Bill Text: MI SB0514 | 2017-2018 | 99th Legislature | Introduced


Bill Title: Land use; other; abandoned and blighted real property conservatorship; provide for appointment of conservators. Creates new act.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2017-09-06 - Referred To Committee On Local Government [SB0514 Detail]

Download: Michigan-2017-SB0514-Introduced.html

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SENATE BILL No. 514

 

 

September 6, 2017, Introduced by Senators YOUNG and JONES and referred to the Committee on Local Government.

 

 

     A bill to provide for court-appointed conservators to

 

rehabilitate, close, seal, demolish, operate, manage, lease, or

 

sell abandoned, blighted or unsafe structures or parcels that

 

violate municipal ordinances; to provide for the ownership interest

 

of conservators in such property for certain purposes; and to

 

provide for financing and the creation and priority of liens.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 1. This act shall be known and may be cited as the

 

"abandoned real property conservatorship act".

 

     Sec. 2. As used in this act:

 

     (a) "Actively marketed" means that a "for sale" sign has been

 

placed on the property with accurate contact information and the

 

owner has done 1 or more of the following:


     (i) Engaged the services of a real estate broker licensed

 

under article 25 of the occupational code, 1980 PA 299, MCL

 

339.2501 to 339.2518, to place the property in a multiple listing

 

service or otherwise market the property.

 

     (ii) Placed weekly or more frequent advertisements for the

 

property in print or electronic media.

 

     (iii) Distributed printed advertisements for the property.

 

     (b) "Building" means a residential, commercial, or industrial

 

building or structure and the land appurtenant thereto, including a

 

vacant parcel on which a building has been demolished.

 

     (c) "Competent entity" means a person or entity, including a

 

governmental unit, with experience in the rehabilitation of

 

residential, commercial, or industrial buildings and the ability to

 

provide or obtain the necessary financing for such rehabilitation.

 

     (d) "Conservator's fee" means a fee equal to the greatest of

 

the following:

 

     (i) An amount equal to $2,500.00, adjusted upward each year by

 

2% of the previous year's amount.

 

     (ii) A 20% markup of the other project costs as described in

 

the final remedial plan and actually incurred.

 

     (iii) 20% of the sale price of the building, if the building

 

is sold pursuant to section 7 or 12.

 

     (e) "Court" means a court of competent jurisdiction.

 

     (f) "Final remedial plan" means a remedial plan as approved by

 

the court under section 9.

 

     (g) "Historic property" means a property that is any of the

 

following:


     (i) Listed on the National Register of Historic Places.

 

     (ii) A contributing property in a district listed on the

 

National Register of Historic Places.

 

     (iii) Located in a local government ordinance historic

 

district established by or pursuant to a local ordinance.

 

     (h) "Immediate family" of an owner means a parent, spouse,

 

child, brother, or sister of the owner.

 

     (i) "Municipal code" means a building, housing, property

 

maintenance, fire, health, or other public safety ordinance adopted

 

by a city, village, or township.

 

     (j) "Nonprofit corporation" means a nonprofit corporation that

 

has, as 1 of its purposes, remediation of blight or community

 

development activities, including economic development, historic

 

preservation, or the promotion or enhancement of affordable housing

 

opportunities.

 

     (k) "Owner" means the holder or holders of title to, or of a

 

legal or equitable interest in, a building. Owner includes an heir,

 

assignee, trustee, beneficiary, or lessee if the interest is a

 

matter of public record.

 

     (l) "Party in interest" means a person or entity who has a

 

direct and immediate interest in a building, including any of the

 

following:

 

     (i) The owner.

 

     (ii) A lienholder.

 

     (iii) A resident who lives within 2,000 feet of the building

 

or the owner of a business located within 2,000 feet of the

 

building.


     (iv) A nonprofit corporation that is located in the

 

municipality where the building is located.

 

     (v) A municipality or school district in which the building is

 

located.

 

     (m) "Project costs" means costs for rehabilitation and

 

operation or demolition, including reasonable nonconstruction costs

 

associated with the project, including, but not limited to,

 

environmental remediation, architectural, engineering, and legal

 

fees and costs, permits, financing fees, and a conservator's fee.

 

     (n) "Rehabilitation" means construction, stabilization,

 

improvement, and repair.

 

     (o) "Remedial plan" means a plan described in section 9(3).

 

     (p) "Substantial rehabilitation" means rehabilitation to which

 

1 or both of the following apply:

 

     (i) The cost of rehabilitation exceeds 15% of the property's

 

value after completion of all rehabilitation.

 

     (ii) More than 1 of the following is being replaced:

 

     (A) Roof structure.

 

     (B) Ceiling.

 

     (C) Wall or floor structure.

 

     (D) Foundation.

 

     (E) Plumbing system.

 

     (F) Heating and air-conditioning system.

 

     (G) Electrical system.

 

     Sec. 3. (1) A party in interest may file a petition for the

 

appointment of a conservator to take possession and to undertake

 

the rehabilitation of a building. The petition shall be filed in a


court in the county in which the building is located. The

 

proceeding on the petition is an action against the property,

 

rather than the owner.

 

     (2) The petition submitted to the court shall include a sworn

 

statement that, to the best of the petitioner's knowledge, the

 

property meets the conditions for conservatorship set forth in

 

section 4(4). The petition shall also include, to the extent

 

available to the petitioner after reasonable efforts to obtain such

 

information, all of the following:

 

     (a) A copy of any citation charging the owner with a violation

 

of a municipal code or declaring the building to be a public

 

nuisance under a municipal code.

 

     (b) A recommendation as to which person or entity should be

 

appointed conservator.

 

     (c) A preliminary plan with initial estimates for project

 

costs to bring the building into compliance with all municipal

 

codes for the area in which the building is located and anticipated

 

funding sources.

 

     (d) A schedule of liens on the building.

 

     (3) The petitioner shall file a notice of lis pendens in the

 

office of the register of deeds for the county in which the

 

building is located.

 

     (4) Notice of filing of the petition shall be provided as

 

follows:

 

     (a) Upon filing the petition with the court, the petitioner

 

shall notify the owner of the building, all political subdivisions

 

in which the building is located, all municipal authorities known


to have provided service to the building, and all lienholders of

 

the filing. The notice shall be given by registered or certified

 

mail to the last known address of each person and by posting a copy

 

of the notice on the building.

 

     (b) If the registered or certified mail is returned with

 

notation by the postal authorities that the recipient refused to

 

accept the mail, the petitioner shall mail a copy to the recipient

 

at the same address by ordinary mail with the return address of the

 

petitioner appearing on the envelope.

 

     (c) Service by ordinary mail is considered complete if the

 

mail is not returned to the petitioner within 30 days after

 

mailing.

 

     (d) If the registered or certified mail is returned with the

 

notation by the postal authorities that it was unclaimed, the

 

notice shall be personally served.

 

     (e) If personal service is not made after 2 attempts, the

 

petitioner shall mail the petition to the recipient at the same

 

address by ordinary mail with the return address of the petitioner

 

appearing on the envelope. The service by ordinary mail is

 

considered complete if the mail is not returned to the petitioner

 

within 15 days after the mailing.

 

     (5) The petition may include 1 or more adjacent buildings in a

 

single action if both of the following apply:

 

     (a) The building that is the primary subject of the action is

 

owned by the same owner as the adjacent building.

 

     (b) The buildings are or were used for a single or

 

interrelated function.


     Sec. 4. (1) The court shall hold a hearing within 60 days of

 

receipt of a petition under section 3 and shall render a decision

 

no later than 30 days after completion of the hearing.

 

     (2) In the manner provided in section 3(4), the petitioner

 

shall notify the owner and each lienholder of the hearing date and

 

that the owner and lienholders may petition to intervene in the

 

action.

 

     (3) A party in interest may intervene in the proceeding and be

 

heard with respect to the petition, the requested relief, or any

 

other matter that may come before the court in connection with the

 

proceeding. At the hearing, any party in interest may present

 

evidence to support or contest the petition, including, but not

 

limited to, the schedule of liens.

 

     (4) The court may appoint a conservator if all of the

 

following apply as of the date of filing the petition:

 

     (a) The building was not legally occupied at any time during

 

the previous 12 months.

 

     (b) The owner fails to present compelling evidence that the

 

owner actively marketed the property during the preceding 60-day

 

period and made a good-faith effort to sell the property at a price

 

that reflects the circumstances and market conditions.

 

     (c) The property is not subject to a pending foreclosure

 

action by an individual or nongovernmental entity.

 

     (d) The owner fails to establish that the owner has acquired

 

the property within the preceding 180 days. For the purposes of

 

this subdivision, acquisition does not include either of the

 

following circumstances:


     (i) The prior owner is a member of the immediate family of the

 

current owner, unless the transfer of title results from the death

 

of the prior owner.

 

     (ii) The current owner is a corporation, partnership, or other

 

entity in which the prior owner or the immediate family of the

 

prior owner has an interest in excess of 5%.

 

     (iii) The prior owner is a corporation, partnership, or other

 

entity in which the current owner or the immediate family of the

 

current owner has an interest in excess of 5%.

 

     (e) The court finds 3 or more of the following:

 

     (i) The building is a public nuisance.

 

     (ii) The building is in need of substantial rehabilitation and

 

no significant rehabilitation has taken place during the previous

 

12 months.

 

     (iii) The building is unfit for human habitation, occupancy,

 

or use.

 

     (iv) The condition and vacancy of the building materially

 

increase the risk of fire to the building and to adjacent

 

properties.

 

     (v) The building is subject to unauthorized entry leading to

 

potential health and safety hazards and 1 or both of the following

 

apply:

 

     (A) The owner has failed to take reasonable and necessary

 

measures to secure the building.

 

     (B) The municipality has secured the building in order to

 

prevent such hazards after the owner has failed to do so.

 

     (vi) The building is an attractive nuisance to children,


including, but not limited to, the presence of abandoned wells,

 

shafts, basements, excavations, and unsafe structures.

 

     (vii) The presence of vermin or the accumulation of debris,

 

uncut vegetation, or physical deterioration of the building has

 

created a potential health and safety hazard and the owner has

 

failed to take reasonable and necessary measures to eliminate the

 

hazard.

 

     (viii) The dilapidated appearance or other condition of the

 

building negatively affects the economic well-being of residents

 

and businesses in close proximity to the building, including

 

decreases in property value and loss of business, and the owner has

 

failed to take reasonable and necessary measures to remedy

 

appearance or the condition.

 

     (ix) The building is an attractive nuisance for illicit

 

purposes, such as prostitution, drug use, or vagrancy.

 

     Sec. 5. (1) If the court appoints a conservator, the court

 

shall also certify the schedule of liens and grant such other

 

relief as may be just and appropriate. The certification is binding

 

with respect to all liens, including municipal liens, arising or

 

attaching to the property before the date the petition was filed.

 

     (2) In appointing a conservator, the court shall do all of the

 

following:

 

     (a) Give first consideration for appointment as conservator to

 

the most senior nongovernmental lienholder on the property. If the

 

senior lienholder is found to be not competent or declines the

 

appointment, the court may appoint a nonprofit corporation or other

 

competent entity.


     (b) Consider any recommendations contained in the petition or

 

otherwise presented by a party in interest.

 

     (c) Give preference to the appointment of a nonprofit

 

corporation or governmental unit over an individual.

 

     (3) A conservator may be removed by the court at any time upon

 

the request of the conservator or upon a showing by a party to the

 

action that the conservator is not carrying out the conservator's

 

responsibilities under this act.

 

     Sec. 6. (1) If the court finds after a hearing that the

 

conditions for conservatorship set forth in section 4(4) have been

 

established, but the owner represents that the conditions described

 

in section 4(4)(e) will be remedied in a reasonable period, the

 

court may enter an order providing that, if those conditions are

 

not remedied by the owner by a specific date or that other

 

specified remedial activities have not occurred by a specific date

 

or dates, an order granting the relief requested in the petition

 

shall be entered.

 

     (2) An order under subsection (1) allowing the owner to remedy

 

the conditions shall require the owner to post a bond in the amount

 

of the project costs estimated in the petition as a condition to

 

retaining possession of the building.

 

     Sec. 7. (1) Upon a finding that the petition states conditions

 

for conservatorship or if the owner elects either to remedy all

 

violations and nuisance or emergency conditions or to sell the

 

property subject to the conservatorship, the owner shall reimburse

 

the petitioner for all costs incurred by the petitioner in

 

preparing and filing the petition under section 3 and the


conservator's fee.

 

     (2) The conservator may file a lien against the property in an

 

amount based on the costs incurred during the conservatorship,

 

including, but not limited to, project costs and court costs. The

 

lien amount may be adjusted from time to time.

 

     Sec. 8. (1) The conservator shall promptly take possession of

 

the building and other property subject to the conservatorship.

 

     (2) The conservator has all powers and duties necessary or

 

desirable for the efficient rehabilitation of the building to bring

 

it into compliance with all municipal codes and fulfill the

 

conservator's responsibilities under this act. Those powers and

 

duties include, but are not limited to, the power to do any of the

 

following:

 

     (a) Take possession and control of the building and any

 

personal property of the owner used with respect to the building,

 

including any bank or operating account for the building.

 

     (b) Collect outstanding accounts receivable.

 

     (c) Pursue all claims or causes of action of the owner with

 

respect to the building and all other property subject to the

 

conservator.

 

     (d) Contract for the rehabilitation of the building. The

 

contracts shall be appropriately documented and included in the

 

reports and accounting that the conservator is required to submit

 

or file under this act. The conservator shall make a reasonable

 

effort to solicit 3 bids for contracts valued at more than

 

$25,000.00, except when the contractor provides or obtains

 

financing for the conservatorship.


     (e) Borrow money and incur indebtedness under section 11.

 

     (f) Contract and pay for the maintenance and restoration of

 

utilities to the building.

 

     (g) Purchase materials, goods, and supplies to accomplish

 

repairs and operate the building.

 

     (h) With the court's approval, enter into new leases for a

 

period not to exceed 1 year.

 

     (i) Affirm, renew, or enter into contracts providing for

 

insurance coverage on the building.

 

     (j) Engage and pay legal, accounting, appraisal, and other

 

professionals to aid the conservator in the conduct of the

 

conservatorship.

 

     (k) If the building has been designated a historic property,

 

consult with the municipality's historical commission or board of

 

historical and architectural review, a local historic preservation

 

organization or, in the absence thereof, the state historic

 

preservation office for recommendations on preserving the

 

property's historic character. If the building has been designated

 

a historic property, the conservator shall restore architectural

 

features that define the property's historic character. If

 

demolition of a property in a historic district is necessary, the

 

conservator shall design any replacement construction on the site

 

to comply with applicable standards under current law.

 

     (l) Apply for and receive public grants or loans.

 

     (m) Sell the property as provided in section 12.

 

     (n) Exercise all authority that an owner of the building would

 

have to improve, maintain, operate, and manage the building.


     (3) While in possession of the building, the conservator shall

 

do all of the following:

 

     (a) Maintain, safeguard, and insure the building.

 

     (b) Apply all revenue generated from the building consistent

 

with this act.

 

     (c) Develop a remedial plan.

 

     (d) Implement the final remedial plan.

 

     (e) Submit a status report to the court and parties to the

 

action annually or more frequently as the court may determine

 

appropriate. The status report shall include all of the following:

 

     (i) A copy of any contract entered into by the conservator to

 

rehabilitate the building.

 

     (ii) An account of the disposition of all revenue generated

 

from the building.

 

     (iii) An account of all costs.

 

     (iv) The status of developing the remedial plan and

 

implementing the final remedial plan pursuant to this subsection.

 

     (v) A description of any proposed actions to be taken in the

 

next 6 months to rehabilitate the building.

 

     Sec. 9. (1) Within 120 days after the appointment of a

 

conservator, the court shall conduct a hearing on a remedial plan.

 

     (2) Thirty days before the date of the hearing under

 

subsection (1), the conservator shall submit the remedial plan to

 

the court and to all parties to the action.

 

     (3) The remedial plan shall include a cost estimate, a

 

financing plan, and either a description of the work to be done for

 

the rehabilitation of the building or, if rehabilitation is not


feasible, a proposal for the closing, sealing, and demolition of

 

the building. The remedial plan shall conform with all municipal

 

codes and historic preservation requirements. The final remedial

 

plan shall describe how the conservator will remedy the conditions

 

under section 4(4)(e) on the basis of which the petition was

 

granted or, if remediation is not feasible, shall provide for

 

alternatives, including the closing, sealing, or demolition of all

 

or part of the building.

 

     (4) At the hearing, all parties may comment on the remedial

 

plan, and the court shall take all comments into consideration when

 

assessing the feasibility of the remedial plan and the proposed

 

financing. The court shall give reasonable regard to the

 

conservator's determination of the scope and necessity of work to

 

be done in approving the remedial plan and in approving the costs

 

of conservatorship and sale of the property.

 

     (5) Within 15 days of the hearing, the court shall issue an

 

order approving the remedial plan or requiring that the remedial

 

plan be amended.

 

     (6) If the court order requires that the remedial plan be

 

amended, the order shall set a hearing date on the amendment within

 

60 days from the date of the order.

 

     (7) Upon the implementation of the final remedial plan, the

 

conservator shall file with the court a full accounting of all

 

income and expenditures during the period of time it took to

 

implement the final remedial plan.

 

     Sec. 10. (1) A conservator has an ownership interest in and

 

legal control of the property for the purposes of filing plans with


public agencies and boards, seeking and obtaining construction

 

permits and other approvals, and submitting applications for

 

financing or other assistance to public or private entities.

 

     (2) Notwithstanding the appointment of a conservator under

 

section 4, this act does not relieve the owner of any civil or

 

criminal liability or of any obligation to pay taxes, municipal or

 

private liens, or municipal or other fees or charges, whether

 

incurred before or after the appointment of the conservator and

 

such liability is not transferred to the conservator.

 

     (3) Notwithstanding any law to the contrary, the conservator

 

is not liable for any environmental damage to the building that

 

existed before the appointment of the conservator.

 

     Sec. 11. (1) A conservator may borrow money or incur

 

indebtedness to cover the project costs or to otherwise fulfill the

 

conservator's obligations under this act.

 

     (2) To facilitate the borrowing of funds for the project

 

costs, the court may grant priority status to a lien given to

 

secure payment on a debt incurred for purposes authorized under

 

this act if both of the following apply:

 

     (a) The conservator sought to obtain the necessary financing

 

from the senior, nongovernmental lienholder, but the lienholder

 

declined to provide financing for reasonable project costs on

 

reasonable terms.

 

     (b) Lien priority is necessary to induce another lender to

 

provide financing on reasonable terms.

 

     (3) If the senior lienholder agrees to provide financing for

 

project costs, any funds loaned to cover the project costs are


added to the senior lienholder's preexisting first lien.

 

     (4) The court may approve financing for project costs, the

 

terms of which may include deferred repayment and use restrictions.

 

The terms of the financing may remain with the property after the

 

conservatorship has ended and be assumed by any of the following:

 

     (a) The owner, if the owner regains possession of the property

 

under section 13.

 

     (b) A buyer who takes title under section 12.

 

     Sec. 12. (1) If a building subject to conservatorship is sold

 

by the owner or foreclosed upon by a lienholder or if any interest

 

therein is transferred, the sale, foreclosure, or transfer is

 

subject to the conservatorship.

 

     (2) Upon application of the conservator, the court may order

 

the sale of the property if the court finds all of the following:

 

     (a) Notice and an opportunity to provide comment to the court

 

was given to each record owner of the building and each lienholder.

 

     (b) The conservator has been in control of the building for

 

more than 90 days and the owner has not successfully petitioned to

 

terminate the conservatorship under section 13.

 

     (c) The terms and conditions of the sale are acceptable to the

 

court, and the buyer has a reasonable likelihood of maintaining the

 

property.

 

     (3) The court may authorize the conservator to sell the

 

building free and clear of all claims and liens, if the proceeds of

 

the sale will be distributed pursuant to subsection (4) at

 

settlement. If the proceeds of the sale are insufficient to pay all

 

existing claims and liens, the proceeds shall be distributed


according to the priorities set forth in subsection (4) and all

 

unpaid claims and liens that have not been assumed under section

 

11(4) are extinguished.

 

     (4) The proceeds of the sale shall be applied to the following

 

in the following order of priority:

 

     (a) All court costs.

 

     (b) Liens of this state, liens for unpaid property taxes, and

 

properly recorded municipal liens.

 

     (c) Costs of sale.

 

     (d) Principal and interest on any borrowing or incurrence of

 

indebtedness granted priority over existing liens under section

 

11(2).

 

     (e) Costs incurred by the petitioner in preparing and filing

 

the petition under section 3.

 

     (f) Costs, other than costs of sale, for which the lien

 

authorized under section 7(2) was filed.

 

     (g) Valid liens in accordance with their priority.

 

     (h) Any unpaid obligations of the conservator.

 

     (i) The owner.

 

     (5) If the owner cannot be located, any proceeds from the sale

 

that belong to the owner are presumed to be unclaimed and are

 

subject to the uniform unclaimed property act, 1995 PA 29, MCL

 

567.221 to 567.265.

 

     Sec. 13. Upon request of a party in interest or the

 

conservator, the court may order the termination of the

 

conservatorship if it determines any of the following:

 

     (a) All of the following apply:


     (i) The conditions that were the grounds for the petition and

 

all other municipal code violations have been remedied.

 

     (ii) The obligations and rehabilitation and other costs of the

 

conservatorship, including the conservator's fee, have been fully

 

paid or provided for.

 

     (iii) The purposes of the conservatorship have been fulfilled.

 

     (b) All of the following apply:

 

     (i) The owner or lienholder has requested the conservatorship

 

be terminated.

 

     (ii) The conditions that constituted grounds for the petition

 

will be promptly remedied.

 

     (iii) The obligations and rehabilitation and other costs of

 

the conservatorship, including the conservator's fee, have been

 

fully paid or provided for.

 

     (iv) The purposes of the conservatorship have been fulfilled.

 

     (c) The building has been sold by the conservator and the

 

proceeds distributed under section 12(4).

 

     (d) The conservator has been unable, after diligent effort, to

 

present a remedial plan that could be approved under section 9 or

 

to implement a final remedial plan or, for any reason, the purposes

 

of the conservatorship cannot be fulfilled.

 

     Sec. 14. (1) This act does not apply to commercial and

 

residential buildings, structures, or land owned by or held in

 

trust for the federal government and regulated under the United

 

States housing act of 1937, 42 USC 1437 to 1437bbb-9, and

 

regulations promulgated under that act.

 

     (2) This act does not apply if the property owner has vacated


the property to perform military service in time of war or armed

 

conflict or to assist with relief efforts during a declared federal

 

or state emergency as a member of the United States Armed Forces or

 

its reserve component.

 

     Enacting section 1. This act takes effect 90 days after the

 

date it is enacted into law.

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