CareersCLIENT ALERT | REAL ESTATE | JUNE 2024
Residents First Legislation Package Adds Requirements for Owners of Non-Owner-Occupied Residential Units
The City of Cleveland recently passed legislation that may affect you. The Residents First Legislation Package, effective February 6th, 2024, added new requirements for owners of non-owner-occupied residential units located in the City of Cleveland. While the ordinance is clearly aimed at seeking a solution to the problem of absentee landlords who neglect their properties, it sweeps up all non-owner-occupied units in its net. In some respects, the impact is draconian.
New Requirements
Identify a Local Agent in Charge; Liability of Local Agent in Charge
All non-owner-occupied units must identify a Local Agent in Charge (LAIC). If the owner resides in Cuyahoga County or a contiguous county, the owner can act as the LAIC. However, for owners that are located outside of Cuyahoga County or a contiguous county, the LAIC must be an individual who resides in Cuyahoga County. Just like the owner, the LAIC will be legally responsible for the property, including the maintenance and management of it. The extent of this legal responsibility is somewhat shocking, as the ordinance specifically states that the LAIC must sign a form to “accept responsibility with the owner (including any potential criminal, civil, or administrative liability) for the maintenance and management of the premises.” While the ordinance states that the City will make good faith efforts to hold the owner exclusively liable, and the form contains an indemnity from the owner to the LAIC should the City pursue the LAIC in an enforcement action, the ordinance states specifically that “the City may, in its sole discretion, hold the Local Agent in Charge responsible or liable, in part or in full.” Any individual serving in the capacity of a LAIC would be well advised to look to the creditworthiness and reliability of any owner retaining the LAIC.
Register Your Unit as a Non-Owner-Occupied Residential Unit
Owners must register all non-owner-occupied units and pay registration fees for each property. The fee is $70.00 per residential unit with a cap of $30,000 per year per owner. Owners can do so in the city’s rental registration portal that is soon to be launched. Required information includes property address, owner identification, and LAIC identification. Even if an owner has registered property previously, this revised registration is now required since it contains newly required information. The City’s website (Residents First Rental Registration | City of Cleveland Ohio) states that the registration fees were to have been paid by May 30, 2024 but the City’s portal for processing applications and fees is not operational. In response to our inquiry to the City regarding the portal, we received the following message: “The rental registration on-line portal will be up by June 6, 2024. Payments will not be considered late until July 1, 2024.”
Apply for a Certificate Approving Rental Occupancy
A Certificate Approving Rental Occupancy is also needed to rent in good standing and be in compliance with the new legislation. These Certificates are not due until September 1, 2024. The application materials are not currently available. As will be seen in the requirements which must be satisfied to obtain the Certificate, timing might be a problem with respect to large projects since HVAC inspections must be obtained (and presumably repairs must be made) in order to complete the application for the Certificate.
To obtain a Certificate Approving Rental Occupancy, owners must:
- Comply with Lead Hazard Control Orders
- Receive a Lead Safe Certificate (if the property is pre-1978)
- Be up to date on property taxes
- Be in compliance with any notices of violation
Owners with 4+ units in a non-owner-occupied residential unit must also:
- Have HVAC examined and certified by a licensed professional as being in good working condition
- Be up to date on utilities that are owner paid
Residents First Legislation also requires owners of vacant buildings in the City of Cleveland to submit a Vacant Building Registration annually or until the building is no longer vacant. To register a vacant building, owners will need to provide the property address, owner identity, LAIC identity, and agree to basic upkeep of the property. If owners wish to sell vacant properties, a City inspection is required. If you need further details on vacant property registration, please get in touch with us.
Conclusion
Registering and paying the required fees for non-owner-occupied residential units is not out of the ordinary. The obligation to name an individual as a local agent in charge, and the imposition of civil and criminal liability on that individual is quite out of the ordinary.
Compounding the issue, requiring owners affected by this legislation to get all HVAC units inspected (and repaired if the inspector does not approve of its condition) is also out of the ordinary. Cost is a significant factor.
It could well be that the vast majority of owners complying with the legislation will be those that are responsible and financially stable, and that those not complying will be the very owners the legislation is designed to bring into responsible property ownership. Time and experience will tell the tale. Meanwhile, we stand ready to assist our clients with the registration process.
Law clerk Jordan Elliott contributed to this alert.
If you have any questions regarding the matters covered in this alert, please reach out to the lawyer(s) listed below or your usual Walter Haverfield contact.
John (“Jack”) W. Waldeck, Jr. | Partner | Real Estate | (216) 928-2914 | jwaldeck@walterhav.com
This communication is for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice. This may be considered attorney advertising in some jurisdictions.