Last week, Philadelphia entrepreneur Kar Vivekananthan paid a visit to Courtroom 446 in City Hall to respond to a suit the city filed against him over 1815 South 6th Street, an eyesore of a building that has sat vacant since he purchased it for $50,000 in 2008. When he got to court, Vivekananthan says that an attorney for the city told him that he was facing close to $2 million in fines, all because there are no windows or doors. “This is a shell in not such a great neighborhood,” Vivekananthan argued. “It isn’t even worth a tenth of that!”
Vivekananthan, who also owns Queen Village restaurant Tapestry and small local tech firm OhmComm, was first cited by the Department of Licenses & Inspection back in January as part of Philadelphia’s Vacant Property Strategy, which kicked off in April 2011 in an effort to cope with the city’s 40,000 vacant properties. If you own a vacant building and don’t maintain it with proper windows and doors (sorry, boards don’t count), the city can fine you $300 per window or door, per day.
“We’re hoping to change the economics of holding on to blight,” explains L&I spokesperson Maura Kennedy. “It’s no longer cheap to let blight sit.” It sure isn’t. In the case of 1815 South 6th Street, a look at Google Maps Street View reveals as many as 30 window and door violations. That means a daily fine of $9,000. Ouch.
Since the program’s inception, 1,100 owners have been cited for door and window violations. About 30 percent have brought their properties into compliance, 10 percent are selling or have sold, while another 10 percent are undertaking full-scale rehabs. Of the remaining 50 percent, about two-thirds are complicated affairs involving tangled titles or deceased owners. “And the rest are hard cases like this one, where the owners do not think they need to follow the law,” says Kennedy. “But we know who you are, and we will take you to court and hold you accountable.”
During his meeting with the city’s attorney last week, Vivekananthan was able to get the fines reduced drastically to $15,000, assuming that he puts new windows and doors in—a job he estimates will cost him $7,500. “I’m not a rich person by any means,” says the 39-year-old. “If I had the money, I would start working on it. I understand anti-blight and all that, but they shouldn’t be able to bankrupt a person. My 75-year-old mother is going to use her IRAs to help me do this.” He also owes the state $30,000 in sales tax for Tapestry, an amount that must be paid by October, or he won’t be able to renew the restaurant’s liquor license.
Kennedy feels little sympathy for his woes, noting that the city received five complaints from neighbors about the decaying structure (one such complaint was for falling bricks) and that L&I made multiple attempts to get Vivekananthan to bring the building into compliance before it assessed a single dime in fines. (Vivekananthan claims that he was unaware of the problem, because the city was sending violation notices to his wife’s address; the two are separated.) “This is an up-and-coming community,” says Kennedy. “I don’t understand why he thinks he can treat his neighbors like this.”
Richard DeMarco, a real estate attorney with the firm Elliott Greenleaf, does not represent Vivekananthan but did speak with him after last week’s court appearance. While DeMarco will not comment specifically on this case, he takes issue with the new ordinance and says that it may be unconstitutional. “These fines are extreme,” he explains. “In many cases, the potential fines are greater than the assessed value of the property. And that is unlawful taking. It violates the Fifth Amendment of the Constitution.”
But, as Kennedy points out, the city is usually willing to settle for as little as one percent of the total amount of potential fines in addition to total compliance. And for the cash-strapped, well, she offers another solution. “If you don’t have the money to properly maintain your property, sell it,” she advises. “This is a great block. He could turn around and sell this for well over $100,000, which is a lot more than he paid for it.”
And so, if you’re in the market for an investment property in an up-and-coming neighborhood, I just happen to know of a windowless 112-year old shell that can be yours for just $185,000.