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Rent Abatement and Escrow PolicyCity of Dubuque City Council Meeting Consent Items # 16. Copyrighted December 6, 2021 ITEM TITLE: Rent Abatement and Escrow Policy SUMMARY: City Manager recommending the City Council receive and file the Rent Escrow Policy and the Rent Abatement Policy, ensuring the public has notification these policies are in effect. SUGGESTED Suggested Disposition: Receive and File DISPOSITION: FIN ik[O]:ILyil21zIII &] Description Type Rent Abatement and Escrow Policy Guidelines-MVM City Manager Memo Memo Staff Memo Rent Abatement Policy Rent Escrow Policy Staff Memo Supporting Documentation Supporting Documentation THE CITY DUOF B TEE Masterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Rent Abatement and Escrow Policy DATE: November 23, 2021 Dubuque All -America City IN 2007.2012.2013 2017*2019 The Building Codes adopted by the City Council, combined with the Rental License Ordinance, dictate the fines, fees and penalties for noncompliance with building codes as well as the Rental Licensing Ordinance. On October 18, 2021, the City of Dubuque adopted an ordinance amendment, allowing the City to abate rent if a property owner fails to carry an active rental license, has failed to provide an essential utility service or failed to remedy a condition that poses a substantial risk to the health or safety of the tenant. Rent abatement means that the property owner is unable to recover any rent from a tenant until the situation is cured. The rent that is abated never becomes due/payable. If the City abates rent, notification will be provided to both the property owner/agent and the tenants affected. Additionally, with the ordinance change, the City may set up an escrow account for a property that remains in non-compliance with city codes. Rent normally paid to the property owner, is instead paid to the City and placed in this escrow account. The escrow account is used to abate the violations and bring the property up to code. Any money remaining in the escrow account after violations are remedied, is returned to the property owner. In most situations, the escrow will reimburse the costs of the improvements, so tenants do not have to wait for improvements to be made. The adopted ordinance includes a requirement that a policy be adopted for rent abatement and for rent escrow that is filed in the Inspection and Construction Services Division and is available to the public. City staff met with the Dubuque Area Landlord Association Executive Board in October 2021 and provided the draft policy for rent escrow to solicit input. No input was received at the meeting or from the Board thereafter. City staff also sent the draft policy to the Chamber of Commerce to distribute to local banks for additional input. The only input received to date was thanking City staff for allowing them to provide input throughout this process. Without any concerns raised with the policy, City staff adopted the attached documents as the final policies for rent abatement and rent escrow. Housing and Community Development Director Alexis Steger recommends the City Council receive and file the Rent Escrow Policy and the Rent Abatement Policy, ensuring the public has notification these policies are in effect. I concur with the recommendation and respectfully request Mayor and City Council approval. Y Mic ael C. Van Milligen MCVM:jh Attachment cc: Crenna Brumwell, City Attorney Cori Burbach, Assistant City Manager Alexis M. Steger, Housing and Community Development Director 2 Dubuque THE CITY OF DUB E Alf -America City Masterpiece on the Mississippi p pp zoo��o 13 zoi7*20*zoi9 TO: Michael C. Van Milligen, City Manager FROM: Alexis M. Steger, Housing and Community Development Director DATE: November 22, 2021 RE: Rent Abatement and Escrow Policy DISCUSSION The Building Codes adopted by the City Council, combined with the Rental License Ordinance, dictate the fines, fees and penalties for noncompliance with building codes as well as the Rental Licensing Ordinance. On October 18, 2021 the City of Dubuque adopted an ordinance amendment, allowing the City to abate rent if a property owner fails to carry an active rental license, has failed to provide an essential utility service or failed to remedy a condition that poses a substantial risk to the health or safety of the tenant. Rent abatement means that the property owner is unable to recover any rent from a tenant until the situation is cured. The rent that is abated never becomes due/payable. If the City abates rent, notification will be provided to both the property owner/agent and the tenants affected. Additionally, with the ordinance change, the City may set up an escrow account for a property that remains in non-compliance with city codes. Rent normally paid to the property owner, is instead paid to the City and placed in this escrow account. The escrow account is used to abate the violations and bring the property up to code. Any money remaining in the escrow account after violations are remedied, is returned to the property owner. In most situations, the escrow will reimburse the costs of the improvements, so tenants do not have to wait for improvements to be made. The adopted ordinance includes a requirement that a policy be adopted for rent abatement and for rent escrow that is filed in the Inspection and Construction Services Division and is available to the public. City staff met with the Dubuque Area Landlord Association Executive Board in October 2021, and provided the draft policy for rent escrow to solicit input. No input was received at the meeting or from the Board thereafter. 1 City staff also sent the draft policy to the Chamber of Commerce to distribute to local banks for additional input. The only input received to date was thanking city staff for allowing them to provide input throughout this process. Without any concerns raised with the policy, City staff adopted the attached documents as the final policies for rent abatement and rent escrow. RECOMMENDATION I respectfully request City Council receive and file the Rent Escrow Policy and the Rent Abatement Policy, ensuring the public has notification these policies are in effect. 2 RENT ABATEMENT POLICY GUIDESHEET A property owner may be subject to a rent abatement order if any of these conditions have been met: • Rental unit lacks an essential service (water, sewer, electricity, heat) • Rental unit has conditions that poses a substantial risk to the health or safety of the tenant • Rental unit lacks a rental license, or the license has been suspended or revoked Notice The code official shall provide a copy of the rent abatement order to the owner or lessor at the address on the rental permit and to the tenant by U.S. mail and by posting the entrance door to dwelling unit. Notice of termination of the rent abatement order will be given in the same manner. Process/Procedures for Rent Escrow The determination to initiate a rent abatement based on the above requirements being met will reside with the Deputy Code Official and/or Building Official. Termination of Rent Abatement Order The rent abatement order will be officially terminated, and written notice of termination provided only when the conditions leading to the abatement of rents has been corrected. RENT ESCROW POLICY GUIDESHEET Basis Used to Abate a Violation and Recover Costs Through Rent Escrow A property owner may be subject to the escrow of rent to abate a building code violation once all the following conditions have been met: • Property Owner received a Notice of Violation(s) • A Court Order has been issued regarding the violation • Property Owner received a Municipal Infraction for the violation(s) • The Court Order has expired and the violation remains Notice Notice of the escrow must be provided to the property owner, tenant and first lien holder in writing and must inform them of all appeal rights and that failure to appeal will constitute a waiver of all rights to an appeal (14-day appeal period per ordinance) Process/Procedures for Rent Escrow The determination to initiate a rent escrow based on the above requirements being met will reside with the Code Official. PRIOR TO RENT ESCROW DETERMINATION RENT ESCROW DETERMINATION ESCROW COLLECTION AND CLOSURE Court Order Issuance —Triggers notification to First Lien Cost to fix violation(s) is determined based on in-house estimates Schedule Repair: Holder that a court order has been issued, and failure to • Contractor will be hired on a cost and qualification basis^ comply may lead to the escrow of rent received. Escrow may be used if: • Access to the property will be coordinated with Property • Estimate = Less Than 3 months of Fair Market Rent* Owner, Tenant or through Search Warrant/Court Order • Rent amount can be reasonably determined and collected when required • Rent Abatement conditions have NOT been met • Repair will be made immediately — escrow will be collected for reimbursement over time. *If cost to repair is greater than 3 months of FMR, escrow determination is made by the ^The City of Dubuque will follow the established administrative policy to receive Code Official for extenuating circumstance three estimates for work as able. The lowest quote will only be accepted if prior workmanship has been demonstrated. Court Order Expires (typically 30 days after issuance): Determination Letter Posted on Entry Door to Unit/Property and Sent Collection of Rent: to: Compliance with Orders, results in no further action The City of Dubuque will collect rent directly from tenants. • Property Owner Non -Compliance moves Property to Rent Escrow • Tenant Any non-payment of rent by a tenant will be reported to the Determination of Feasibility • First Lien Holder property owner within 7-days of non-payment. Additional Municipal Infractions may be issued during the A request for appeal filed within 14 days of the order, will stay the Release of Escrow: determination of escrow period. escrow order until the appeal is heard. Once the repair cost has been recovered, and the violation has An order of rent escrow does not preclude the City from filing The appeal may be filed by the Property Owner or First Lien Holder been corrected per the Code Official, the remaining escrow will a Contempt of Court for failing to comply with a Court Order. be released to the Property Owner or the First Lienholder if an Assignment of Rents are required to be filed with the City of Dubuque Assignment of Rents has been filed. prior to, or within, the 14-day appeal window to be applicable. Tenant will be notified of the release and obligation to pay rent to Property Owner or First Lienholder.