City of Lorain, Ohio Will Require Mortgage Lenders to Post $10,000 Cash Bond When Foreclosing Vacant Property

The City of Lorain, Ohio has joined the growing number of municipalities to pass ordinances governing the maintenance of vacant residential properties, by creating a vacant property registry. On October 20, 2014, Lorain City Council enacted Chapter 1541 of the Lorain Codified Ordinances, entitled "Untenanted Residential Property Certification."   The law will go into effect on January 1, 2015.

Mortgage lenders have been specifically targeted by this new law. Lenders filing a foreclosure on vacant residential land will be required to provide a $10,000 cash bond to the City, in order to assure the continued maintenance of the property throughout its vacancy and to reimburse the City for any expenses incurred in inspecting, securing, repairing or demolishing the property.

This cash bond requirement is similar to one passed by the Cities of Worcester and Lynn in Massachusetts.  The passage of those Ordinances made headlines when they came under attack by local mortgage lenders.  The mortgage lenders filed a lawsuit in Federal Court seeking an injunction against the implementation of the Ordinances.   The lenders argue that the Ordinances are invalid because they create an unconstitutional tax in violation of the United States and Massachusetts constitutions, and should also be pre-empted by state law.  The litigation remains pending, and a copy of the complaint can be viewed here.  

A similar Ordinance was passed in Ohio by the City of Youngstown in 2013, but as of the date of this writing, no challenges have been brought against the Youngstown Ordinance. 

In accordance with the new law in the City of Lorain, the owner of any property which has become vacant must file a registration certificate annually with the Building Department and pay a registration fee of $125.  The property owner will be required to designate a person in the City of Lorain to receive notice of any code violations; otherwise notices will be posted at the property only.  The property owner will also be required to cause an inspection of the property within 15 days of registration. 

Property owners who fail to register vacant property in the City of Lorain will be subject to a civil fine of $50 per day, with a maximum penalty of $1000 and a First Degree Misdemeanor criminal penalty, which carries with it a daily fine of $225 for each continued offense. 

The City of Lorain Building Department advised the required registry forms will be available on their website before the new law's effective date at http://www.cityoflorain.org/forms/.