Landlords Fight Back, Gain Some Ground in Epic Licensing Dispute

After the New Britain, Connecticut Common Council passed a controversial rental ordinance, charging rental property owners a license fee of $150 per unit, per year, landlords decided to fight back. They say the measure isn’t about safety — it’s about filling the city’s budget shortfall.

New Britain Connecticut Mayor Tim O’Brien has a self-inflicted budget deficit and he™s trying to balance the city’s books on the backs of rental property owners, according to Bob DeCosmo, president of the CT Property Owners Alliance Inc. “For a newly elected mayor to come into office and increase spending by nearly 15 million dollars without a plan to generate enough revenue to pay for the increased spending is short-sighted, especially in this economy!”

These comments were made as a result of the New Britain Common Council voting 11 to 4 to pass O’Brien’s controversial housing ordinance requiring landlords in his city to obtain a license to own their rental property. The new licensing ordinance required non-owner occupied rental property owners to pay an annual fee of $150 for every apartment unit they own to the city.

DeCosmo warned; “All New Britain residents will be negatively impacted by this ordinance as it almost forces landlords to increase rents to offset the new cost. If a landlord does not choose to pass the fee onto their renters, the landlord’s property value decreases. In fact, the licensing fee decreases a multi-family property value by a negative factor of 10 to 1 in a benefit analysis when a 7 percent capitalization rate is used for valuation purposes.

The income approach to value, an appraisal technique most often used to value rental property indicates values will decrease by $1,500 per unit as a result of the $150 annual fee at a 7-cap rate. Lowering property values on the rental property sector creates a huge loss to the city™s grand list. DeCosmo says that loss must compensated for and it must be shifted to the single family homeowners; ultimately the shift will raise property taxes on every New Britain single family homeowner.

“This ordinance is truly causing a large ripple effect that the Council members simply didn’t think through. According to DeCosmo; If the fee doesn™t get you, the fine will kill you! The ordinance has a penalty clause allowing the city to fine each landlord $250 per unit, per day for failure to pay the annual $150 fee. If the owner can’t pay the fee, after just 60 days, the ordinance creates a “super lien” on the land records and allows the city to foreclose out both the owners interest in the property as well as the bank’s mortgage.

DeCosmo said; The fine and superior lien the ordinance allows is the classic text book definition of a Government Takings Action and tantamount to inverse condemnation. I was surprised the New Britain Corporation Council™s office left this language in the ordinance. We feel the ordinance is very poorly constructed and they will loose the lawsuit on the penalty grounds alone

The CT Property Owners Alliance is a statewide trade association for property owners and was the initial group spearheading opposition to the new ordinance and fee. Several others groups have since joined in the efforts to repeal the ordinance and a coalition in opposition to the license fee has developed; most notably is the CT Association of REALTORS to recently vote to oppose the policy.

On November 13, 2012, the CT Property Owners Alliance along with four larger landlords filed for an injunction in New Britain Superior Court to stop the measure from going into effect.

The push-back appears to be working. Council members have announced they are considering a plan to lower the fees, at least for landlords with few units, and they are also considering some form of incentive program, where “good” landlords are rewarded, although the specifics of such a plan are unclear.

However, the response to the incentive program is being met with skepticism, as some landlords express concern that it’s simply a ploy to split up the landlord coalition, and fees could easily be increased in later years once the ordinance is in place.

The controversy between the city’s mayor and landlords worsened over Christmas when the mayor announced he had agreed to pay a public relations firm $100,000 to quell dissension over the city’s ‘hot spot’ bill, which allows the city to charge landlords for 911 calls to their rental properties. Landlords protested the measure, and are accused of warning tenants that if 911 responders were called to the property, the tenant would pay the fee. The mayor says the measure was not intended to apply to “legitimate” emergency calls.

According to a recent news report, Common Council members opposed the expenditure, and are angry that they were not informed of it ahead of time. By earmarking money from the city’s legal defense fund, the mayor avoided a Council vote on the decision, according to the report. Landlords opposing the hot spot measure have also hired a public relations firm.

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