Signature of Solon rental properties cause concern

The City of Solon Planning Commission is discussing an ordinance proposal which will require that owners or agents obtain Occupancy Permit for rental units.

Signature of Solon Golf Community Subdivision

A Signature of Solon resident approached City of Solon Planning Commission and stated that she believes there have been builders in the Signature of Solon neighborhood who have built homes and rented them prior to obtaining an occupancy permit.  Additionally, many Signature of Solon model homes were built but not sold and have become rental properties.  Many of these Signature of Solon rental homes are neglected and improperly maintained which is damaging to the Signature of Solon community. This resident was concerned that the appearance of some of the homes will affect overall resale in the Signature of Solon neighborhood.

It appears that due to  the economic downturn, builders and homeowners associated with some  Signature of Solon properties are renting homes out of necessity rather than facing foreclosure.  There have been some foreclosure filings on properties located on Royal Portrush Drive, Capilano Drive, Vahalla Drive, Bellerive Drive, Merion Court, Prairie Dunes Court, Sotograde Court in Signature of Solon.

Foreclosure decreases the property value by 28% (Campbell, John Y., Stefano Giglio, and Parag Pathak. 2009. “Forced Sales and House Prices.” NBER Working Paper 14866).  Some builders are facing property foreclosures because lenders have become conservative by cutting their line of credit.  Common sense lending standards mean that lenders expect builders to have their own skin in the game.

Home-equity loans and lines of credit are second mortgages.  Second mortgages are made after a primary mortgage is in place.  If a homeowner defaults, the proceeds of the home’s sale go first to the lender that holds the primary mortgage.  The second-mortgage holder gets whatever is left after the primary mortgage is satisfied.  Lenders are rightly shying away from secondary mortgages and rental occupancy permits will not loosen the line of credit leash.

Signature of Solon does allow home rentals, however,  a deed restriction stipulates that home must be owner-occupied for the first year to ensure that landscape work and proper maintenance is completed.  However, Signature of Solon does not request the tenant’s name.  Chagrin Highlands subdivision in northeast Solon also has a deed restriction similar to Signature of Solon.

A deed is the legal document that transfers ownership of real estate.  It contains the names of the old and new owners and a legal description of the property etc.  The deed is signed by the property owner.  Deed restrictions place limitations on the use of the property by the property developer.  It is my belief that some property owners may use a bypass  to get around a deed restriction.