Just A Landlord

City of St. Paul Inspection Dept to go to trial for Fair Housing violations.

Federal Court of Appeals ruled today that the combined cases of  Gallagher, Steinhauser,Harrilal (rental property owners) vs St. Paul will go to trial.

This case alleges that St Paul housing inspection programs were used in a racially motivated manner to force racial minorities out of St Paul and that such actions violated the Fair Housing rights of the occupants.

A very interesting point is a number of city employees including inspectors are on the hook personally in this suit.  From a legal perspective each city employee must defend themselves as they, their co-workers and their employer have disparate interest.

For the city to win if the allegations are proven true they must claim rouge employees were acting outside of the law and contrary to department policy. For the inspectors to win they must argue that they were following instructions from their supervisors that they believed were legal. And the employee need to name their union as a third party defendant , arguing the union failed to step in and protect them from bad rules enforced by their supervisors  The inspectors may have a hard time at this however as the owners had provided the inspectors with documentation that the inspectors’ acts were contrary to Fair Housing, yet the inspectors continued with their agenda.

From my conversations with two of the plaintiffs over the past five or six years they seem to be just a handful of hard working landlords who independently found themselves on the losing end of government behaving badly.  The current case is a consolidation of three or four cases that started independent of each other, but the claims were so similar that the federal court combined them.  Most of the cases claimed RICO (racketeering) on the part of the city employees.

Much of this is so similar to what we are seeing in Milwaukee.

Note the vacant building ordinance for example.  Our former Commissioner of Neighborhood Services had a number of conversations with his counterparts in MN, and proposed a number of ordinances that were based on what was on the books there.

Here is an except from today’s ruling

To demonstrate a disparate impact, Appellants have offered evidence supporting the following conclusions:

(a) The City experienced a shortage of affordable housing.  The City represented in its 2003 report to the U.S. Department of Housing and Urban Development (“HUD”) that “the lack of affordable housing opportunities remains a major issue facing many Saint Paul lower income households, who are also protected class members,” and that “27.6% of Saint Paul’s lower income residents cannot find adequate affordable housing in the City.”  Then, in 2005, the City estimated that 32% of the households in St. Paul had unmet housing needs (cost burdens, overcrowding, etc.).

(b) Racial minorities, especially African-Americans, made up a disproportionate percentage of lower-income households in the City that rely on low-income housing.  The district court noted that the parties agree that African-Americans make up a disproportionate percentage of low-income tenants in the City.  The City’s 2000 census data showed that 11.7% of the City’s population was African-American, whereas data from October 2004 showed that 61% and 62% of those on waiting lists for public housing and Section 8 assistance, respectively, were African- American.  Further, the City’s 2000 report to HUD showed that 52% of minority-headed renter households were in the bottom bracket for household adjusted median family income, compared to 32% of all renter households.

(c) The City’s aggressive Housing Code enforcement practices increased costs for property owners that rent to low-income tenants.  Appellants produced at least six affidavits describing the toll that the City’s aggressive Housing Code enforcement took on their rental business. They reported a substantial increase in costs, resulting in evictions for tenants and “forced sales” of their properties in some cases.  These allegations are corroborated by an internal memorandum from the City’s fire marshal in 1995, comparing the Housing Code and the HQS and concluding that the Housing Code was more strict in regard to 82% of the examined categories.

(d) The increased burden on rental-property owners from aggressive code enforcement resulted in less affordable housing in the City.  Documents from the City and the Public Housing Authority acknowledged that any decrease in federally assisted rental housing would reduce the amount of affordable housing in the City.  Those predictions were supported by the City’s Vacant Buildings Report, which showed that the number of vacant homes listed in the City rose from 367 to 1,466 between March 2003 and November 2007, which was a nearly 300% increase.  Further, Appellants submitted affidavits from three tenants who alleged that they endured hardship when their homes were condemned for minimal or false Housing Code violations.

These premises, together, reasonably demonstrate that the City’s aggressive enforcement of the Housing Code resulted in a disproportionate adverse effect on racial minorities, particularly African-Americans.  Viewed in the light most favorable to Appellants, the evidence shows that the City’s Housing Code enforcement temporarily, if not permanently, burdened Appellants’ rental businesses, which indirectly burdened their tenants.

Read the entire decision here.  I have a fairly complete set of pleadings if anyone wishes to study this more.

A lively discussion of the case on Ademocracy

I and others were crying tears of joy when we heard this news. It has been a long emotional ordeal for many of us.

There isn’t a jury in the entire world who could listen to this story and not favor the plaintiffs!

ABC News  -Landlord Suit Could Cost City Millions

A legal battle between the City of Saint Paul and a handful of landlords could force the city to pay millions.

It all centers around code enforcement.

Pioneer Press on the lawsuit.

A set of lawsuits alleging St. Paul’s housing-code enforcement discriminated against black tenants was given new life Wednesday when a federal appeals panel reinstated a portion of the case.

The allegations “reasonably demonstrate that the city’s aggressive enforcement of the housing code resulted in a disproportionate adverse effect on racial minorities, particularly African-Americans,” a three-judge panel for the 8th Circuit Court of Appeals wrote in overturning part of a 2008 dismissal of the case by U.S. District Judge Joan Ericksen.

Seems like a way to increase revenue a bit but there is one big gotcha to be aware of.  In WI if parking is charged separately or an additional charge then you must collect and pay sales tax on it.

A couple of years ago the Wisconsin Department of Revenue went around checking for owners who were charging extra for tenants to park or offering a lower rate to those who did not want parking.   The landlords involved had to pay sales tax that they should have collected plus interest and penalties.

Tax 11.48 Landlords, hotels and motels. (1) LANDLORDS.

(b) The sales price from providing parking space for motor vehicles and aircraft and from providing docking and storage space for boats are taxable. If a separate charge is made for the parking, docking, or storage space, the charge is taxable. However, if a separate charge is not made and the price of a rental unit includes a charge for a
parking, docking, or storage space, and if similar units are rented at a reduced price if the parking, docking, or storage space is not utilized, the difference between the rental price of the 2 similar units is taxable as a charge for parking, docking, or storage.

A thread from one of the rental property email list I subscribe to begins with a question regarding a lease that was invalidated due to a provision requiring the tenant to pay the landlord’s attorney contrary to  Wisconsin ATCP 134. Below is a follow up question:

So if the tenancy is disolved and i can not enforce the lease but shouldnt i be able to enforce the damages they did? otherwise this allows tenannts to be sneaky. not pay rent and damage and walk away better.

My response was as follows (cleaned up a bit from the original):

Read the rest of this entry »

Hey folks

It election time again…at the Apartment Association.

Here is a real opportunity to help change the industry, the direction of the association and your life. Yes, and improve your life. As an AASEW board member you will see opportunities and pitfalls facing our industry well in advance of others. You will help decide which issues we should address and what resources the association should provide.

Back in the 1980′s I looked at joining the Association, but was reluctant because I did not see it as addressing my needs and concerns. Then John Chitko, Jeff’s Dad, said the one thing that changed my life probably more than anything else: ‘This is an all volunteer group. Join, put your ideas out there. If they have merit people will support them, if not you’ll learn something’

Taking John’s challenge and becoming actively involved with the board taught me so much and propelled my business far beyond were it would have been otherwise. Ask any former board member – I am certain you will not find one who will not tell you they came away with more than they gave.

You say ‘I don’t know all that much about landlording, what can I contribute?’ I did not know that much either when I first became a board member many, many years ago. I only  knew there were things in my industry that needed to be changed.

So take John’s challenge and improve your life.

Requirements: Member of the AASEW for six months

A question posted to one of the email lists that I participate in: