Editor’s note: This feature originally appeared in the January issue of DS News.
In June 2018, Pennsylvania enacted the Vacant and Abandoned Real Estate Foreclosure Act, creating a new process for foreclosure of blighted properties. This legislation, effective December 16, 2018, will be key for servicers and lenders, as it can drastically reduce time frames and save costs that existed under the prior process. The Pennsylvania legislature declared that “Vacant and abandoned real estate, coupled with a default in the obligation to make mortgage payments secured by that real estate, presents a danger to the health, safety, and welfare of a community.”
The legislature concluded that “An accelerated procedure is needed to maintain the due process rights of owners of real estate and to reduce unnecessary delays in an action of mortgage foreclosure ... to recover real estate that is vacant and abandoned.” There are three ways of establishing abandonment. A property shall be “certified” as vacant and abandoned if (1) a creditor has been designated as a “conservator” of the property under the Abandoned and Blighted Property Conservatorship Act; (2) the property is certified as vacant and abandoned by the municipality in which the property is located; or (3) the property is certified as vacant and abandoned in a judicial proceeding. Under the Municipal Certification process, a property shall be deemed vacant and abandoned by the municipality if a creditor requests that a municipal code enforcement officer make such a determination.
The code enforcement officer must inspect the property and determine that it is abandoned under the criteria set forth in section 2305. The officer shall then provide notice of the determination and an opportunity for hearing to contest the determination. If the owner, after receiving notice and opportunity for hearing, fails within 30 days to seek review of a determination that the property is vacant, the determination will be final.
The third alternative is the judicial certification process. A property shall be deemed certified as abandoned when a creditor or purchaser files a request with the court to issue a rule to show cause. The creditor must submit an affidavit supported by images or other appropriate evidence, alleging that the property qualifies for certification as vacant and abandoned under the requirements of section 2305. The request may be filed together with the original complaint in the proceeding or at any time during the course of the proceeding. The required affidavit may be provided by a municipal code enforcement officer, the creditor, purchaser, or by a competent adult who has personal knowledge of the condition of the property.
Section 2305 sets forth the indicia for determination of abandonment, and the property must satisfy at least three of the following:
- windows, doors boarded up, unhinged, closed off, or smashed in
- property stripped of copper or other metals
- furnishings, personal items, appliances, or fixtures removed » utilities terminated
- newspapers or mail accumulated, or delivery discontinued by USPS
- rubbish, trash, or debris accumulated
- multiple municipal building/housing code violations
- written statements by neighbors, delivery persons, or municipal code enforcement officers indicating that the property is abandoned
- hazardous, noxious, or unhealthy substances accumulated
- communication from the owner stating that he has vacated the property or intends to
An owner may respond in the judicial proceeding by filing a statement that the property is occupied. The response shall include a denial of any of the factors listed above that are considered in the determination of vacancy. If a response is not filed within 20 days after being served, the court shall render an order certifying the property as vacant. If a timely response is filed, the court shall schedule a hearing to determine if credible evidence exists to certify the property as vacant within not fewer than 20 nor more than 30 days after proof of service of the rule to show cause. Following a certification that a property is abandoned, any subsequent documents required to be served on the owner may be served and delivered by first-class mail to an address specified by the owner for the receipt of communications relating to the property or, if no address is specified, by delivery to the address of the property and by posting of notice in a conspicuous location on the property. This saves significant time and cost involved with the regular foreclosure process requiring personal service of a Notice of Sale. After certification of vacancy, the Act lays out the process for expedited Sheriff’s sale.
According to section 2306, a property certified as abandoned shall not be subject to mediation or conciliation established by a local court to encourage resolution of owneroccupied residential mortgage foreclosures. When certified as vacant, upon the request of a creditor, the sheriff, on receipt of an accelerated sale fee of $500, shall schedule a sale of the property to be conducted no later than 60 days following the filing of the writ of execution and the sheriff’s deed must be recorded no later than 30 days following the sale. This is a significant savings of time from the regular foreclosure process. Finally, if a property is certified as abandoned, or with the consent of the owner, the creditor may enter the property for the purpose of inspecting, maintaining, and repairing the property, and the creditor shall not be liable to the owner for trespass or damage resulting from something other than the creditor’s gross negligence or willful misconduct.
Remediation of conditions that provide evidence of abandonment by the creditor or corrective action taken by a municipality to protect public health and welfare shall not prevent a property from meeting the requirements to be certified as vacant and abandoned. Both of these provisions are excellent additions that will benefit lenders and servicers. As there are significant benefits for lenders and servicers, servicers should be actively reviewing current portfolios for properties that may be able to take part in the new expedited process.