Unpaid Water Bills Could Lead To Home Condemnation, Resulting In Big Hit For Foreclosing Lenders

Buried in a recent story from Grand Rapids, Michigan on rent-skimming landlords facing foreclosure who are stiffing the local utility on their water bills resulting in water shut-offs is the following excerpt reported by WOOD-TV Channel 8. Those water shut-offs should be of some concern to lenders, who face taking a big hit on account of possible action by local officials arising from the lack of water to the premises being foreclosed:

• The city can condemn an occupied property with no water and undoing that action will take more than simply paying the bill. "We require that that property be brought up to, once it's condemned, brought completely 100% up to code before it can be occupied again," said Virginia Million with the Grand Rapids Housing Commission. That means everything up to code, from electricity to structure, often a tall task on an older property.(1)

Source: Landlord not paying bills? Move (Read the lease before you sign).

(1) Depending on how old the structure is, the cost of bringing a property up to the current building code could cost a small fortune. In real estate markets where that cost exceeds the value of the property, the foreclosing lender could find its loan collateral rendered worthless. Once the property is condemned, it is no longer a question of doing the necessary repairs or otherwise curing whatever the problem was that gave rise to the condemnation. A new certificate of occupancy is necessary which, as the story points out, requires that the home be completely brought up to meet the current building code - not the one in effect when the home was built (which could be 50+ years ago in many places). This means that, in addition to fixing things that need fixing, the property owner will now have to also fix things that, prior to the loss of the certificate of occupancy, didn't need fixing.