City code violations on mortgage note secured by SFR

[Gary Campanaro]

Hi Bigger Pockets collegues, I own a mortgage note on a SFR property in Canton, Ohio which was purchased by the borrower who secured the loan with a land contract.

I recently received a notice from the city of Canton, Ohio that this property has numerous code violations that has to be corrected immediately or I will be fined heavily daily for violations or face imprisionment.  

I didn't even know about these violations and never received notice of these until receiving this letter.  They give me less that a week to correct all these violations.   

I know you can't give legal advise has anyone ever ran into anything like this, and what is a good starting point to protect the tenant (person holding the contract) the property and myself?   Thank you in advance for any insight in this matter. 

[Jamie Bateman]

This is why we've largely gotten our of the CFD business. Read through your documents. The buyer is likely responsible (to you) per your contract but the city won't care about that. You are on the deed so you are responsible in their eyes. You can hire someone to fix the issues and then charge the borrower for the costs, most likely. Depends what the infractions are. You can also contact the city to attempt to get an extension. You have a responsibility to the city and the buyer has a responsibility to you.

You could also look into converting this to a note and mortgage so these issues are no longer your problem in the future.