Also the properties were vacant at some point after the lis pendis (a kind of pre-foreclosure notice filed with the register of deeds) was filed. In one case the property was vacant for slightly more than six months, the other owner was unsure how long it was vacant.

The owners said inspectors were requiring upgrades to current code such a replacing all two prong outlets and pull chain room lights; changes to plumbing and other upgrades.

The owners independently stated they planning on walking away from the properties and mortgages because they could not afford to complying and they are being hit with large fines/fees.

This seems to a recently issue as I have not heard of this prior.   The owners said they were not made aware of the requirement at the time of purchase. One said he knows three other owners in similar situations.

I asked around to see if others have heard of this.  One member stated his employee had a similar, but slightly less intrusive experience on a home he bought  at sheriff’s sale for use as his personal residence.

I vaguely recall an ordinance that passed a year or two ago, which may have given DNS this authority.

If this is as described, and I have no reason to doubt these owners, my crystal ball shows Milwaukee becoming the next Detroit of real estate where the median home value is under seven thousand dollars.

So I went to the top and asked Art Dahlberg, the Commissioner of the Department of Neighborhood Services to comment.  His response is below (with embedded links to the city code were added to help you follow along):

Dear Mr. Ballering:

Thank you for your email. Without having actual addresses I cannot discuss what happened in those specific instances. That said I will speak to the general issue that you have raised.

Generally speaking when a property is purchased that is not intended to be owner occupied the new property owner is required to file a property recording with DNS. Additionally 1&2 family properties in specific reinvestment areas and those that are non-owner occupied are to request a code compliance certificate. As you know the certificate necessitates a exterior inspection to verify compliance with the property maintainence provisions (chapter 275) of the Milwaukee Code of Ordinances,(MCO). Provided that the property has not been required to receive a new occupancy permit, this is the extent of the enforcement scheme. As you know chapter 275 is a property maintenace code not a requirement to upgrade to current construction standards.

There are situations in which the MCO requires existing buildings to receive new occupancy permits. Some examples that apply to the situations you describe are when the building has been placarded and declared unfit or unsafe for occupancy and those buildings that have been vacant for more than 6 months. Please refer to MCO 200-42-2c for this legal requirement. The purpose for this requirement is a recognition that when a property has not been maintained to the point that the building is been deemed unsafe, then the issue is no longer a question of maintenance but rather upgrades are necessary to return the property to a safe condition. The property is then measured against current construction standards. Likewise the same process applies for buildings that have been vacant for 6 months. The logic there is that many buildings get significantly degraded when left vacant for an extended period of time. As a result ordinary maintenance will not ensure the building is safe and fit for occupancy.

During the occupancy process the inspectors do require the building to meet code requirements to the extent practicable. DNS staff require all needed alterations to comply with current construction codes. In addition they evaluate the building and its systems from a safety perspective. Unsafe, unsanitary or unfit conditions require repairs and or replacements to meet todays code. All other elements are permitted to remain as is. This means that DNS must take into consideration the nature of the original construction and order repairs and alterations that are consistent with those conditions.

A prime example is a unsafe stair. Provided that the stair is being used as it was originally built, the stair would need to be repaired/replaced in kind with like materials to make it safe. For example the treads and risers would need to be consistent in dimension and not represent a tripping hazard. The stair would not necessarily be required to meet current tread and riser requirements if it would require reframing of the floor opening so that the stair run would fit into the building. Other examples would be requiring ungrounded electrical systems to be properly bonded and grounded but not require all operating 2 prong outlets to be replaced with 3 prong outlets.

As you can see this sets an upgrade requirement directly related to alterations/repairs needed to be done because of the condition of the portions of the property.

I would always encourage all purchasers to do due diligence verification of the property. That would include determining outstanding orders. This information can be determined by requesting a “title” search from DNS. If that search shows that the property was declared unfit and placarded, then their offer should take into consideration the cost of correcting the violations and code upgrades if the the building was declared unfit. I would also encourage the purchaser to contact DNS if they need clarification on what is required by the existing orders prior to the purchase of the building.

I hope this email clarifies the code requirements related to the concerns raised in your email. Our goal is not prevent the purchasing of foreclosed property, rather it is to ensure that the housing is made safe through code compliance.

If you have further questions feel free to contact me at 286-2543.

Sincerely,

Art Dahlberg

What should a buyer of foreclosed MIlwaukee properties do to quantify their exposure?

Bottom line: If you are going to buy foreclosed properties within the City of Milwaukee you need to verify is it was placarded or has been vacant for more than six months. If so adjust the price accordingly.

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Under the guise of protecting tenants from foreclosure related evictions the speakers were  promoting just cause eviction laws – starting with CA but their goal is nationwide.  Let’s face it in most foreclosures the tenants live rent free for months.

More alarming was the second half the program where they discussed tactics used to avoid eviction for non-payment.

All this concerns me  on a couple of levels

Just Cause Eviction Laws

The foreclosure element is a smokescreen. The just cause laws I’ve looked at apply across the board to all tenants, not just those whose owners are in foreclosure. Under these laws you need to have “just cause” to evict or in most cases to raise rent. The theory on rent increases is that legally they are termination of a tenancy and with an offer to enter into a new one at a higher rent. In WI a tenant is not required to give notice after you give a rent increase, they can just vacate the last day of the old rate.

The neighbors and other tenants will complain to you about a loud, rude tenant, but usually will not appear in court on a for cause eviction hearing, often because they are afraid of the hoodlum or would have to miss work to be there.  Today 28-day termination notices are a good way to get rid of a tenant who is annoying the neighbors without requiring the neighbors to testify at an eviction hearing.  If your property is in a community where there are just cause eviction laws either the neighbors would have to testify or the troublesome  tenant gets to stay, leaving the good tenants and neighbors to put up with it or move themselves.

Tactics used to avoid eviction for non-payment.

About two thirds the way through the broadcast is a segment with Studs Terkel interviewing a Judge Samuel Heller on how he was creatively circumventing the eviction laws back in the ’30s. His tricks and thoughts are the similar to what is coming out of the Milwaukee eviction courts this past year. He spoke of how he change the 5-day notice to ten days, then a month.   None of this has to do with foreclosure, but with a socialist attitude that tenant rights are superior to owner rights. 

They also had an interview with people who during the same time period helped others forcibly reoccupy their apartments after eviction and steal utilities.

When NPR puts these types of thoughts out there it encourages others to apply them today as a method to steal from owners, forcing more into foreclosure. But that won’t matter as the banks won’t be able to evict them either.

Listen to the program. It is thirty minutes long, but much more useful than watching another rerun of Lavern and Shirley. Heck put it on your iPod and listen to it while you exercise   Any landlord listening to this will be able to bench press twenty percent more and trim a minute off their mile time.

It is unlikely the public or judicial system would feel that others regardless of their economic condition should be able to steal groceries, gas for their car or clothes.  Yet somehow they feel that stealing rent money is okay.  We need to work to change this perception.  We also have to help tenants understand what is bad for rental property owners is ultimately bad for them

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EPA Renovator Rules (lead paint)

• How to comply in a cost effective and efficient manner
• How do you avoid career ending mistakes given the nature of the work we perform, the amount of urgent response repairs and the educational level of the workforce typical to our industry.
• See: http://renovatorrules.com/

Landlord licensing

Yes, this is being shopped around City hall today

• Costs
• Targeting, political attacks.

Eviction court challenges

• Constant changes to slow the process and increase costs.
• The unintended consequence may be an increase in illegal “self help” tactics

Utility rate increases

• Despite WE Energies outperforming expectations, rates are set to go up again by 4.9%
• Water rate increases (due to too much conservation per the JS article)

Runaway government expenses applied to property owners

• Property taxes
• Property assessment schemes that shift tax burdens from the outlying homeowners to lower income neighborhoods.
• Water bills and so called user fees for items that should be taxes.
• Fees, fees and more fees
• Improper use of reinspection fees and repeat “litter” fees

Tenant issues

DNS (building) inspections

Efforts to restrict access to CCAP /  creation of a protected housing class for criminals

Plummeting property values

• many owners are  ”underwater”

Litigation and fear of litigation

• This is compounded by increasing insurance exempted coverage.

Fragmentation of our industry

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http://www.jsonline.com/watchdog/watchdogreports/50548282.html

“Rodney Lass figured his days as a homeowner were over when he was hit with a foreclosure judgment more than a year ago.
He stopped rehabbing his two-story Bay View home and moved on. [snip]

The foreclosure, however, failed to go through after the California-based lender decided it didn’t want the gutted house. Lass said he found out for certain that he still owned it from the Journal Sentinel.”

Tim’s comments

In response to this posting on the ApartmentAssoc@YahooGroups.com list, one reader asked:

Why is this bad? Money collected from out of state banks makes our  taxes go down!!

My response was in the long term, it’s very bad for us.

When a few lenders start dumping houses for a few thousand dollars to limit their DNS exposure that makes your house in the same neighborhood worth… I don’t know… around a few thousand dollars? Ultimately property taxes will have to go down in those areas.

When the market starts to come back national lenders will remember the pain they suffered here and simply won’t write in our market. Why would they? They are not obligated to write in Milwaukee.

This will cause Milwaukee and other communities that took aggressive action against lenders to lag the rest of the nation in recovery.

And by the way, the only way our taxes can go down is if our governments’ spending goes down.

~~Tim Ballering

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