There's an interesting little scenario playing out in the courtroom these days.  According to the Business Week article "Dirty Deeds", the defendants in the Buffalo City, NY courtroom are there because they are being cited about their failure to fix problems. Unsightly defects like peeling paint and broken windows as well as other troublesome repair issues stemming from vandalism to their  orphaned properties. 

But these are not your normal run of the mill offenders. Beholden to the courts' jurisdiction are representatives from some of the nations most powerful banking outfits like CitiFinancial, JP Morgan and Countrywide Financial.  The prospects of these types of defendants appearing in Judge Henry J. Nowak's housing court in Buffalo may seem absurd, but they are there...and it's very serious business.

The prosecutor Cindy T. Cooper is leading a pioneering effort which may soon be adopted by cities across the nation troubled by the visceral scaring that occurs when neighborhoods are blighted by vacant homes . A similar initiative appears to be underway in Cleveland, Ohio.  In areas like the Midwest and the Rust Belt, where housing prices have fallen dramatically and the rates of foreclosure increased astronomically, some lenders have been simply walking away from the problem.  In some cases leaving entire neighborhoods abandoned.

Sometimes it's been difficult to even unravel who actually owns the title to the property. With so many mortgages being sold and transferred,  the "chain" of title breaks or becomes toxic.  So Prosecutor Cooper is bringing lenders into court to hold them accountable and threatening to hold up their other real estate transactions until they clean up the property or donate it to community groups which will do so.

Hence, another peculiar situation...lenders appearing in court with receipts, documenting in some cases thousands of dollars in repairs, to get their liens released.  However, according to the article, it's not just lenders.  Although homeowners are also cited, increasingly violations are being levied against loan originators and servicers to Wall Street trust.  It got me to thinking...could Real Estate Brokers also be implicated in this new twist of the law?

Well, that conclusion may not be far fetched.  Apparently, in 2004, New York State amended the definition of "owner" in its property maintenance code to included not just titleholders but others who had "control" over the premises.  Although the statue did not include lenders, it is now being used to force them to clean up neighborhoods on the basis of the fact that they had the "control" to kick out non-paying mortgagees.

It's a fascinating, if not somewhat frightening development for any party who has contractual obligations with homeowners.  Is there a possibility that in the future, Real Estate Brokers will be cited for violations of city code or assessed liens if homeowners fail to cut their grass or maintain their property while the home is listed because the Brokers' sign in the yard indicates a measure of "control" over the property through the listing agreement?

As the problem of Foreclosures and Short Sales continues to escalate, there will be increased pressure to save entire communities from being marginalized. The sight of thousands of boarded up homes is not something anyone wants in their community and certainly not something which most city and local governments can afford in terms of lost tax revenue.

So, what do you think about this approach to cleaning up blighted communities?  How do you feel about the prospect of city inspectors being able to issue a citation against you if the lawns are not kept green and the pool in the backyard of your home listing looks like a swamp?

Copyright 2007 Audu Real Estate  All Rights Reserved

picture courtesy of jakeliefer's photostream  on flickr

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