The state Supreme Judicial Court’s Dec. 19 ruling striking down key provisions in a Springfield city ordinance regarding the maintenance of foreclosed residential properties is headed back to the Appeals Court. The finding could also affect a related Worcester case.
The dilemma of who is responsible for the maintenance of foreclosed structures, whether occupied or empty, was brought on by an upheaval in the private housing market, which then got thrown into the laps of municipalities and the legal system.
Springfield, Worcester and Lynn have proposed city ordinances meant to hold foreclosing banks responsible for the maintenance of residential properties. The U.S. District Court upheld the Springfield ordinance, but the U.S. Court of Appeals issued a stay preventing enforcement. The case then headed to the SJC.
In Easthampton Savings Bank et als. v City of Springfield, six Western Massachusetts banks brought suit, protesting the city ordinance as excessively burdensome to banks involved with properties either foreclosed or about to go into foreclosure. Among the concerns was an ordinance which required the mortgagee bank to post a $10,000 bond for maintenance of each foreclosed property, and also pay for most of the cost of mediation between the mortgagor and the mortgagee.
The Real Estate Bar Association for Massachusetts contributed an amicus brief in the case earlier this year. Attorney Daniel Ossoff of Rackemann, Sawyer & Brewster, co-chair of REBA’s Amicus Committee, says allowing municipalities to apply a patchwork of foreclosure ordinances would only delay foreclosure proceedings further due to the conflicts between local and state law. A wider consensus concurs, saying that local standards would cripple lending, particularly in low-income neighborhoods, which took the strongest hit.
The SJC decision wasn’t a total win for the banking community, but it did address some basic issues. The court ruled that the Springfield law was unconstitutional because it is pre-empted by existing state laws, which have a narrower definition of property ownership than the city ordinance. On the other hand, the SJC ruled that the bond is a legal fee, rather than an illegal tax, and proceeds should be used to remediate the consequences of blight.
Municipalities took the major hit both to their tax bases and their neighborhoods’ wellbeing. Distressed properties’ problems aren’t restricted to cities. The Worcester Telegram and Gazette reported mid-December that in the Worcester suburb of Shrewsbury, an evacuation notice had to be issued for residences within 300 feet of a Prospect Street home in which the copper piping had been cut away, exposing water and gas mains. The Telegram reported at the time that the home was “up for sale.” No one was hurt, but the neighborhood was disrupted.
The Springfield case is heading back to U.S. Court of Appeals. Its outcome could affect the fates of a suit brought by banks against the cities of Lynn and Worcester, combined in a case pending in the U.S. District Court in Worcester.
Let’s hope that the courts can help the state and cities cut the cake for maximum benefit for all parties involved.
