Can public nuisance law protect your neighborhood from big banks?

• Author: Lind, Kermit J.
• Position: Ohio

1. Introduction

   This article considers how the law of public nuisance might be applied to protect neighborhoods from the destructive forces of the mortgage crisis. (2) For more than thirty years I have been a close observer and a participant in community development at the neighborhood level in Cleveland, Ohio. (3) I now supervise a law school clinical practice that provides legal counsel to an array of nonprofit community development corporations that, for more than thirty-five years, have been renewing housing and neighborhood sustainability in a city going through major social and economic change. (4)

   No city has mounted a more determined effort to restore its housing stock and sustain neighborhood vitality than Cleveland. (5) This effort has included the investment of hundreds of millions of dollars in public funds and private donations, including resources provided by some of the banks whose business practices undercut the value and benefit of their investments. (6) it is within the context of that struggle that I look to the law of public nuisance as a tool to remedy the physical condition of real property standing in violation of local and state laws and, in addition, as a tool to stop the business practices of commercial property owners that perpetuate the harmful conditions prohibited by state and local nuisance abatement laws.

   The profession of law involves engaged, informed, and skilled thinking coupled with disciplined action on matters critical to the welfare of human kind. The critical societal problems of each epoch set the agenda for the study and practice of law. With the advent of the mortgage crisis in the 1990s, the practice of community development law in Cleveland came to include, then to focus on, protecting neighborhood residents from the impact of abusive home financing schemes. (7) Representing both public and private clients, community development lawyers in Cleveland were tasked with protecting decades of housing and community renewal from the rising tide of vacant and abandoned houses, which threatened the health, safety, and welfare of residents and the public. That effort led to new state and local public policies and to creative use of both criminal and civil litigation using public nuisance abatement doctrine. More generally, the task raised the question of whether, and in what capacity, nuisance law can effectively abate nuisance conditions and the business practices that destroy stable neighborhoods. This article attempts to illustrate the view that knowledge of and practical experience with public nuisance law is critical to the discussion of the topic.

   The article begins by surveying the litigation experience in Cleveland and Cincinnati, Ohio, over the past twelve years--a period during which nuisance abatement by traditional housing code enforcement to remedy serious residential nuisances became obsolete and insufficient. The second part looks at the development of the doctrine of public nuisance and its current status in both scholarly and judicial writing. The third part applies a test for public nuisance litigation advocated by opponents of public nuisance litigation against producers of products and byproducts that do harm. The question is whether bank business practices of owning and maintaining nuisance real estate would be actionable under this test intended to limit the application of public nuisance doctrine. The final part offers an assessment of the possibility of using public nuisance law to protect neighborhoods that are being threatened by large scale bank-owned housing.

2. TWELVE YEARS OF NUISANCE ABATEMENT LITIGATION IN THE MORTGAGE CRISIS

   1. The Insufficiency of Traditional Housing Code Enforcement (8)

      The prevailing legal process for abating public nuisances starts with inspection of dwellings and issuance of notices of violations to the parties responsible along with an order to comply with the statute or ordinance prohibiting the nuisance. Failure to comply or to successfully appeal the order results in a summons to an administrative or judicial hearing on the issue of the failure to comply with the administrative order. (9) This exercise of the police power to protect the public health, safety, and welfare imposes criminal penalties for failing to comply with the requirements of specific codes as well as failing to comply with a police order. The court in such proceedings has jurisdiction over the individual or individuals responsible for the property condition and for the failure to comply, but lacks jurisdiction over the property itself. The court may sentence a person for the offense--to a fine and sometimes jail time--but the nuisance conditions are not abated.

      Criminal enforcement of housing, zoning, health, and safety codes has certain limitations. The purposes of criminal prosecution for noncompliance with housing codes are punishment and behavior modification. Prosecution may elicit remedial compliance by a defendant who wants to avoid or mitigate a sentence. (10) That assumption generally works well in circumstances where homeowners live or work in the property where code violations are cited and have the means to comply. in fact, the rate of voluntary compliance with housing and building code citations has traditionally been very high. However, neither that assumption nor the reliability of voluntary compliance is the norm in neighborhoods with a high degree of mortgage failures, absentee owners, and vacant houses. indeed, the possibility of achieving any meaningful compliance with the traditional policing methods for housing, health, and safety codes diminishes where owners are not present or are not financially able to maintain their houses. (11)

      Traditional code enforcement methods designed for maintenance of owner-occupied housing are essentially obsolete in the neighborhoods most affected by mortgage failures. Vast numbers of houses serving as mortgage collateral are chronically vacant and the repair of dwellings falls on owners who may lack the means or the will to keep a house from becoming dangerously harmful. (12) Abandoned, vacant houses in the process of foreclosure are a communicable disease that diminishes the benefit to neighbors of keeping up or restoring their own houses. (13) Furthermore, although judges generally prefer compliance rather than punishment in housing code enforcement cases, many are frustrated with the limited punishments available to force abatement of serious and expensive nuisance conditions. Finally, the volume and the increased level of work required to inspect dwellings, cite owners, and bring a criminal prosecution is a growing financial burden on municipalities. (14) Effective code enforcement to require compliance with nuisance abatement codes in any large American city is a very rare thing. The spreading scourge of abandoned vacant housing is overwhelming the archaic and arthritic methods of traditional code enforcement. in the face of this crisis, new housing code enforcement methods and strategies are required.

   2. Ohio's Civil Residential Nuisance Abatement Statute

      An alternative to criminal prosecution of serious nuisance conditions is the civil action. in civil cases, statutes or the common law provide injunctive relief whereby the court directs compliance with its order to abate a nuisance condition. (15) Civil liability for public nuisances does not focus on punishment; rather, civil actions expand the available tools that a court may use to directly deal with the conduct causing nuisance conditions and to remedy the offending conditions. Permanent injunctions by a court eliminate the necessity of multiple prosecutions for repeated offenses. Additionally, because a court in a civil action has jurisdiction over property and persons, it has a sure way of permanently abating nuisance conditions. it is an action available to both municipal prosecutors and private persons. Many states and municipalities have codified laws that grant private persons the right to bring suit individually or as a private attorney general for an injunction to abate conditions the statute declares to be public nuisances. (16)

      Ohio's residential nuisance abatement statute is an example of a state statute authorizing civil nuisance abatement actions. (17) Not only does the statute authorize civil actions to abate public nuisance conditions, it authorizes nongovernmental persons to be plaintiffs in the action along with the municipal government. (18) This is a clear departure from the traditional notion that only the sovereign may vindicate rights belonging to the public. Unlike the enforcement of building and housing codes in criminal actions against owners, a nuisance abatement action initiated pursuant to the Ohio statute is a civil action whereby the court-either following the plaintiff's motion or sua sponte--can issue an injunction requiring the property owner to abate any adjudicated nuisance conditions or issue any order necessary or appropriate to cause the abatement of the public nuisance. (19) Additionally, either in response to a plaintiffs motion or through its own action, the court may offer to all parties having an interest in the property an opportunity to undertake the work and furnish the materials necessary to abate the public nuisance conditions or appoint a receiver to take control of the nuisance property and implement a court-approved abatement plan. (20)

      Key provisions of the statute start with definitions that narrow its application to residential buildings (21) not occupied by the owner primarily as a residence and that are in a nuisance condition (22) making them harmful to the public and unfit for habitation. The statute does not apply to ordinary wear and tear acceptable to a reasonable homeowner in his or her residence. The statute defines abatement to mean either a complete rehabilitation or demolition of a building found to be a public nuisance. (23) Its definition of "neighbor"...