each year, according to Grant Colledge, the former board president of One House at a Time. Last year, the Hampden-based nonprofit was appointed the receiver for 271 — more than four times that number.
Receivership was used in Sandtown Winchester in the 1990s, but the difficult market, in combination with back taxes owed on many of the properties, limited the program's success, said Jim Kelly, former executive director of Save a Neighborhood, an earlier auction organization. In Patterson Park, the program met with more success but remained limited in its scope, said Kelly, now a clinical professor of law at Notre Dame Law School in Indiana.
This time, Braverman said, the city has targeted its receivership efforts on cases with market appeal — in neighborhoods where vacants are the exception rather than the rule or on a group of properties where a redevelopment can have an impact.
City housing attorneys now have more time to focus on receiverships after 2009 city ordinance gave inspectors the power to issue tickets. Attorneys previously had go to court over violations.
The numbers show the stepped-up efforts. Since Vacants to Value started in late 2010, Baltimore Housing attorneys have filed nearly 1,350 receivership cases, and another 200 or so are pending, according to the city.
"We have basically completely re-engineered how we do housing code enforcement, how we do inspections, and when and how we choose to litigate," Braverman said.
Receivership laws first developed as a way to force landlords to maintain occupied buildings. Other states often require the receiver to perform the repair work or impose waiting periods before transferring ownership, said Kelly, who has looked at laws across the country. Baltimore's focus on a quick sale makes it unique, he said.
"Baltimore has a lot to offer a lot of other jurisdictions in terms of the particular way it's going about it," he said.
A case starts with tickets — as much as $900 for some violations — and if there's no action, ends up in court, where Baltimore Housing attorneys petition for an ownership transfer, a process that can take about nine months, said Katy Byrne, Baltimore Housing deputy assistant commissioner for litigation (The threat of a receiver often prompts action by itself, Braverman said.)
Once appointed by the court as the receiver, One House at a Time organizes the auction and pre-screens potential bidders to ensure they have the money and intent to start work within 12 months. Money from the sale goes first to pay the auctioneer and lien holders, followed by the fees to One House at a Time and city attorneys. Any funds left over are returned to the original owner.
The changes brought by Vacants to Value are creating enough sales volume to make the system financially viable, said board member Bill Romani, one of founders of One House at a Time, started by an attorney who bought his home through a receiver.
"You have a very hard time doing it at a volume to be able to make money doing it," he said. "As the Vacants to Value program has grown and made more of an impact on neighborhoods, so has One House at a Time."
At last week's auction, more than 20 homes sold in less than an hour. One single-family bungalow on Cedarcroft Road brought $87,000. Another two-story townhouse on Reisterstown Road netted $5,000, the minimum auction bid. Several didn't attract any buyers.
Some of the properties go to nonprofits, such as Habitat for Humanity, but the auctions have attracted a wider range of investors.
"Most other cities use the receivership as a way for nonprofit partners to rehab properties. We are basically saying we want to work at scale," Braverman said. "We can reach scale and use the market and we don't need to have the receiver rehab the houses. There are plenty of for- and non-profit developers to do that."
Isaac Ouazana, 29, a co-owner of Waz Investments LLC, which owns and manages about 100 properties in Baltimore, purchased two properties at last week's auction at the Radisson Hotel at Cross Keys.
"The good thing about One House at a Time is it's not open to everybody," he said of the nonprofit's screening process. "It's open to people who understand construction. It's open to builders that have a background of building houses."
As a result of receivership cases filed in 2012, about 234 rehabs have been completed so far, Baltimore Housing spokeswoman Cheron Porter said. As the cases work their way through the court, auction sales settle and rehabs get complete, neighborhoods should start to see more of an impact.
"It looks like a vacant house today and a year later it looks like a vacant house, but the reality is it's been pushed into the stream of commerce," Braverman said.