Source: Sherman Publications

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Withholding program protects neighbors after fire

by Susan Bromley

February 12, 2014

Brandon Twp.- A proposed program in which the township would have the ability to hold on to up to $8,200 of insurance money in the event a home in the township burns, is meant to protect neighbors.

A vote on whether to join the state's Fire Insurance Withholding Program has been postponed to the township's next board of trustees meeting, set for 7 p.m., March 3, at the township offices, 395 Mill St.

The board agreed at their Feb. 3 meeting to postpone the decision after several boardmembers questioned the appropriateness of the program.

Trustee Ron Lapp suggested it was an "overreach by government," while Trustee Dana DePalma also expressed doubts, saying she didn't believe the board should hold residents' money.

Trustee Jayson Rumball was more blunt.

"I don't think we should reach into constituents' pockets that have just suffered a tragedy," he said.

However, Supervisor Kathy Thurman and Building Director Bill Dinnan said that is not what is happening.

"The proposal is pursuant to state laws and on the books for years," said Dinnan. "What the withholding does is, if there is an insurance payout to a property owner and the owner doesn't have a contract with a fire restoration company, it allows the township to withhold up to 25 percent of the insurance payout, or a maximum of whatever the state allows, which happens to be $8,200. There will be plenty of money to fix the house."

The Fire Insurance Withholding Program is administered through the state's licensing bureau. Dinnan said about 580 communities have joined the program, including Holly, Oxford, and Rose Township. Atlas Township joined the program two years ago, with a unanimous vote from the township board of trustees.

Dinnan and Fire Chief Dave Kwapis are recommending the township adopt the program as well.

"The purpose of this withholding fund is to protect the community from having a loss to an insured real property... and having an owner collect insurance monies and not repairing, replacing, or removing the damages," wrote Dinnan in a memo to the board. "The withholding is to assure, to the extent of the funds received, that the damage has been repaired or replaced, that the damage has been removed from the site or that the insured has entered into a contract for repairs or replacement or removal and that the withheld monies be paid directly to a licensed contractor for performing the above services. In the past there have been fire damaged buildings that were not repaired or removed and became nuisances to neighbors for long periods of time."

One such instance occurred a few years ago in the township. A residence on Seymour Lake Road suffered fire damage and the homeowner sold the property in "as is" condition. The building sat vacant for two years, as Dinnan said neighbors in the area "got to enjoy the aroma of a burnt building" in the hot, humid days of summer.

"It was a long process dealing with the new owner," said Thurman. "We wanted to make sure the building was safe and secure, it was an eyesore, the neighbors were complaining."

Under the Fire Insurance Withholding Program, insurance companies will notify the township when a fire claim has been made and in turn, the township would have the ability to request holding up to the maximum of $8,200, only if the homeowner has not contracted with a company to do repairs. If a contract has been signed, the township does not have the ability to hold any money. Once a contract has been signed, the township will release all money.

Dinnan said what the program allows the township to do is insure that the repairs are done, particularly if a homeowner chooses to walk away from the property.

"If they have insurance, but no mortgage, they could walk away without an incentive to do anything," he noted. "If they walked away, we could use the money to board it up, clean it up, remove the hazards."

"It's a shame we have to have all these rules and laws to protect others in the community," Dinnan continued. "What I'm trying to do is use one more piece of the legal puzzle to protect residents around here."

The township is not profiting off of holding money temporarily in any way, he stressed, and there are no fees attached. The money will be held in an escrow fund until a contract is signed or, if property owners do not get a contract for clean-up within 120 days, the township can use the money to cleanup the site.

"We are not taking any money if they are in the process of rebuilding," he said. "Will I use their money to clean up the mess they leave behind if they don't want to rebuild? Yes. That's the point of it. I am not being insensitive to their plight, they are being insensitive to their neighbor's peace (if they don't take restorative action)."