The city of Las Vegas, Nevada, has apparently decided to roll the dice and, as Chicago did a couple of months ago, try an end-run around the 14th Amendment. Well, not an end-run, exactly; more like a fullback bulldozing off-tackle.
The Las Vegas City Council is considering a proposal that would make lenders responsible for the maintenance of vacant properties in default or foreclosure, or else face possible fines or jail time.
The ordinance, sponsored by Councilman Steven Ross, would force a mortgagee to inspect properties in pending or actual default and, if vacant, register them with the city for $200. The mortgagee would have to then designate a manager to keep up the vacant property.
Required upkeep would include landscaping "maintained up to the neighborhood standard," such as regular watering and mowing.
Violators of the ordinance would get a maximum $1,000 fine or six months in jail for each offense. Each day of violation would constitute a separate offense.
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Chicago passed a similar law in July that made mortgagees responsible for maintenance on vacant homes in default or foreclosure. Some cried foul, saying the ordinance violated lenders' 14th Amendment right to equal protection.
As we said in August about Chicago's ordinance (expanding on statements made by Moody's Investor's Service):
[T]he burden of the law could chase lending out of the very blighted areas it was intended to benefit. If there's more risk and potential liability to lending there than elsewhere, either lenders aren't going to lend there or they will price the risk accordingly, which means borrowers who can get financing will pay more for it than they would without this misguided effort.
It's already harder to get a residential mortgage loan than it is to score a date with Jennifer Lopez (not that I'm discouraged by the restraining order). By all means, Las Vegas, compound your woes by making it even harder for your citizens to buy a home.
Critics who think that these ordinances won't stand up to legal challenges are placing a sure bet. Lenders may be the public's favorite object of fear and loathing these days, but none of them are suckers. A city council that would pass such an unconstitutional ordinance is full of either the abysmally ignorant or the hopelessly cynical, or, perhaps, both.
The ordinance comes up for a vote on November 15th. Perhaps sanity will prevail.
What are the odds?
