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California: Office of the Los Angeles City Attorney Receivership Program

Posted By USFN, Tuesday, April 5, 2016
Updated: Wednesday, April 6, 2016

April 5, 2016

 

by Kayo Manson-Tompkins
The Wolf Firm – USFN Member (California)

On August 12, 2015 Los Angeles City approved a receivership program in order to address the ongoing “blight” that has continued to exist with vacant properties (City of Los Angeles Report No. R15-0212). Under this program, if the efforts of Code Enforcement and Building & Safety have not resulted in a remedy or abatement of the violations or nuisances, contract attorneys will be hired to file a receivership action. Once a receiver is appointed, the receiver will take steps to remedy or abate the violations or nuisances; a secured loan can be obtained to do so.

This loan will have first lien priority over all existing liens secured by the property in order to recover full costs of abatement, as well as the costs associated with the receivership (including attorneys’ fees and costs). Under the program servicers and investors may encounter properties where the amount of recovery post-sale has been significantly reduced by the receiver’s first-priority lien. Another option for a receiver is to force a sale of the property so as to recover these costs.

As a reminder, Los Angeles has a foreclosure registration requirement whether the property is vacant or occupied. The city also has a vacant registration program regardless of whether the property is in foreclosure. Furthermore, once the property has gone to sale, there is a registration program for REOs.

To prevent incurring stiff penalties (and, if applicable, having a receiver appointed) it is imperative that servicers and investors review their Los Angeles, California portfolios. Go to Los Angeles Housing Department Foreclosure Registry Program at http://hcidla.lacity.org/ForeclosureInformation and have your property preservation company register the properties.

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