Please see the following Bulletin from Larry R. Rothenberg, Esq, partner in the law firm of Weltman, Weinberg & Reis Co., L.P.A. regarding a previously reported proposed Cleveland Ordinance and its enactment by two Cleveland suburbs, Parma (44129-31,44133-34) and Euclid (44117,44119,44123,44132,44143)

To run a property report for Parma and Euclid properties housed in the Safeguard database please click on the following links.

Parma Ohio Ordinances
Euclid Ohio Ordinances
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Ordinances Being Enforced by the Cleveland, Ohio

Suburbs of Parma and Euclid Apply to

Mortgage Servicers Filing Foreclosures

Cleveland’s Proposed Ordinance
During 2005, the City of Cleveland proposed an ordinance requiring notification to the city in the event that a foreclosure is filed against a property within the city. The proposed ordinance would have required the foreclosing party to deliver a notice to the city within ten (10) days, indicating who would be responsible for maintaining the property if the property is, or becomes, vacant. Cleveland’s ordinance would have imposed a $60.00 fee upon the foreclosing party, for registering” the foreclosed property, and criminal liability for a failure to deliver the notice.

Action Taken
As the Chairman of the Cleveland Bar Association’s Foreclosure Procedures Committee, I took the position that the proposed ordinance was misguided, and possibly unconstitutional on its face or as applied to mortgage holders. I convened meetings with Cleveland city councilman Zachary Reed, who was the principal sponsor of the ordinance, and was successful in convincing him to table the proposed ordinance. As a result, the City of Cleveland has not enacted the ordinance. However, the Cleveland suburbs of Parma and Euclid enacted virtually identical ordinances, without any opportunity for prior discussion.

Parma & Euclid’s Ordinances

Parma and Euclid have been sending notices and registration forms to the Plaintiff and/or the Plaintiff’s attorney in foreclosure actions that have been filed on properties located in those suburbs, requesting completion of the forms and payment

of the fees. In the event the property becomes vacant while the foreclosure is pending, additional notices are required. Parma also requires additional fees for “registration” of the vacant building.

Filing Fees Required

The fee for the form to notify the city of a foreclosure filing is $75.00 in Parma and $60.00 in Euclid. Parma requires additional fees for registration of vacant buildings as follows: $150.00 for the first year of vacancy; $350.00 for the second year; and $750.00 for the third year.

The ordinances impose a criminal penalty, a fourth degree misdemeanor, for failure to comply.

Constitutional Questions

The constitutionality of these ordinances can be questioned for the following reasons:

■ The ordinances are not necessary in order to accomplish the purported purpose. The cities may argue that the ordinances are necessary in order for the city to become apprised of a foreclosure on one of its properties, so that its building department’s representatives can watch the property for potential vandalism or maintenance problems. However, information relating to the filing of foreclosures in properties located in any particular city in Cuyahoga County is available from the Cuyahoga County Clerk of Court’s website. Parma and Euclid are obviously aware of that, as those cities apparently monitor the website, and then send their forms to the foreclosure Plaintiffs. Moreover, if the cities’ concern is to know the name of the Plaintiff’s representative whom the city can contact in the event of vandalism or a maintenance problem, the ordinance is also not necessary, because the Plaintiffs are always represented by an attorney whom the city can contact in the event of such problems.

■ The ordinances imply that a representative of the mortgage holder will be “responsible” for maintaining the property. However, only the owner of the property has any direct responsibility to maintain the property. Although it may be in the mortgage holder’s best interest to do so, a mortgage holder, who is not in possession of the property, generally has no legal responsibility

to maintain the property, unless and until it acquires title to the property through either a deed-in-lieu of foreclosure or a sheriff’s deed.

■ The fees arguably are an unlawful tax rather than a fee, because they exceed the cost and expense to the city of providing the “service” in question. Here, there is no service provided by the city to the mortgage holder, and the fees bear no relationship to any cost incurred by the city in receiving and recording the information required by the ordinance.

■ The ordinances (according to Parma’s and Euclid’s interpretations) require the mortgage holder to notify the city if the property becomes vacant, but the ordinances are silent as to whether the mortgage holder must have actual knowledge in order for the requirement to apply. It would be patently unfair to impose a criminal penalty if the mortgage holder did not have actual knowledge that the property is vacant.

■ The ordinances apply to any plaintiff who files a foreclosure on property located in the cities in question. However, a foreclosure may be filed by a lienholder whose lien is not even a mortgage. It could be a judgment lien, a mechanics lien, or the plaintiff might be the county treasurer foreclosing on delinquent real estate taxes. It seems even less reasonable to require those parties to designate a representative who will be “responsible” in the event the property becomes vacant. If the cities enforce the ordinances only against mortgage holders, it would seem to be unconstitutional discrimination as applied.

Retention of Counsel

I convened meetings over a period of weeks, with representatives of other Ohio foreclosure firms, and spearheaded action to retain outside counsel at the firms’ expense, to seek the repeal of these ordinances. As the leader of the group of firms, I arranged for attorney Sheldon Berns, a well-known specialist in municipal law, to send letters and other communications to the Law Directors of Parma and Euclid in that regard. On July 18, a letter was received from the office of the law director of Parma, stating that he is reviewing the legal issues we presented, and expects to respond by the end of this month. If the cities do not agree to repeal or modify their ordinances, we will be consulting with the outside counsel to determine whether court action might be viable and the potential cost of litigation.

Compliance With Ordinances

In the meantime, in view of the criminal penalties for noncompliance with the ordinances, we must recommend compliance with the portion of the ordinances requiring notification of foreclosure filing on properties in those cities. In doing so, we will advise the city that in the event of a maintenance or vandalism problem, or if the property becomes vacant, the city should communicate to our firm regarding the issue and we will in turn advise our client.

In the event that the city serves a notice indicating that the property in foreclosure has become vacant, and pursuant to the ordinance, an additional form is required, we will advise the city that the owner is the only party responsible for maintaining the property, and thatour client is not legally responsible.

Non-Routine Fees

Complying with these ordinances and handling the communications with the cities’ building departments is a non-routine service that is not contemplated by the flat fee for handling the foreclosure action. Therefore, we must charge a flat fee of $100.00 for this additional service.

In order to avoid duplicate or inconsistent filing of forms and fees, in the event that you receive a notice from the city requiring compliance with its ordinance, please forward the notice to our firm for handling, rather than responding directly to the city.

To view the advisory and for contact information for Larry R Rothenberg, Esq., please click on the following.

  Ordinances Being Enforced By Parma and Euclid .pdf