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In fight against urban blight, Lowell adds tool to arsenal

By John Laidler
Globe Correspondent / May 27, 2012
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A once-blighted Lowell house has been rehabilitated and put on the market through the city’s use of a state tool that allows abandoned properties to be placed into receivership.

City officials Tuesday held a ribbon cutting ceremony to highlight the completed upgrade to the home at 128 6th St. and the process that enabled them to accomplish it.

Using the model of state Attorney General Martha Coakley’s Abandoned Housing Initiative, Lowell tapped a state law that enables the court to appoint receivers for properties whose owners fail to rectify sanitary code violations.

A receiver appointed by the court at Lowell’s request last August overhauled the building in about four months of renovations. After initiating foreclosure proceedings, the receiver purchased the property at auction on April 23 and recently placed it on the market.

The property is the first that Lowell has brought through receivership in recent history, according to city officials, who hope to replicate the effort with other properties.

“This program is an excellent tool for changing the momentum in a neighborhood by taking a building that is a blighting influence on its neighbors and turning it into a model that can inspire others to improve their properties as well,” Mayor Patrick Murphy said in a prepared statement. “We’ve already started to see this positive impact on 6th Street.”

Through the abandoned housing initiative, Coakley’s office, working with the local municipality, uses enforcement of the state sanitary code and receivership to address abandoned properties that are in poor condition, according to Emalie Gainey, a spokeswoman for the office.

Since the AG’s office expanded the program in 2009, 14 receiverships have been completed and 85 cases have been closed after properties were repaired in response to pressure from the office. The Lowell case is not included because the city handled it on its own, using the AG’s model.

The AG’s office has 198 active cases in the program, 16 of them in some stage of receivership. The active cases are in 29 cities and towns, including Chelsea, Everett, Haverhill, Lawrence, Lynn, Medford, Methuen, Revere, Salisbury, Saugus, and Somerville.

“Receivership is a particularly attractive way to address problem properties in a time of tight municipal budgets and limited grant resources,” Lowell city manager Bernard Lynch said in a statement.

“The program allows communities to compel positive change with little to no public expense.”

City inspectors in 2010 found that the 6th Street home was in significant disrepair, and had safety problems as well as illegal apartments in the attic and basement, and squatters in residence.

The city boarded up the property to keep squatters out and to prevent further deterioration, according to Kendra Amaral, deputy director of the city’s Department of Planning and Development.

Amaral said that after trying unsuccessfully to contact the property owner, the city petitioned the state Housing Court to appoint a receiver. She said the owner, who also owed the city about $24,000 in back taxes, contacted the city at that point, but did not contest the petition and later left the state without remedying the conditions of the house.

On Aug. 8, 2011, Judge David D. Kerman granted the petition for receivership, and at the city’s request appointed the Charles Hope Companies to serve as receiver.

Located in Lawrence and North Andover, Charles Hope is a development firm that has been receiver for five Lawrence properties, according to Alan Hope, its managing partner.

Hope said when he first entered the house, he found it in very poor condition.

“There were five units” in what is legally a two-unit house, he said. “There were all kinds of code violations, everything from toilets not working to deficient lighting, mold in the basement, and rain coming through the ceilings and the roof.”

Following the procedure provided in the law, Charles Hope secured approval from the court for a repairs budget. That budget, which after several revisions was finalized at $265,000, includes about $30,000 to cover the firm’s overhead costs and its development fee.

The renovations included removing the illegal units and repairing or replacing walls, fixtures, the roof, and other key structures.

The bank that held a mortgage on the property had the option to acquire it by paying Charles Hope $265,000 to cover the court-approved budget. But the bank opted not to do so, and Charles Hope exercised its right to initiate foreclosure proceedings against the owner. That resulted in the auction, at which Charles Hope acquired the property with a successful bid of $265,000.

When the property is sold, the first $24,000 of the proceeds will go to the city to cover the unpaid taxes, and the balance will go to Charles Hope to cover some or all of the $265,000 in development costs, including its fee.

Should the sale price fall short of $289,000, Hope would not receive full compensation for the development costs, according to Daniel Bumagin, a consultant to the firm.

Alan Hope said receivers do not always end up with a net profit for their work. But he said for him, it is still worthwhile.

“I’ve seen how neighborhoods have been devastated. I can see what a small dent I can make in improving them, not only socially but economically,” he said, noting that through his projects he has been able to provide work for teens as well as ex-offenders.

“I think it’s a good system for everybody,” he said, noting that receivership not only generates new tax revenues for communities, but results in properties “that are no longer boarded up, that no longer degrade the entire area.”

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