What is House Abandonment?
Legally speaking, the abandonment of a house is defined as renouncing possession, or relinquishing it with the intention of not retaking possession, and this of course can be with or without intent to transfer it to another without compensation. Some examples of when house abandonment typically occurs are as follows: the owner has been absent from the property with no intention of renting or maintaining it. For instance, if a person buys a house, moves in, and then goes to another state for a lengthy period for work or school and leaves the property unattended, not hiring a caretaker to look after it, and pays no utility bills or property taxes on it, evidence may suggest that the person has in fact abandoned the property . The owner of the property never pay property taxes on it and utility services have ceased for an extended period of time and the property has fallen into a state of disrepair – these are signs of abandonment. Other scenarios for voluntary abandonment involve: the homeowner going into the hospital and the remaining family members moving out of the house; the owner selling the property to another who later vacates the property; the owner borrowing money on the property and not paying it back; The above involuntary terminations of occupancy or abandonment are due to circumstances beyond the control of the owner of the property while the voluntary type may be intentional or simply a failure by the owner to act.
Abandonment of Your Home and the Law
Abandoning a house does not remove the owner’s legal obligation for it, as that property owner is still responsible for any lawsuits or claims brought against his/her property, however, the pool of assets available to carry any such claim is likely to be very small, if it exists at all. The property owner is usually subject to additional penalties or more severe penalties than a "mere landlord".
Consider in the following scenario: Owner purchases a house years ago when market value of the house was $250,000. Owner stops paying on the mortgage and does not respond to the Notices of Default (NODs) and foreclosure proceeding. The mortgage is then foreclosed upon, and the house is sold for $60,000 at auction. The mortgage balance is $300,000. Because Owner has a deficiency of $240,000, the lender can collect on the deficiency with very few limitations. The owner may face the ability of recovery on all borrowings, such as a car loan or a credit card, and may even lose portions of salary or other accounts. Even once the courts have entered a judgment against Owner, the lender will need to discover assets owned by the Owner. If Owner no longer can afford to handle the property, it is unlikely that Owner can afford to pay for private investigators or skip tracers to find out where Owner has migrated to. Money judgements are enforceable for 10 years, so a person can work to get the financials back "in the black" for many years, and then be hunted down by delaying the judgment during their existence. The property owner may want to consider how long the judgments may be enforced, and try to make a little more for a while or move more money around, before it becomes truly burdensome. If amounts are less than $5,000.00, they may get away without ever being found under the judgment; but, if debts are higher, scrutiny of bank records is possible. Even if Owner can evade the lender, after 10 years of delay, the lender may have their entire debt effectively forgiven and have to start over, unless the debt is guaranteed by someone else.
Abandonment Laws by State
House abandonment laws vary by state and property owners need to be aware of how their state treats the abandonment of houses or lots. Here is a breakdown of how house abandonment is treated in Connecticut, Michigan, Utah, Washington and Wisconsin.
Connecticut
Abandonment of a real property is defined as a condition "in which it appears that the owner has relinquished all right, title and interest to the subject property and intends, at the time of relinquishment, that the property shall no longer belong to the owner." Conn. Stat. Ann. Sec. 207a(2) (West 2011). Connecticut requires that a property be abandoned for five years prior to a municipality being able to take action. The process is filed by the municipality in Superior court. The municipality will have to show that the property has been vacant for five consecutive years and has not been used for anything. If the property has a building and you can show the court that it is not being used, that may be sufficient to show that the property is abandoned. However, showing that a property has not been occupied for five years is another matter. A house that has seen small amounts of repair over the past five years may still be considered occupied. In addition, a property can be deemed abandoned even if the owner has engaged in some activity related to it. For example, there are many homeowners who have moved off-site but continue draining funds into their real estate property. There are also a lot who leave trash on their property over time. This means that sending notices to owners and checking with the court is necessary to get them to respond within the statutory timeline.
Michigan
The Abandon Property Act (Act 136 of 2000) replaced the Lands Abandoned Property Act (Act 243 of 1931). This act is meant to eliminate the visually blight created by abandoned homes. Once an act of abandonment has been established, the municipality is required to have a title examination conducted to determine if there are any liens or encumbrances on the property. If there are any, a lien will be filed against the municipality. Additionally, each subdivider who furnished the property will receive a notice to determine if the property is being maintained by the owner or anyone else by virtue of an expired ground lease. Courts under the act have the authority to order public agencies to enforce the provisions of the act. Municipalities also have the power to create an authority to take direct action when required under the act. Courts and municipalities also have the ability to assess fines against owners who refuse to comply with determined citation for neglect. The past owner, mortgagee, fee holder or other person can file a claim to the title and maintain ownership.
Utah
Utah offers the fastest process in the United States for reclaiming abandoned property. However, it is one of the more expensive states when it comes to the foreclosure process and the cost is usually passed along to consumers who will then pay it through the fees attached to selling a home. The first step for municipalities looking to file for foreclosure is to file a notice of pending action in the county where the property is located. The only requirements for seeking to reclaim a property are providing an affidavit of the cause, posting an application and certifying a homestead. The municipality must then publish a newspaper advertisement, mail over 20 days and put a sign on the real estate. The trustee can then take possession of the property and prepare it for either a sale or renovation before selling.
Washington
The Washington Abandoned Property Act allows for the selling of abandoned property, though most states specify a waiting period before taking action. The Washington Public Health and Safety code considers property to be abandoned when the owner has left it without any apparent intention to when he or she has abandoned the property for the length of the statute of limitations. The process is rather clear-cut, as it requires no additional filing of substantial documents. The trustee can record an affidavit listing the abandoned personal property, which must include a description of the property, the name and address of the owners and the trustee’s statement saying the property has been abandoned and will be liquidated to pay the encumbrances and expenses associated with it. An advertising process must then be instituted in the local commerce newspaper once every two weeks for 4-6 months. When it is sold, the owner can make a claim of the difference in value after liquidation costs. If not, it is given to the municipality.
Wisconsin
Wisconsin requires a 15-day notice and once the owner lets it expire, the home is covered for four months. After the four months, if the owner has not reclaimed it, the city can either demolish the building or sell it at a public auction and recoup its losses. However, this process will not occur until every single individual with a stake in the property has been notified.
Effect on Mortgages and Foreclosure
A clear example of the impact of house abandonment is the default and foreclosure of the mortgage loan. In fact, the mortgage company may be the first to alert authorities to a potential house abandonment. A lender must look at multiple factors in determining if it is time to foreclose or wait it out.
In most residential real estate closings, a bank will require the owner to purchase insurance coverage for the property as a condition of the loan. The lender may even require the owner to assign the insurance policy as collateral. This security helps ensure that the bank will recoup its losses for fire damage, or other losses, to the property . However, a fairly common occurrence is the owner of the property failing to pay the property insurance. After a certain period without an insurance payment the bank may begin to insure the property and charge the owner for the cost through property taxes or other means.
Once a property is abandoned and a bank has lost contact with a borrower, the bank may begin to initiate foreclosure proceedings. This process can take many months. A bank may either file a foreclosure proceeding against a property or initiate a public sale under O.C.G.A. 44-14-162(a). It could be in the bank’s best interest in some situations to wait and collect homeowners’ dues or postpone foreclosure until a public sale where the bank can buy back its own property.
What to Do if You Are Abandoning Your House
Should you not have your mortgage, real property taxes, and your HOA dues paid, give you an option to walk away the house, so the bank gets it back, but it is not something that you should do and this is why: In California, the lender can pursue you for the debt on a second loan in the following ways: In non-judicial foreclosure states, like California, the bank must do a publicly available Notice of Default which is given to you by certified mail or personal delivery and leaves a notice posted on the front door of your home. After a statutory period has passed and the default has not been cured, they file a public Notice of Sale. Once again, the bank must give you notice via certified mail or personal delivery, and leave a notice on the front door of your home. The bank will then sell your house at a public auction, bid on it, and becomes the owner or they may just send you a Notice of Sale and file the Notice with the county Recorder’s Office, then it’s a race to see which one of you will get there first to record your deed. The bank will almost always win. In either case, after the sale, the bank has acquired the right to the house, but without the right to pursue you for the difference between what was owed to them and what they sold the house for. (Except for a second in some cases). At this point, it’s not abandonment, but it’s not good news. Moving out of (or abandoning) your house before the bank sells it may be something you’re considering. But it may cause you some problems with bank collections. You may decide to negotiate with the bank for a loan modification or short sale, and it can often take some time for the bank to make a decision on your request for a loan modification or short sale, so if you move out, it may impede that process. When negotiating with your bank for a loan modification or short sale, you should make sure you have not clearly abandoned the property. Abandonment means here that you have lost your right to possession of the property, in other words, you have no intention of ever living there again and you’ve made overt steps to convey that intention. So if you have signed a Notice of Abandonment, you’ve probably lost any chance of getting the property back via a loan modification or more importantly, a short sale. If the bank under California law has already taken back the property, it may be very difficult for you to get it back. The bank doesn’t have to consider your loan modification or short sale request if you have abandoned the property. So if you know or suspect the bank is filing Notice of Default, wait until the Notice of Sale is filed to move out. The bank may just take it back and you’ll be able to send in a short sale package to try and sell it for an amount that allows the bank to avoid a deficiency balance. The bank will then pay you a small incentive to do this. It really is considered a good thing, and it is one way to keep your credit rating in relatively good shape.
Effects on Neighborhood and Property Values
Abandoned houses create an upsurge in community concerns. Foremost among these concerns is property value. There is the possibility that a vacant house nearby will drive down the prices of an entire neighborhood, starting with the home of a person who lives next door to the abandoned property. If the value of each house in a neighborhood decreases by a certain percentage, homeowners may become unable to pay their mortgages. If this happens, many of them may abandon their homes to become squatter residents in vacant properties. This fact can begin a cycle of decay within an entire community. In addition to depreciation of property values , crime rates are often affected by the presence of an abandoned house. All corners of the world are experiencing a crime wave, which has been occurring daily in every town and city. There are many that attribute the growth in crime to the increasing number of vacant houses. Vandalism, fires, drug use, littering, and murder have been attached to vacant properties in the communities they are located in. The increase of police presence as a response to this issue only serves to further tax public budgets and resources. Finally, the deterioration of the aesthetics of a neighborhood is a big concern when faced with the burden of an abandoned home being present.