The Pennsylvania legislature recently enacted the “Vacant and Abandoned Real Estate Foreclosure Act,” found at 68 Pa. C.S.A. § 2301 et seq (the “Act”). The Act became effective on December 17, 2018, and was motivated by concerns that vacant and abandoned properties pose a threat to public health, safety, and welfare, coupled with the realization that such properties are rarely rehabilitated and returned to productive use until after a lender acquires title to the property.
As many financial institutions have experienced first-hand, foreclosure proceedings involving vacant or abandoned properties can often drag on longer than other foreclosures, largely because of difficulties in effectuating service, required participation in foreclosure diversion programs, and other obstacles. The Act attempts to expedite the foreclosure process if the property involved constitutes “vacant and abandoned real estate” as defined in the Act.
The Act sets forth detailed criteria for what constitutes “vacant and abandoned real estate,” and creates a certification procedure which allows a lender (or in some cases, a conservator appointed pursuant to other applicable law) to establish that a particular property qualifies as “vacant and abandoned.” The certification procedure can be pursued through either a municipal process (which generally requires that a municipal code enforcement officer inspect the property) or a judicial process that requires the filing of a petition and evidence with the Court as part of the foreclosure action. Regardless of which path is taken, the party seeking the certification (typically the lender) has the burden of proof, and the owner has certain due process rights which require notice and an opportunity to contest the certification.
Once a property is certified as “vacant and abandoned,” the typical foreclosure process (and in some cases, ejectment proceedings necessary for the lender to obtain possession) can be expedited in several respects. These include, without limitation, the following:
Any required or permitted foreclosure resolution programs, such as mediations, diversions, conciliations, or other required or permitted programs designed to assist owners to avoid the loss of their properties will not be required;
Simplified service of process requirements, and accelerated sheriff’s sale and ejectment procedures; and
During the pendency of a foreclosure action, the lender is permitted to enter the property to inspect, maintain, or repair the property, and will not be liable to the owner for any damages other than those caused by gross negligence.
It will be interesting to see whether the Act proves to have practical value. The certification procedure is somewhat cumbersome and may require additional expenses not typically incurred in a foreclosure, and it is possible that the foreclosure process could actually be elongated by the certification procedure in some situations. However, at the very least, it is encouraging that lawmakers are attempting to address the problems encountered by both lenders and the local community when the collateral involved is vacant and abandoned, and lenders may wish to consider the relief available under the Act in appropriate circumstances.