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 - Dead) 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.
