May 03
Fox 6 did an expose on Alderman Stampler’s side gig as a landlord.
While Stampler may or may not be a good or bad landlord[1], the problem with this type of reporting is it stigmatizes everyone who is in this very tough business.  And it is a hard business. Many a well-funded nonprofit has failed trying to provide housing in lower income markets
So the Baird investment banker takes a public shaming that may be career-ending. An NBA star receives a public shaming that could potentially have forced him out of the league. An alderman takes a public shaming.
This relentless negative press on the industry creates a fear within those of slightly lesser means that if things go even a bit wrong, they will be publicly attacked. What a disincentive for those with adequate resources to invest in the poorer neighborhoods of the city, creating an environment that allows and perhaps even encourages predatory owners into the market due to the vacuum created by the of others unwillingness of others to take the chance.

[1] Stampler responded to the reporter “Put it this way, when she moved into that property it wasn’t like that, okay,
If the house had rodent problems, broken windows, defective detectors and damaged light fixtures when the tenant moved in shame on Stampler.  If the tenant did the damage and lived in a way that contributed to infestations and then blamed  Stampler in an attempt to ruin his career, then shame on her.
The home on N 22nd is a single family.  If the infestation was not present when she moved in, then the responsibility was that of the tenant under both state statutes, §704.07(3)(a), and Milwaukee ordinances  275-82-3-b.  The woman was a landlord herself prior to a handful of foreclosures in 2010.
DNS orders are not always what they appear to be. A defective detector often is one that the tenant simply took the batteries out of. A handrail violation? Many times DNS orders retrofitting of rails to newer standards, contrary to the codes. In DNS terms a defective roof could be an entire failed roof or a single missing tab.
Prior to 1986 Milwaukee’s code and building inspection held tenants responsible for things like removing batteries from detectors, housekeeping and the damage they did.  In 1986, File Number 85-1396-a,  the Council decided that tenant responsibility was a bad thing. The only recourse owners have now is an eviction or small claims judgments.  Judgments on uncollectible defendants are worthless.
Evictions are expensive, and the results are not satisfying despite what the author of Evicted may purport.  Not holding tenants accountable for their actions contributes to the decline in housing and neighborhood disorder.
We must return to a system where all parties are responsible for their acts and omissions, not just the landlord.

M.C.O. 275-82-3

b. Occupant’s Responsibility. Every occupant of a structure containing a single occupancy shall be responsible for the extermination of any insects, rodents or other pests on the premises. Every occupant of a structure containing more than one occupancy shall be responsible for extermination within the occupancy whenever the occupancy is the only one infested. Whenever infestation is caused by failure of the owner to maintain a structure in a reasonably rodent-proof or reasonably insect-proof condition, extermination shall be the responsibility of the owner.

Wis. Stats. §704.07

(3) Duty of tenant.
(a) If the premises are damaged, including by an infestation of insects or other pests, due to the acts or inaction of the tenant, the landlord may elect to allow the tenant to remediate or repair the damage and restore the appearance of the premises by redecorating. However, the landlord may elect to undertake the remediation, repair, or redecoration, and in such case the tenant must reimburse the landlord for the reasonable cost thereof; the cost to the landlord is presumed reasonable unless proved otherwise by the tenant.
Apr 12

From today’s Milwaukee Journal Schneider: Desmond’s ‘Evicted’ is a flawed masterpiece

The article misses the mark in some aspects.
 
Homes in Milwaukee’s poorest areas often can be bought for as little as $8,000, with rents running upwards of $500 a month. In virtually no time, landlords can own the properties free and clear and the rent they collect is pure profit — as long as they can collect. As succinctly put by one of the landlords featured in the book, an African-American woman named “Sherrena,” (pseudonyms are used throughout the book) “The ‘hood is good.”
 
This furthers the misperception that landlording is a “get rich quick” scheme. Sherrena made statements to Desmond that sent up red flags, at least to us in the industry,  that she was already in the throes of failure at the time of the interviews.  

Attorney Heiner Giese did the research to discover Sherrena’s identity.  She was not becoming wealthy on these properties.  Instead, Sherrena began losing her buildings to foreclosure shortly after the Desmond interviews and was out of business well before the book was published.  Many of her properties have since been razed.

However, Schneider does recognize a fact that is missed by many who look at rental housing and urban issues from the outside

 

Further, despite the book’s grim portrayal of landlords, one can only imagine how far these neighborhoods could fall if landlords weren’t there to keep at least some semblance of order. If housing laws were to squeeze the amount of money property owners could make on their rental units, they may simply abandon these homes altogether, leaving a lawless landscape devoid of structure.

 

Feb 09

For the past couple of years, we have sold out both the spring and fall sessions of Attorney Tristan Pettit’s AASEW Landlord Tenant Law Boot Camp.

It looks like we are on track to do the same for the upcoming February 18th, 2017 Boot Camp.

Last fall I waited too long to sign up my new staff members and could not get them in. I signed up three staff people very early for this one. 😉

You may ask ‘Why would Tim pay $537 plus wages to send three people to Boot Camp when he knows the laws so well?’

The answer is easy: One small mistake or missed opportunity will cost us far more than this. It is important that my folks know the law as WI landlord Tenant Law is not always what a reasonable person would assume it to be. And this is ever evolving, with both new laws, new interpretations by courts and new tricks by tenant advocates*. This is not the first time we’ve sent staff either.

This course is presented by Attorney Tristan Pettit. Tristan’s law practice focuses on landlord-tenant law, he is a current board member of the Apartment Association as well as former president, and drumroll please, he writes all the standard landlord tenant forms for Wisconsin Legal Blank.

If you want to go, now that my seats are secure ;-), you can sign up online or call Joy at the Association 414-276-7378 and reserve a spot.

http://www.landlordbootcamp2017.com

* Most “tenant advocates” only advocate for tenants that break the rules. This ultimately costs the rest of the good tenants more in increased rents and decreased service or more noise and disruption… but this is another story for another day.

Feb 09

I previously wrote about problems with Milwaukee’s DNS computer system.  They now have their new system online.

I spoke to a couple of people that have attended a recent DNS presentation on the new property information system.

At this presentation, the attendees were told that DNS was prevented from collecting contact information, such as phone numbers, through property recording due to ACT 176.  This is not accurate but is just more “Fake News”  that our industry has been subjected to so much lately.
 
ACT 176 explicitly permits the collection of the contact information for the authorized contact person for the property. This exclusion was supported by the Apartment Association as most owners find value in having people be able to contact them or the people they have managing their properties so that they may address small problems before they become big problems. We also find it useful to be able to contact other owners during screening.
 
Here is the law as enacted by ACT 176:
 
66.0104 (2) (e) No city, village, town, or county may enact an ordinance that does any of the following:

1. Requires that a rental property or rental unit be inspected except upon a complaint by any person, as part of a program of regularly scheduled inspections conducted in compliance with s. 66.0119, as applicable, or as required under state or federal law
.
2. Charges a fee for conducting an inspection of a residential rental property unless all of the following are satisfied:
a. The amount of the fee is uniform for residential rental inspections.
b. The fee is charged at the time that the inspection is actually performed.

3. Charges a fee for a subsequent reinspection of a residential rental property that is more than twice the fee charged for an initial reinspection.

4. Except as provided in this subdivision, requires that a rental property or rental unit be certified, registered, or licensed. A city, village, town, or county may require that a rental unit be registered if the registration consists only of providing the name of the owner and an authorized contact person and an address and telephone number at which the contact person may be contacted.
Jan 07

Recently the Milwaukee Journal ran a series “Landlord Games” that inaccurately portrayed LLCs as being used simply to avoiding paying property taxes and fines.  The result is the Milwaukee Common Council is creating a committee to study LLCs and rental housing. Text of proposal. The rental industry is again, noticeably absent from those invited to the table.

View as formatted pdf with footnotes

Let’s agree that all property owners pay a cost when someone fails to pay their taxes or their property is foreclosed and abandoned.

The Apartment Association does not support bad actors. None of those owners featured in the Journal article are members of the Association.

Rather we see the importance of the city, and private investors working together to make rental housing, and therefore neighborhoods, succeed for the mutual good of both.

Rental housing is an important and integral element of Milwaukee. About 58% of the residents of Milwaukee are tenants. In some neighborhoods, such as 53233 the number of renters exceeds 97%. The success or failure of neighborhoods and rental housing are closely tied.

Rental Housing is the largest small business in Milwaukee with over $7 billion invested in Milwaukee. (MPROP assessor records October 2015) Rental properties account for well over a half billion dollars a year of economic impact, starting with $190 million in property taxes, sewer and water charges, maintenance, insurance and everything else that goes into running rental housing. The Census Bureau found the yearly median operating costs per unit for multifamily rental properties vary between $3,600 per unit for small properties and $5,170 per unit for large properties, adjusted to 2016 dollars. These numbers exclude interest and mortgage servicing.

Providing rental housing in older, poorer neighborhoods is difficult, challenging and unappreciated work. Many have failed, some are opportunists or worse, but the majority were simply overwhelmed financially and mentally by the task at hand.

Owners are impacted by the financial and social problems of their tenants, the high costs of maintenance and lack of capital to address those problems. It is not the owner’s lifestyle that contributes to insect infestations or broken windows, yet it is the owner and not the occupant that is accountable both financially and recently in the media.

Not only do private owners suffer these burdens. One only needs to look at the long history of failure among Milwaukee’s nonprofit housing providers. (see excerpt below) These groups had every advantage over the small private investor. They had significant financial resources, typically through Block Grant and other government funding and grants; they had well-paid and well-educated staff; they often obtaining properties without costs, and they had access to the best tenants on Rent Assistance. Nearly all of Milwaukee’s nonprofit housing providers failed financially.

These groups had every advantage over the small private investor. They had significant financial resources, typically through Block Grant and other government funding and grants; they had well-paid and well-educated staff; they often obtaining properties without costs, and they had access to the best tenants on Rent Assistance. Nearly all of Milwaukee’s nonprofit housing providers failed financially.

Or one could look at the Milwaukee’s Housing Authority budget to see the costs they incur housing low-income Milwaukeeans. Here too is an organization that gets Rent Assistance tenants, tenants who risk losing their housing subsidy if they fail to comply with the rules or pay their rent. HACM does not rent to the populations with bad histories, leaving the segment most in need of housing to the private sector.

Milwaukee should strive to encourage a successful private rental housing market in this once great city, but since the mid-1980s’ the city adopted a culture of hatred towards private rental owners. That has not produced positive results, but instead, discourages the right people from participating.

If Milwaukee rental housing became more sustainable, where people willing to invest their time and money were to make reasonable profits, it would be harder for the few charlatans to exist because of increased competition for available properties. An added benefit is more interest in investing in Milwaukee’s rental housing will result in an increase in values and therefore an increase in the tax base.

Alderman Witkowski, who is the co-author of this proposal, created a Local Business Action Team to help small business succeed. Rental housing is the largest segment of small business within the city and one that may have the greatest impact on the well-being of the city. With our half billion dollars a year of economic impact, a similar effort should be undertaken towards making private rental housing more successful.

Let’s look at the recent Journal Sentinel series on landlords.

This investigative reporting – using easily available public records – showed that the individual owners behind LLCs could be revealed and that other properties owned by these individuals or different LLCs could also be exposed. Changes in the LLC laws are not necessary, contrary to the assertions of Aldermen Murphy and Witkowski that bad landlords are operating in secret. The City Attorney’s office has recently been successful in having a receiver appointed for the various ownership entities used by inner city landlord

Within existing laws, the city could have caused most of the featured landlords out of business, through docketing and enforcing code enforcement fines, and foreclosing f tax delinquencies. For whatever reason the city allowed these owners to continue unabated.

Perhaps most troubling is the relentless attack on James H. Herrick, who works for Baird, that went as far as the Mayor calling for the guy to be fired. He is not a member of the Association nor known to us.

The Journal reports that inspectors show up and find basement doors illegally padlocked. In the article, the owner’s manager states he did this in an attempt to keep drug dealers from entering the property.

There is no argument that inoperable fire doors are an unreasonable risk to occupants. Clearly, this was a novice mistake made by someone who did not understand fire codes.

The correct response by DNS would be for the inspector to explain the problem and demand the owner’s rep immediately remove the padlocks. If the owner did not comply, the Department of Neighborhood Services has an essential services program where the city can contract a repair and then bill the owner.

Instead, the inspection supervisor chose to placard the building and force 50 families out onto the street. Closing a 50 unit building would not have been the DNS response had the property been located on the Eastside, Bayview or the Southwest side. In these more affluent neighborhood they would have compelled a solution that kept the tenants safely in their homes.

But this building is in a poor, minority neighborhood.  The city’s response was harsh as it typically is in these neighborhoods. The DNS employees who acted out of spite towards the owners and a disregard of the tenant population, instead of attempting to protect the homes of 50 low income, primarily minority tenants, should lose their jobs.

The 50 unit building remained closed for a couple of months. It is no surprise that the building ended in foreclosure and sold at a distressed price due to this.

The owner’ use of single property LLCs, in this case, were an advantage to the city. Because the owner had his properties in separate LLCs, this allowed only this one to be foreclosed upon, instead of all 13.

It is a lending industry practice in larger real estate deals to require single asset entities to separate liability from one project and others with a similar ownership interest.

It would actually be in Milwaukee’s best interest if every investment property was in a properly segregated LLC. That way a failure at one property would not have a domino effect and bring down perhaps dozens or more other properties that are under similar ownership.

Then the Journal and Mayor put pressure on Baird, Herrick’s employer, placing his job in jeopardy. What advantage does the city receive in this? If he loses his job, his remaining properties will likely fall into financial problems as well, resulting in more boarded buildings, displaced tenants, and distressed sales.

Similarly, what did the city gain by the public attack on NBA basketball star Devin Harris? While it may have been expedient in causing the payment of some fines and taxes, overall it sent a clear warning to others with capital “Do not invest in Milwaukee. If you fail, you will be ridiculed and perhaps lose your career.” Similar results could have been obtained with a private conversation with Harris, thereby not discouraging outside investment.

Journal article on non-profit failures

West End joins a list of other nonprofit housing organizations that have failed in the last 10 years, including Walker’s Point Development Corp., East Side Housing Action Coalition and Community Development, and the Westside Conservation Corp.

 


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