Virginia’s vacant buildings: what’s stopping the free market? (Part 2)

This is a guest post by Lane Pearson. Lane works as an attorney and urban planner for the Better Housing Coalition’s Center for Neighborhood Revitalization. He lives in Richmond Virginia.

Lane Pearson

The problems associated with vacant buildings are by no means unique to Richmond or other localities in Virginia. In my last blogpost I discussed how a process that gives property owners the ability to recoup more value from their property could make a big difference. So it makes sense to explore tools that other cities and states are using in their efforts to address blight.  One innovative tool that has been used successfully in a number of places and is gaining traction nationwide is receivership for blighted buildings.

Receivership is an equitable tool traditionally used by courts in business disputes or bankruptcies, in cases where a viable business is managed by a court-appointed receiver in order to preserve the assets of the business while the litigating parties await the resolution of their dispute.  Receivership for blighted buildings works under this same principle, wherein a court can appoint a receiver to take possession (but not ownership) of vacant and blighted building in order to repair it and make it habitable again.  Unlike demolition or Spot Blight Abatement, the value of the asset, in this case the blighted building, is not only preserved, but actually enhanced.  This is of direct benefit to the neighborhood as well as to the property owner.  Once the work of the receiver is complete, the cost of the repair work becomes a lien on the property.  This allows the receiver to recover the costs through a court-ordered auction, if necessary, but it also allows the property owner to pay off the lien and maintain ownership of the property, or sell it in a private transaction.

The receivership proposal that is currently being discussed for Virginia is very limited in scope.  Unlike the receivership legislation that Texas recently passed, or the receivership program that Baltimore has been using successfully for years now, the Virginia proposal would only apply to properties where eminent domain has already been authorized under the Spot Blight Abatement process.  Moreover, the Virginia approach would only apply to vacant and blighted residential properties and does not allow for a zoning change to occur as a result.  While this does significantly limit the scope, it also erases any concern over property rights and expanded government takings power.

The Virginia proposal, in its current incarnation, would allow a locality to petition the court to be appointed as the receiver for a vacant and blighted residential property that has already been the subject of a Spot Blight Abatement ordinance by the local governing body.  Acting as receiver, the locality can then contract for all reasonable repairs necessary to bring the property into compliance with the building code.  The cost of the repair work is attached to the property as a lien on par with delinquent real estate taxes.  This twist on traditional receivership for blighted buildings allows the blighted condition of the property to be improved and adds a layer of protection for the property owner.  The owner of the property can redeem it at any time by paying the receiver’s lien.

Most importantly, the Virginia derelict building receivership proposal would offer relief to those most affected by blight: the surrounding neighbors.  Often, the property rights of those who live near blighted properties are forgotten in the debate over blight and private property rights.  When every day that passes presents a new risk of fire, collapse, criminal activity and drug use, a solution that results in the cleanup and repair of a blighted building while offering a new layer of protection to the owner of the blighted property is good for everyone involved.

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