Investment Realty Services, LLC v. City of Allen Park

          Mag. David R. Grand Judge

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND SUA SPONTE GRANTING PARTIAL SUMMARY JUDGMENT FOR PLAINTIFF [25]

          JUDITH E. LEVY UNITED STATES DISTRICT JUDGE.

         This is a case about a municipal ordinance. Like other cities in Michigan, Defendant City of Allen Park maintains a property management code to regulate its supply of rental housing units. Under Chapter 10, Articles III and IV of the City's Code of Ordinances, would-be landlords are required to register rental property with the city and obtain an inspection of the property prior to tenancy and once every three years thereafter. As a landlord of property in the city, Plaintiff Investment Realty Services, LLC is subject to the terms and requirements of the city code.

         In February 2018, Defendant initiated criminal proceedings against Plaintiff for failure to have its rental property inspected prior to tenancy. Three months later, Plaintiff filed this suit, challenging the property maintenance code as unconstitutional, both facially and as-applied, on the grounds that it coerces consent of warrantless searches through the imposition of criminal penalties. After the close of discovery, Defendant moved for summary judgment on all claims, asserting that Plaintiff lacks standing to challenge the code, the code does not provide for warrantless searches, and even if it does, the code provides owners and landlords sufficient precompliance review. (ECF No. 25.)

         The Court heard oral argument on December 5, 2019. Chapter 10, Articles III and IV of Allen Park's Code of Ordinances are unconstitutional on their face in that they impose criminal penalties for failure to have a property inspected without the opportunity for precompliance review of the need for an inspection. For this reason, the Court gives notice of its intent to grant summary judgment to Plaintiff on its § 1983 claim seeking injunctive and declaratory relief. The Court grants Defendant's summary judgment motion with respect to all other claims.

         I. Background

         City Code

         Michigan law empowers cities to adopt codes pertaining to building safety. MCL 117.3(K). In particular, the law allows cities to adopt preexisting codes, such as the International Property Maintenance Code (IPMC). Id. The IPMC, in relevant part, provides standards and enforcement procedures related to the maintenance of rental property. The City of Allen Park adopted the 2009 version of the IPMC. Allen Park, MI, Code of Ordinances ch. 10, art. III, § 83.^[1]

         The Code of Ordinances imposes obligations and outlines penalties for noncompliance for landlords and owners who wish to rent property within the City. Landlords and owners must register residential rental property with the City “within 30 days after assuming ownership or control of the property.” Ch. 10, art. IV, §117. Prior to being certified for rental and subsequently every three years, all residential real property must pass an inspection pursuant to the IPMC, after which the property will receive a certificate of inspection. Ch. 10, art. IV, §§ 119-121. The IPMC empowers city officials to inspect property:

[W]here it is necessary to make an inspection to enforce the provisions of this code, or whenever the code official has reasonable cause to believe that there exists in a structure or upon a premises a condition in violation of this code, the code official is authorized to enter the structure or premises at reasonable times to inspect or perform the duties imposed by this code, provided that if such structure or premises is occupied the code official shall present credentials to the occupant and request entry. If such structure or premises is unoccupied, the code official shall first make a reasonable effort to locate the owner or other person having charge or control of the structure or premises and request entry. If entry is refused, the code official shall have recourse to the remedies provided by law to secure entry.

         Intern. Prop. Maintenance Code § 104.3 (2009). A landlord's refusal to allow an inspection of rental property can lead to criminal charges: “[A]ny person who refuses to allow an inspection required under this article or interferes with the code official in the discharge of his duties shall be guilty of a misdemeanor.” Ch. 10, art. III, § 85(c).

         There is no appeals process for a landlord who wishes to contest the need for an inspection prior to compliance. Although the IPMC provides procedures through which a person may appeal actions by code officials, Intern. Prop. Maintenance Code § 111 (2009), Allen Park, in adopting the IPMC, struck this provision. Instead, the Code of Ordinances provides that “[a]ppeals are controlled by article XIII, chapter 6 of the Allen Park Code of Ordinances.” Ch. 10, art. III, § 84. Article XIII, Chapter 6 of the Allen Park Code of Ordinances does not exist.

         Plaintiff's Property at 15339 Euclid Avenue

         Plaintiff Investment Realty Services is a property management company that owns or leases residential rental property in the City of Allen Park. Investment Realty Services also transacts business under the name SBYC Garner, LLC. (ECF No. 30-2.) Christopher Garner both manages Plaintiff and is Plaintiff's primary member. (ECF No. 25, PageID.185.)

         On October 13, 2017, Plaintiff purchased the residence at 15539 Euclid Avenue, Allen Park, Michigan. (ECF No. 25, PageID.185; ECF No. 25-4, PageID.267.) On January 1, 2018, Plaintiff sold the property to Itay 2017, LLC. (ECF No. 25, PageID.186; ECF No. 25-8, PageID.299). Itay 2017 and Plaintiff promptly entered into a lease agreement, which empowers Plaintiff to fully manage the property: “[Itay] specifically designates [Plaintiff] as [Itay's] Agent and grants [Plaintiff] the full right and power to take any action with respect to the Property that [Plaintiff] deems appropriate. . . .” (ECF No. 25-11, PageID.364.) This includes the power to sublease, sue, appeal property taxes, insure the property, and take “any and all other acts, except selling or mortgaging the Property, that [Itay] could perform related to leasing and owning the Property.” Id. On January 11, 2018, Plaintiff, under the name SBYC Garner, subleased the property to a third party, David Potts. (ECF No. 25, PageID.187.) On August, 21, 2018, Plaintiff-again under the name SBYC Garner-subleased the property to another third party, Obinna Kokeke. (ECF No. 30-4, PageID.800.) On June 1, 2019, Itay 2017 sold the property back to Plaintiff. (ECF No. 25-8, PageID.299.)

         Code Enforcement

         On February 20, 2018, Allen Park sent Plaintiff a notice of the requirements to register the property as a non-homestead, non-owner-occupied rental property and to obtain a certificate of inspection. (ECF No. 25, PageID.186; ECF No. 25-5, PageID.269). The notice reads, “Our records indicate that you have not obtained a certificate of inspection for this property. You must do so within 30 days. Failure to do so will result in court action. If you no longer own this property, please notify us at (313) 928-4441.” (ECF No. 25-5, PageID.269.)

         Two days later, despite the notice's thirty-day timeframe, the City issued a citation to Plaintiff for three code violations: 1. failure to register rental property; 2. failure to obtain a rental inspection; and 3. failure to obtain a rental certificate. (ECF No. 25-6, PageID.271). Each alleged violation was a criminal misdemeanor. Id. Importantly, the citation notes that a first notice was sent on January 10, 2018, and that the February 20, 2018 notice was sent in error. Id. Defendant included an unsigned copy of this January 20 letter in its supplemental brief.^[2] (ECF No. 29-3.) Regardless, the City of Allen Park dismissed the citation, citing the two-day gap between the February 20 notice of violation and the criminal charges. (ECF No. 25, PageID.186.)

         Itay 2017, not Plaintiff, ultimately completed a Rental House Registration on February 26, 2018, listing the tenant as David Potts. (ECF No. 29-5, PageID.755.) Itay 2017 had the property inspected and received notice of violations on April 10, 2018. (ECF No. 29-6, PageID.757.) Itay 2017 received a certificate of compliance on August 2, 2018. (ECF No. 25-10, PageIDs.360-62.) Garner Properties & Management, LLC paid the $200 rental registration and inspection fee. (ECF No. 27-5, PageID.484.) Pursuant to Plaintiff's lease agreements, Garner Properties & Management, L.L.C. billed the fee to Plaintiff. (ECF No. 30-5, PageID.803.)

         On May 1, 2018, Plaintiff filed its complaint in this case. (ECF No. 1.) Plaintiff uses the City's February 22, 2018 citation as a means to bring a facial challenge to Allen Park's rental property ordinance. Plaintiff challenges two provisions that it refers to as the “Inspection Provisions”: IMPC § 104.3 and Chapter Ten, Article III, Section 85(c). IPMC § 104.3 gives code officials vast authority to undertake inspections; Chapter Ten, Article III, Section 85(c) imposes criminal penalties on property owners who refuse to allow inspections. Plaintiff alleges that the composite effect of these provisions is that property owners who wish to rent property face a catch-22 of either submitting to warrantless searches or facing criminal penalties.

         II. ...