Iowa Supreme Court Rules that Cities May Take Possession of Abandoned Properties

Cby Eric Christianson

Eagle Grove v. Cahalan Investments
(Iowa Supreme Court, December 1, 2017)

Cahalan Investments purchased two residential properties in the City of Eagle Grove, one in 2002 and the other in 2011. Both properties have remained unoccupied and in deteriorating condition since their purchase. The properties were the subject of multiple complaints by neighbors and were found to be unfit for human occupancy.  In 2014 the city began an effort to clean up a number of nuisance properties, these properties were among those targeted. The city sent several letters to Cahalan advising them that they were in violation of the city’s nuisance ordinance. Cahalan made no effort to abate the nuisance and would later testify that they had no intention of making either property habitable in the foreseeable future

Iowa Code section 657A.10A allows cities to petition a district court to transfer ownership of abandoned properties to the city. The code details the following criteria that a court is to use when determining if a property has been abandoned.

a. Whether any property taxes or special assessments on the property were delinquent at the time the petition was filed.
b. Whether any utilities are currently being provided to the property.
c. Whether the building is unoccupied by the owner or lessees or licensees of the owner.
d. Whether the building meets the city’s housing code for being fit for human habitation, occupancy, or use.
e. Whether the building is exposed to the elements such that deterioration of the building is occurring.
f. Whether the building is boarded up.
g. Past efforts to rehabilitate the building and grounds.
h. The presence of vermin, accumulation of debris, and uncut vegetation.
i. The effort expended by the petitioning city to maintain the building and grounds.
j. Past and current compliance with orders of the local housing official.
k. Any other evidence the court deems relevant.

The code then states that if the court finds the property is abandoned, “the court shall enter judgment awarding title to the city.” In this case, the district court found that Cahalan’s properties were indeed abandoned under the definition set forth in the statute. In fact Cahalan Investments does not dispute this finding; however, Cahalan argued that awarding ownership of these properties to the city without compensation violated the takings clause of the US Constitution. In this case, the district court found Cahalan Investment’s argument convincing and did not award title to the City of Eagle Grove.

The City of Eagle Grove appealed the district court’s decision to the Iowa Supreme Court.

The Iowa Supreme Court revisited the question of whether awarding ownership to a city under Iowa Code section 657A.10 is constitutional.

Proving that a section of state code is unconstitutional is not easy. The court quotes an earlier decision stating that, “statutes are cloaked with a presumption of constitutionality. The challenger bears a heavy burden, because it must prove the unconstitutionality beyond a reasonable doubt.”

Takings jurisprudence is based primarily on the takings clause of the Fifth Amendment which states that, “private property [shall not] be taken for public use, without just compensation.” To determine if a governmental action has violated the takings clause, the court uses the following framework:

(1) Is there a constitutionally protected private property interest at stake? (2) Has this private property interest been “taken” by the government for public use? and (3) If the protected property interest has been taken, has just compensation been paid to the owner?

In this case, Cahalan’s case fails on the first question. The court cites an earlier ruling which states that “the State has the power to condition the permanent retention of [those] property right[s] on the performance of reasonable conditions that indicate a present intention to retain the interest[s].” Ownership of property comes with many rights, but is not absolute. Here the court is saying that in Iowa a property owner’s rights do not include allowing properties to remain abandoned. By doing so here, Cahalan has forfeited their rights.

By allowing the properties to persist in a condition unfit for human habitation, allowing the properties to remain vacant, and failing to make timely and reasonable efforts to remedy the public nuisances created by the properties after notification of the problems, Cahalan did not comply with the section 657A.10A(3) criteria. Thus it failed to “indicate a present intention to retain the interest.” See id. at 526, 102 S. Ct. at 790. We conclude the district court erred in concluding Cahalan holds a constitutionally protected private property interest in the abandoned properties for which just compensation is owed.

Finding that Cahalan Investment’s stake in the properties was not a constitutionally protected right is enough to decide the case, but for completeness the court did examine the second question as well.

Assuming that Cahalan did have a constitutionally protected private property right the court still found that takings jurisprudence supports the city’s actions. A taking occurs when the government denies a property owner “all economically beneficial or productive use” of property. In this case there is no dispute that Cahalan Investments has been deprived of all use of these two properties. Generally when that occurs, the government is required to pay just compensation. However, there is a public nuisance exception in takings jurisprudence. The state has the “power to abate nuisances that affect the public generally, or otherwise,” and this action, “is not a constitutional taking for which compensation is required.”

The court also examined whether the fact that Cahalan Investments purchased these properties before the enactment of this particular section of 657A would prevent it from being applied in this case. Here the court found that the state’s existing legislation as well as the principles of nuisance law already in place at the time of purchase were sufficient to hold that Cahalan never possessed the right to maintain properties in an abandoned state.

The Iowa Supreme Court reversed the finding of the district court that the city’s exercise of 657A constituted an unconstitutional taking and remanded the case back to district court.

Fire-damaged home “abandoned” despite owner’s intentions to contrary

by Gary Taylor

Council Bluffs v. Harder
(Iowa Court of Appeals, November 12, 2009)

Fire-damaged house deemed “abandoned” under Iowa Code, despite owner’s continued payment of mortgage, taxes and insurance.

Anita Harder owned a house in Council Bluffs that sustained serious fire damage in September 2004.  It has not been inhabited since.  She moved out and her insurer initially paid some living expenses, but has not paid anything else. She has continued to pay her mortgage, property taxes and insurance. As time passed, neighbors complained to the City about the deteriorating condition of the house. The City determined the home was uninhabitable, and the fire department shut off the utilities.  Approximately two years after the fire the City filed a petition requesting a transfer of title to the property to the City, alleging the property had been abandoned and was a public nuisance.  All the while Harder was continuing to negotiate with the insurance company for payment. The case was eventually tried in April 2008, with the district court finding that the house was an abandoned property within the meaning of section 657A.10A, and awarded title to the City.

The Court of Appeals characterized the question as “whether an unoccupied house may be deemed ‘abandoned’ under Iowa Code section 657A.10A where it was rendered uninhabitable by fire three and a half years ago, has been boarded up since then, has been broken into repeatedly, and is the subject of complaints from neighbors.”

The Court of Appeals focused on the definition of “abandoned” found in Iowa Code 657A.1(1), and the eleven factors enumerated by the legislature in Iowa Code 657A.10A(3)  for the court to consider when determining whether a property has been abandoned.  Harder admitted that the property met several of the listed factors (it was unoccupied for more than six months, it did not meet code, it was not habitable, it had no utility service), but contended her failure to correct the situation was due to an ongoing dispute with her insurance company, and did not reflect an intent to abandon the property.  She cited her payment of the mortgage, taxes and insurance as evidence of her intent.  While the Court of Appeals recognized that these factors weighed against abandonment, they were not sufficient to overcome the other factors.  The court pointed to the underlying purpose of the statute, which is to prevent the “serious adverse effects of unsafe, abandoned homes on neighborhoods and communities….It would undermine the purposes of section 657A.10A to allow a homeowner’s private dispute with her insurer, even if meritorious, to serve as a defense to an abandonment proceeding.  If the insurer never paid, could the house remain boarded up and deteriorating forever?”  In a footnote the court analogized the situation to a bank foreclosure where the bank pays its property tax obligations but allows the home to deteriorate.  “This is not an abstract hypothetical” the court reasoned, “given the current troubles in our economy.”  The Court of Appeals affirmed the district court’s ruling that Harder abandoned the house. 

Justice Vaitheswaran dissented, concluding that the important factors weighed against a finding of abandonment:  (1) Harder continued to pay real estate taxes, mortgage payments, and insurance; (2) Harder continued to maintain the property; (3) there was no evidence of the presence of vermin, accumulated debris, or uncut vegetation; (4) the deteriorating condition of the home was a factor beyond Harder’s control because she did not have the benefit of insurance proceeds; and (5) Harder had no intent to abandon the home.

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