Generally I come down on the side of the obligation of the owner to meet their ownership responsibilities and needs of the community. That is fundamentally what the lien process is all about. That said, there are situations where the question of ethics against proceeding with foreclosure gets really personal. In those cases, it's my belief that unless resources (various types) can be brought to the person(s) in default, they're going to end up under water again. I'm thinking primarily of elderly homeowners with dementia or simply overwhelmed with life. I have some thoughts on how I will handle that IF I come across it, but it's a personal decision that each of us in the biz should think about while we can still be objective.
On the specific scenarios posed...
I agree with @Jay Hinrichs - I don't see the fence scenario as unethical at all; a property owner has an obligation to pay the taxes on their property - if they don't or can't, there are consequences. I do believe it may have been a very poor investment choice though. There's really no room for motivating repayment as the property is likely useless, even with access blocking as a strategy. I doubt the property is worth the cost of the cert plus cost to foreclose. As to land-locking, my experience is that there are judicial remedies to gain access. From the property owners perspective, if resources are tight, I would probably hold off. Paying up is really a pride & responsibility issue on this one. On access blocking, I like that strategy as it tends to motivate repayment and would only intentionally acquire one of these if the lot also has development potential.
Maybey somebody else can address whether or not a the lien on this fence property has impact on credit or clouds other property(ies) they may own, such as the main residence.
On the retention ponds, after reading the linked article, I have the same opinion. Why would the neighbors have to do anything, or even care... it's a retention pond. With no HOA, there's nobody or group of people that have right or obligation to keep the ponds up, except the person or entity that now owns it. Those ponds require maintenance - even if just a low level of maintenance - and may carry fines if they're not kept up. As to possible trespassing charges - who's going to monitor it and file charges? Surely not the new owner as it's a 2hr+ ride from the closest outskirts of Chicago to Champaign (I had to Google it since I've never been there.) Much ado about nothing and again, a poor investment choice in my opinion, unless there is development potential within the lot.
About the developer, I also don't think this is unethical, but I do agree with @John Underwood and @Glenn Gerisch and question the legitimacy. I believe the owner would generally be a prohibited bidder on his own lots. The same goes for the foreclosure auctions that I've attended. That aside, I agree with @Steven J.that it's genius if the rules permit him to legitimately bid and sever inferior obligations. Lower priority liens such as mortgages are severed in the states I'm familiar with, but don't blast me on this... Though it may be a great tactic on paper, in reality the lien holders would be notified of the foreclosure and would have right to pay the taxes themselves. If they step in, they can preserve their note status. Don't hate the player... In my mind, bankruptcy falls into the same type of category as this, it's an option that the rules allow, don't hate the player... If you're in the game, know the risks.
Again, if somebody else can weigh in... I've never done a bid-down, so I don't know if the actual burden to the owner is the lower rate (i.e. if 18% is bid down to 1% (or zero), does the owner still pay the full freight and the locality keeps the spread? I have no idea.
There's another Genius example that I recently read about in CA - a couple bought a gated right of way and common area in the multimillion-dollar neighborhood in Presidio Heights. Diane Fienstein and Nancy Pelosi used to live there. The purchasers said they were considering opening up the gate and allowing non-residents to park there since nearby parking was horrendous. Likely a motivating strategy vs an actual strategy, but who knows. See the article here. Just found another article on this matter - it says that Feinstein weighed in and the SF Supervisors have overturned the sale.
Great question - it got my brain cells bouncing against each other.
