Tuesday, July 13, 2010

Foreclosed Property Maintenance: Model Ordinance?


In an ongoing effort to assure that foreclosed properties do not fall into disrepair, adversely impacting property values and safety issues in the community, on July 8, 2010 the City of Los Angeles Department of Consumer Affairs began its City of Los Angeles Foreclosure Registry Program (Registry).

The Council of the City of Los Angeles passed Ordinance No. 181185 on May 21, 2010 (Ordinance), which, among other things, requires lenders to register their foreclosed properties, makes them responsible for their maintenance, penalizes them if maintenance is not implemented, and also provides certain protections to tenant occupants lawfully demising the premises.

While such initiatives are not new - and many lenders maintain their foreclosed houses in order to assure their value - this new law is drawing the attention of other municipalities around the county as a possible model for such protective measures.

Although many lenders work with local maintenance companies to maintain their Real Estate Owned properties (REO), and the Department of Housing and Urban Development (HUD) has its own Monitor and Maintenance (M&M) system for such purposes, many small lenders have not retained such service providers.

Consequently, an ordinance such as the one passed by the City of Los Angeles has been gaining traction with certain legislators, due to the growing blight of properties in disrepair in their communities.

The Registry further facilitates the work of building inspectors to identify who owns foreclosed and abandoned homes, specifically, the beneficiary (i.e., a lender under a note secured by a deed of trust on any unimproved or improved residential real property) or a trustee (i.e., the person, firm or corporation holding a deed of trust on such property).

Many other municipalities in California have adopted ordinances requiring registration and maintenance of vacant properties. For instance, cities in California that have enacted somewhat similar ordinances requiring registration of foreclosed properties include Fresno (Fresno Municipal Code Section 10-620PDF 12x12), Oakland (Oakland Municipal Code Chapter 8.54PDF 12x12), and San Bruno (San Bruno Municipal Code Chapter 5.26PDF 12x12).

The extent to which certain provisions of the Ordinance, as written, are enforceable under state and federal law may be questionable, and it is therefore possible that such provisions will be susceptible to legal challenge. Beneficiaries, trustees and any others affected by the Ordinance may wish to consult with legal counsel to understand their obligations under the Ordinance and the best practices to comply with such laws.

If you have any questions about this matter or would like assistance with mortgage compliance, please contact Jonathan Foxx, Managing Director or call 516-442-3456 x 100.


Certain Features

  • Effective Thursday, July 8, 2010.
  • Lenders are responsible for cleaning up their foreclosed properties to prevent further blight and nuisance.
  • Lenders are responsible for maintaining the property as soon as they issue a Notice of Default.
  • Allows the City to fine mortgage lenders $1,000 per day per violation, up to $100,000.
  • Lenders must register their inventory of homes in default in the City of LA Foreclosure Registry Program.
  • Applies to foreclosed homes only in the City of Los Angeles.
  • Consumers can report problem properties to LA City's 311 hot line.


In addition to the foregoing, any beneficiary or trustee subject to the Ordinance must:

  • Ensure that utility services to the property are not terminated if the property is lawfully occupied
  • Perform an inspection of the property prior to issuing a notice of default.
  • Perform monthly inspections of the property, if occupied, until the default is remedied.
  • Report any change to the information contained in the registration within 10 days of such change.

Visit Library for Issuances

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City of Los Angeles Foreclosure Registry Program
Ordinance No. 181185, 5/21/2010
City of Los Angeles Foreclosure Registry Program
Registration Guidelines - Revised 7/7/2010