Vacant buildings and blighted neighborhoods challenge redevelopment in Connecticut cities.  Two statutes awaiting Governor Ned Lamont’s signature provide a time-tested avenue for redeveloping these urban areas.  The new laws enable municipalities to form nonstock corporations, referred to as “land banks”, to take title to, rehabilitate and convey abandoned and blighted real property within their municipal boundaries. Land banks have been an important component in the redevelopment of cities such as Detroit and Cleveland; 25 land banks in New York State are hard at work.  Connecticut already has a unique land bank for brownfield properties.

The first statute, PA 19-175, is effective from passage and allows one or more municipalities to establish an “authority” to accept real property by foreclosure, gift, exchange or other means for the purpose or rehabilitating the property.  These “land bank authorities” may acquire, design, demolish and construct property.  They have the ability to borrow money and secure it with a mortgage.  They may also issue limited obligation revenue bonds.

This statute includes certain requirements to facilitate good governance and transparency.  The land banks are required to maintain a public inventory of its holdings. The municipality may adopt restrictions and guidelines for the future use of the properties in order to serve the municipality’s goals.  For 5 years after a land bank property is conveyed, 50% of the municipal taxes on the property are earmarked for the land bank.

The second statute, PA 19-92, is effective January 1, 2020 and permits a “party in interest” to petition the local superior court for the appointment of a receiver to take possession of vacant, blighted property for the purpose of rehabilitation.  A party in interest can be an owner, a lien holder, a resident or business owner located less than 1000 feet from the property, a development organization (such as a land bank) or a municipality.  Properties adjacent to the subject property may be eligible, too.

The court may appoint a receiver if the petitioner can show that the property was vacant for the last 12 months, was not actively marketed with a good faith effort to sell at market conditions, the then owner had owned the property for at least 12 months, there is not pending foreclosure action and that the property creates hazards for the for the health and safety of others (vermin, increased risk of fire, appearance or condition decreases the economic well-being of the neighborhood.  The owner, of course, has an opportunity to convince the court otherwise.

While the most senior, nongovernmental lienholder has “first dibs” on becoming the receiver, a development organization, such as a land bank, may be appointed as the receiver.  The receiver will present a plan to the court for the rehabilitation of the property.  Once approved, the receiver will be able to demolish, construct, restore and rent it, seek public grants, loans and land use approvals, and ultimately, with the court’s approval, sell the property.  The receiver’s expenses and financing in implementing the plan will receive a lien priority over certain other liens enumerated in the statute.  The receiver is required to submit accountings to the court, at least annually.

Once signed into law, these statutes will provide new opportunities for owners, lenders, developers and neighborhoods and cities.

Attorneys