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Private Nuisance
Short (but relevant) Stories:
Private NuisanceShort (but relevant) Stories:
"A private nuisance is a civil wrong, based on a disturbance of rights in land." Prosser and Keaton Torts (Fifth edition) Section 87, page 618. The "granddaddy" of Michigan Supreme Court cases regarding private nuisance is the oft-cited Kilts v Board of Supervisors of Kent County 162 Mich 646,127 NW2d 821 (1910) which goes through the
historical considerations giving rise to a private nuisance. The Court says, beginning at NW2d 822:
"While adjudicated cases have been so variable that courts generally regard a technical and comprehensible definition difficult if not impracticable, the trend of opinions seems to be that the circumstances must be examined with a view to ascertaining that the alleged condition is one so serious as to interfere with the comfort of life and enjoyment of property, or are so threatening as to constitute an impending danger to persons in the enjoyment of their legitimate rights."
The following quotations from cases throughout the country are found in the Kilts' case and indicate this rule:
"Anything wrongfully done or permitted which injures or annoys another in the enjoyment of his legal rights....injury to property with reference to its reasonable and ordinary use, by continuous hurtful acts constitute a nuisance undoubtedly...., the real question in all cases is a question of fact, viz., whether the annoyance is such as to materially interfere with the ordinary comfort of human existence....anything not warranted by law which annoys and disturbs one in the use of his property, rendering its ordinary use and occupation uncomfortable to him, is a nuisance. If the annoyance is such as to materially interfere with the ordinary comfort of human existence, it is a nuisance....the unauthorized or unreasonable use of or the neglect to properly use one's own property to the detriment, hurt, annoyance, discomfort, injury or damage of another in his property or legal rights, or of the public is a nuisance.
"A private nuisance is where one so uses his property as to damage another's or disturb his quiet enjoyment of it. A nuisance is also defined as a tort. It is the use of one's own property which involves injury to the property, or other right or interest of the neighborhood...." [Citations omitted]
What are your adversaries doing that constitutes a private nuisance to you or your neighbors?
REOMAC Update – A Guide to Increasing the Return on an REO Sale through Property Maintenance and Preservation
By Justin F. Carter, Esq.
As seen in the REOMAC Update, March/April 2008
Today’s REO market is like an overstocked grocery store with few browsing customers. In fact, the customer really must dig past all the bruised apples (let alone the apples with the unknown worm inside) to find the juicy apple hiding at the bottom of the produce bin. Analogies aside, the National Association of Realtors (NAR) recently released statistics on existing home sales which underscore the current market trend.(1) According to the NAR, sales of existing homes in December dropped to the lowest level since the NAR began tracking the data in 1999. Existing home sales in 2007 were down 22% from sales in 2006 – the largest drop on record. While the data appears to paint a bleak picture for the market, 2007 annual existing home sales were still the fifth highest on record since the NAR began tracking the figure in 1989. In essence, existing home sales are slowing and inventories are rising.
With market conditions in mind, REO sellers, asset managers and agents must focus now more than ever on increasing the bottom line of each sale. One of the main approaches to increasing profitability focuses on the home’s condition. By correctly maintaining, improving and avoiding violations related to property’s condition, the seller can ensure a strong return of investment on each sale. Specifically, this article will focus on property preservation, rehabilitating the property versus selling in an ‘as-is’ condition and avoiding various housing code violations related to the home’s condition as a way to increase the seller’s bottom line.
Maintaining the Property’s ConditionThe first step in selling any vacant REO property is preparing the home’s condition for marketing and then maintaining the property until sale. The longer it takes to ready the home for marketing, the more the seller must pay in holding costs. Moreover, by maintaining the property, the seller can achieve a price for the home that is closer to actual market value with less time spent on the market. Well maintained homes will maintain value while poorly maintained homes tend to deteriorate. Most sellers use one or two methods (or a mix) for property preservation: using the agent/broker or a field service company.
Traditionally, the agent or broker will initially assess each property’s condition after vacancy. The agent will then order the necessary services for the re-key, trash out and lawn maintenance. Once the home is ready for market, the agent will order any repairs or further maintenance. While this model gives the agent tighter control over the property, it also leads to billing and waiting for reimbursement on hundreds of invoices – time the agent could spend on marketing the property.
More recently, the prevailing trend is to use field service companies for repairing and preserving an REO property due to rising inventories. Most provide a flat-fee for all pre-marketing services and preservation during the marketing stage essentially creating a ‘one stop shop.’ Many field service agencies even allow for a ‘cradle to the grave’ approach where services can begin from the first delinquency. Additionally, field service providers typically assume liability for incidents related to any service, including liability incurred from failing to adhere to HUD, FHA and VA regulations. A field service company will use a vast network of local personnel specialized in preserving property conditions to provide comprehensive service in a timely manner.
While the traditional agent model certainly has benefits in certain markets, national REO sellers with large portfolios can improve a home’s bottom line by using a field service company. In a recent study, the average total days a home spent in an outsourcer’s inventory was 14% less when using a field preservation company.2 Moreover, the study found the average days a home spent on the market was also 17% less when using a field preservation company.3 A field service company can provide timely maintenance and respond to repairs better than an agent who must seek approval from an asset manager and then order the services. Again, the better the maintenance of the property and less time spent on the market, the higher the home’s value and the less the seller must pay in holding costs. Most importantly, a field service company will allow the agent and his or her staff to focus on marketing the property instead of coordinating and billing for services.
Selling ‘As-Is’ or Renovating the PropertyThe majority of REO properties are sold in an ‘as-is’ condition with little to no renovations or repairs for good reason. Performed repairs or renovations do not automatically increase the home’s value or buyer appeal. In fact, many impromptu or poorly planned renovations quickly depreciate down to the ‘as-is’ value negating any added value to the bottom line. However, some properties may see a significant increase in value by performing repairs with a low cost to high value ratio. By increasing the relative value, the property will sell for a price much closer to actual fair market value in a shorter period of time.
After initially securing the property, the agent and asset manager should cooperate in developing a specific marketing plan for the property with the seller’s goals in mind.(4) Some sellers are more concerned with a quick turnaround on the property rather than performing renovations that may or may not add to the bottom line. Conversely, other sellers focus on the ultimate return and are willing to invest in the initial time and money to renovate a property. Either way, an accurate marketing plan for each property will determine whether a property is best marketed in an ‘as-is’ condition or if the seller should consider renovations. Providing options to the seller, even if the best option is not consistent with the seller’s goals, allows the seller to maximize the potential return on its asset portfolio.
If the seller elects to renovate a property, the seller must put costs and values in context. The seller must choose renovations that add value a prospective buyer will notice and be willing to pay more for. However, the seller has a competing interest to invest as little money as possible in the renovation. Recently, Remodeling magazine released the 20th annual ‘Cost vs. Value Report’, done in cooperation with REALTOR magazine. (5) The report indicated that overall, outside repairs tend to draw more attention and value to a property. The report noted that of the four projects that had a national cost recovery rate of more than 80%, only one was an interior upgrade – a minor kitchen remodel. The other three projects included an upscale siding replacement using fiber cement materials, a wood deck addition, a midrange vinyl siding replacement and upscale vinyl and midrange wood window replacements. Conversely the report indicated the projects with the lowest national cost recovery rate included home office remodels, installing a backup generator and adding a mid-range sunroom.
While the report is not intended to suggest a seller should add a wood deck to every property, the report does provide valuable guidance in deciding what type of renovation to perform. Clearly, the report emphasizes the need for curb appeal. Putting the proverbial ‘best foot forward’ can greatly increase the property’s value. Neighbors will also appreciate external renovations as vacant and deteriorating properties tend to depreciate adjacent property values.
Ideally, the local agent is in the best position to help the Seller determine what type of renovation to perform. One type of project may provide a better return in one region or locality, but it might also provide a lower return in a different region or locality. This underscores the importance of a specific marketing plan for each property as a way to maximize the seller’s bottom line. In the end, understanding when to sell a property in an ‘as-is’ or renovated condition will directly effect the ultimate return on the property.
Avoiding Costly Housing Code ViolationsMany communities are beginning to take an aggressive, pro-active approach when dealing with municipal code violations occurring on vacant properties. Specifically, cities are increasingly watchful for code violations related to blight or nuisance conditions and the safety and security of the property. Many cities have enacted stricter consequences, increased fines and even created specific task forces for dealing with vacant properties. A seller and its local agent must be continually mindful of a property’s compliance with local ordinances to avoid costly violations that diminish the seller’s bottom line.
Most major violations concern securing the home and maintaining the outside appearance. Broken windows or doors lead to vandalism, squatters and create potentially hazardous conditions for children. While boarding up a window or door often corrected the housing violation in the past, cities are enacting ordinances requiring increased corrective security measures. For example, in Philadelphia, plywood boarding is prohibited in certain areas of the city. As a result, companies are now offering products designed to secure windows and doorways that allow natural light and ventilation to pass through, but also secure the opening without using nails, screws or bolts. Not only are the alternative products more aesthetically pleasing than a plywood board, but the products provide better security too. (6)
Ideally, a seller must be pro-active in complying with local housing ordinances. When violations do occur, a city will often post a notice on the property or file a complaint in the local court. In either scenario, the seller will usually receive notice only when it is too late to respond. By then, the city has already assessed fines and costs to correct the violations which the seller must pay at closing. Additionally, many cities require housing inspections prior to closing. If the seller has not maintained the property and the city inspector discovers code violations, the closing is either delayed or the deal is cancelled all together as the seller works to bring the property back into compliance. By working closely with the local agent or field service company, the seller can secure the property quickly, correct any violations and establish a maintenance schedule to prevent future violations.
A seller’s pro-active approach also creates goodwill with the municipality and local neighbors. Neighbors are less likely to call in occasional complaints if they notice the seller has tried to maintain the property. Likewise, the city housing department or judge is more likely to work with a seller who has tried to pro-actively maintain properties in the past. Often times, the department or judge will provide the seller with a grace period to cure violations instead of immediately assessing fines and costs. By correcting violations and maintaining the property throughout the marketing phase, a seller can avoid costly nuisance and blight violations that delay closings and diminish the seller’s bottom line.
Looking Forward to 2008Mid-2008 will bring a new round of subprime adjustable-rate resets, and with it, increased default and foreclosure rates. As a result, existing REO inventory will dramatically increase by the end of the year. If existing home sales continue to decline or remain stagnant, a seller’s portfolio will become bloated with non-returning assets. For that reason, a seller must focus on increasing the profitability of each sale. Specifically, by focusing on maintaining, improving and avoiding violations related to property’s condition, the seller can ensure a strong return of investment on each sale. By following the above suggestions, a seller can ensure a continually performing asset portfolio even in tomorrow’s troubled REO market.
Endnotes1 Walter Molony, Existing-home Sales Down in December but 2007 was Fifth Highest on Record, January 24, 2008, at http://www.realtor.org/press_room/news_releases/2008/.
2 Angelo Desantis, Enhancing Teamwork, in DSNews, 52, 54 (January 2008).
3 Id.
4 For more information on this topic, see James Comtois, To Preserve or Not to Preserve: How to Manage REO Assets, in Managing REO, 17, 17 (January 23, 2008 Volume 2, Issue 22).
5 Remodeling Magazine’s 20th Annual 2007 Cost vs. Value Report, REALTOR magazine, December 1, 2007, at https://www.nar.realtor/rmomag.nsf/pages/2007CostvsValue.
6 For more information on this topic, see Jennifer Harmon, Rehab and Property Preservation, in Managing REO, 11, 13 (October 17, 2007 Volume 2, Issue 15).