A recently passed ordinance, which includes the bank who lends the property owner the mortgage, or the mortgagee, as a property owner and responsible for upkeep on abandoned properties, is being argued by many for its violation of the constitution.
Legal experts say that this new ordinance violates the 14th Amendment, right to equal protection, because it would force lenders, who are listed as mortgagees, to pay for upkeep and maintenance to these abandoned properties before they officially own the property.
Mortgagees cannot even legally walk on a property without full ownership. This means mortgagees could face a trespass violation because this ordinance instructs them to fix a property that they don’t officially own and cannot step foot on.
Mayor Rahm Emanuel is reportedly happy with the ordinance because is will prevent the taxpayers’ money from being used to handle upkeep and maintenance on these abandoned properties.
However according to HousingWire, Richard Gottlieb, chair of Dykema’s Financial Industry Group, states that the ordinance requirements are overly broad and not narrowly tailored enough to meet a legitimate government interest without violating the rights of lenders.
“A number of trade associations wrote formal objections to the proposed ordinance,” Gottlieb said. “If the property went into REO, they (the financial institution) have every obligation in the world to fix the code violations, this is just a gotcha moment for the city. They are going to punish lenders in circumstances where the code violation is 100% out of their control.”
Gottlieb explains that this ordinance is a catch-22 for lenders and believes it will be over turned in court.