Hidden costs ambush buyers

Michael Evans bought the bank-owned fourplex near Monroe Avenue and H Street at an auction without seeing it first.

The condition of the property might have scared off other investors, but he has been rehabbing and renting out property for a long time.

Broken, boarded-up windows? No problem.

Stripped plumbing and stolen air conditioners? You expect that.

Holes in the walls? Ho-hum.

Feces in the bathtub and dirty mattresses left by squatters? Goes with the territory.

Then he ran into something new.

"I thought everything was great until the letter came in the mail," Evans said.

The letter, from the city of Las Vegas, informed him that a previous, neglectful owner had racked up more than $60,000 in fees and fines because the city had to hire someone to board up the building and pick up trash.

Those charges stay with the property, meaning Evans was potentially on the hook for a bill that was far more than the property's $37,500 auction price.

So far, two cases like this have made it before the City Council. More are expected because of the number of foreclosed and abandoned properties being snapped up by investors who might be receiving clean titles to places that shouldn't have clean titles.

It could be partially the buyer's fault if he or she isn't checking the property's history in the Clark County recorder's office, said Devin Smith, neighborhood response manager for the city.

"I probably get a phone call a day from someone who bought a property, and now they want their fees waived," he said. "People are just showing up, they're buying properties and then they're saying, 'I didn't know about this.'"

But some people, like Evans, are telling the city they were given a clear title, though title to the property should have been "clouded" by city notices that work was done on the property.

Mayor Oscar Goodman recently sent a letter to title companies urging them to be vigilant about the issue and warning about potential legal liability.

"I feel sorry for these folks who are sort of being middled here," Goodman said. "But they certainly, in my opinion -- and that's the reason I wrote the letter -- have a potential cause of action.

"The title policy should pick up any kind of liens or any kind of notice that's properly recorded against the property."

Title companies research the ownership history of a property and check for liens and judgments that might be encumbering the property.

When the city gets a report about a blight, it hires a contractor to bring the property up to basic standards.

Broken windows are boarded up, open doors are secured or blocked, unsanitary pools are drained, weeds and trash are cleared away. In extreme cases, buildings are simply demolished.

The city incurs "hard costs" for that work, usually a few thousand dollars.

Since the foreclosure crisis deepened and abandoned properties proliferated, the City Council has started imposing civil fines of up to $500 a day in an effort to scare owners into maintaining properties rather than face tens or hundreds of thousands of dollars in fines.

In the two cases heard before the counci -- Evans' property and one on Stacey Avenue near Lake Mead and Decatur -- the new owners bought the properties after the work had been done but before the council met to establish the fines.

In each case, the council left the "hard costs" in place as a lien against the property, which must be paid if the property is sold.

For Evans, those amounted to $2,416. The large civil fines were waived.

That's the approach the council most likely will take with future cases, Smith said.

"The council wants to know what you're going to do to bring the property up to standard," he said. "I don't think they're going to waive the hard costs."

Evans said he understood that, though he doesn't agree that the approach is fair because he is not the one who neglected the property.

It allows him to proceed with the renovation of his four units in a part of town that has seen hard times and needs investment.

"By the 25th, it'll look good. If you didn't care about the neighborhood, you would say, 'Yeah. I can live here,'" Evans said.

"You've got to start somewhere. Somebody's got to do something nice and hope that people appreciate it."

Contact reporter Alan Choate at achoate @reviewjournal.com or 702-229-6435.