Oct 22

A reader of the ApartmentAssoc Yahoo Group questions how the new landlord tenant bill affects leases that attempt to deal with criminal activity.  The new law is:

704.44 (9) Allows the landlord to terminate the tenancy of a tenant based solely on the commission of a crime in or on the rental property if the tenant, or someone who lawfully resides with the tenant, is the victim, as defined in s. 950.02 (4), of that crime.

704.44 (9) is a prohibited lease provision. Therefore a lease is void if it allows you to evict the tenant solely because of a crime that the tenant or an authorized co occupant were the victim of.   The provision was meant to be a protection for domestic violence victims.

As I read this an example would be if the tenant’s door is broken.

  • If the damage was caused by the tenant and you use your lease to evict them for the damage all is good.
  • If the damage occurred during a burglary and you attempt to evict them based on a lease provision, you would fail and possibly be in trouble. It would be wrong even without this law to evict a victim of a crime.  ‘Oh, you were robbed of your tv and radio – well now you are losing your home too because having your door broken during a robbery is a lease violation’. – bad landlord.
  • If the door was broken by the ex boyfriend that they had a restraining order against, you would most certainly be in trouble.  But that is the current law under 106.50 (5m) (dm).
  • On the other hand if the door was broken during a robbery committed by a rival drug dealer and the police report indicated that, then a lease provision such as a crime free addendum would be fine.

I agree it is not the perfect language. However this is far better than the prior prohibition against a lease that permitted you to evict the tenant for a crime they could not have reasonably prevented.

Under the new wording you can evict a tenant if they fail to exercise reasonable control of the property.   An example is if the tenant’s grandson who does not live at the property comes over and sells drugs out of grandma’s unit.  Under the current law you would have a hard time crafting a lease that would be legal and permit you to evict as a means of stopping the drug traffic because it is very likely that granny could not reasonably prevent the activity. The only answer would be wait until the Police send an angry letter about the nuisance activity.  Under the new law your lease will be able to address this because granny is not a victim.

His second question is:

What happens if a tenant gets a Disorderly Conduct ticket, or a ticket for possession of marijuana, or a ticket for… Was there a commission of a crime?

You do not have to differentiate between citations and crimes in the above.  The tenant was not a victim, they were the perpetrator of the act and therefore a lease provision that permits eviction would be valid under both the old and new law. Plus the law acknowledges that criminals are not victims of their own crimes

§950.02 (4) (b) “Victim” does not include the person charged with or alleged to have committed the crime.

However if the tenant was the victim of what could be considered a criminal act, I think you must treat the tenant as a victim regardless if the perp was given a citation or a state charge.  So if in the prior door broken by a burglar example you would be wrong in evicting a tenant even if the guy who did it only received a muni citation.

There will be more on this as a discussion of how to make the Crime Free Lease or addendum work within this new law.

Oct 21

With the passage of SB179 and the previous passage of ACT 143 a lot has changed with Wisconsin landlord tenant law.

I am trying to assemble a working group of landlord/tenant attorneys and managers with a lot of experience to create a great Wisconsin lease that incorporates the changes in the new law as well as those from ACT 143.

First if you are one of the above group and want to be a participant, let me know.

However even if you are not a landlord tenant attorney or seasoned property manager, I would like to hear of instances that you found your lease defective or deficient.

Jul 31

Attorney General J.B. Van Hollen Issues Formal Opinion Concerning Residential Lease Provisions Requiring Departing Tenants to Pay for Carpet Cleaning

MADISON — Attorney General J.B. Van Hollen today issued an opinion to Department of Agriculture, Trade and Consumer Protection Secretary Ben Brancel in which Van Hollen concluded that Wisconsin law does not prohibit residential lease provisions that require a departing tenant to pay for routine carpet cleaning. Van Hollen determined that such a provision is not in conflict with a landlord’s statutory duty to maintain the premises “in a reasonable state of repair” under Wis. Stat. 704.07(2). Because routine carpet cleaning is not a statutorily-imposed obligation of a landlord, assigning this responsibility to a tenant through a contractual provision does not render a rental agreement void.

The full opinion letter is here:

www.doj.state.wi.us/sites/default/files/2013-news/oag-04-13.pdf

NOTE: This opinion does NOT permit the deduction of the carpet cleaning from a security deposit.

So then what  does this do for owners?

Very little to collect extra money from tenants.  However it forecloses tenants arguments that we had a common law duty to clean between tenants, i.e. cleaning is not part of a reasonable state of repairs.

I can also see this being used when DNS issues orders for housekeeping on the owner rather than the tenant.

It also clarifies you can have a lease that requires a tenant to clean when they move. You just have to bill them outside of the deposit.

Bottom line:  Personally I  never felt an across the board fee for carpet cleaning was anything more than a fee for moving out, which is probably a bad business practice even if it were legal.  Cost should be imposed on those tenants that do not leave the place reasonable well, while those that take care of the place should be treated in a manner they would rent from you again or tell their friends to do so.

Mar 09

The Journal is reporting:

Over the next three years, Barrett said raze orders in the city are expected to grow to 1,600 homes, with a cost of $24 million.  “We have a very severe problem right now,” Barrett said.

No kidding we have a “severe problem ”  This a problem that continues to grow rather than moderating.  The number of abandoned and foreclosed houses was bad nine months ago and with fresh snow on the ground you can see even a greater number of unoccupied properties than ever before. At least here on the Southside of Milwaukee these numbers are far worse than what is being reported by the city.

How much of the $24 million of anticipated razing costs could be avoided by making it more favorable to rehab properties and restore them to the tax rolls?

Perhaps the city would do better by working with, instead of against people willing to invest their own money, time and effort into putting foreclosures back in service.  I’m not even suggesting a hand up, just not the current beat down attitude. Not only would there be less spent on bulldozing, but more of the tax base would remain plus the positive economic impact for the community due to spending by owners to maintain and operate this housing.

Between taxes and the sewer and water bills the city gets  at least $5-6 million per year from 1600 functional properties. In the three year period Barrett defines this is a potential of $18 million in city revenue if the buildings were returned to occupancy. Add this to the $24 million to bulldoze and you are north of 40 million dollars.

Can every property that is deemed to be worthy of razing able to be salvaged, of course not.  But many that are in the pipeline today can be.  Every day that a property sits unattended is a day closer to the wrecking ball being the only option for that property.  There are many properties sitting vacant today that are worthy of repair, but will not be so six months or a year from now.

Additionally every time someone like you or I take on the challenge of putting properties back in service the local economy sees a benefit through the wages and materials we pay to get the job done.  All but one of my employees live in the city.  While the money you spend at the Home Depot doesn’t stay in Milwaukee,  the person who is employed by the Home Depot lives in the area and spend their wages here.

A downside for us, but an upside for the community is a greater amount of housing stock available holds rents down.  A more competative market also forces owners to do more to properties to get and keep them rented.

Once the property is back in service ongoing maintenance similarly impacts the local economy in a positive manner. It is estimated that repairs and improvements to rental properties represent $90 -120 million a year in the city of Milwaukee alone.   (These numbers are derived from our company’s experiences, the experiences of other long term owners that I’ve discussed this with and data from the Census Bureau’s Property Owners and Managers Survey.  Our data and that of many other owners indicate a slightly higher number than the Census)

Our company has the capacity and had the will to do 10-12 such projects a year without any government monies.  Heck if the environment was more favorable I could see us doing two properties a month.  We have not made an offer in MIlwaukee since November due the unfavorable policies adopted by the city. See my prior post on buying foreclosures in Milwaukee.  I talk to a lot of other owners with similar capacities that say the same thing.

Milwaukee acts like they are the only girl at the dance – as though real estate investors need to accept their petty obstructions and poor treatment because they are the only game in town.  But there are many other places to invest that treat owners much better.  One of our members is doing a big rehab in Beloit.  When I asked his project manager how it was going with the city he said they were unbelievably nice and truly seem they want to see the project succeed.  We are actively looking at the South Florida market today.

A few notes:

These 1,600 properties must be city owned or near to being city owned.  If they were bank owned the city could and would force the banks to demo the properties on the bank’s dime.  A growing trend is banks that  simply walked away from the mortgage rather than be subjected to the bad side of city regulations and fees. In another instance I spoke to an owner who the bank sued- he thought he lost the properties to foreclosure only to find out later that it was a money judgment only suit.  This adds to the zombie housing effect.  And you though only borrowers walked away.  😉

Our police chief is in the news speaking about the link between foreclosed and abandoned housing and crime.  I am certain he is correct on this.  But the Milwaukee Police do not do what they should in cases of property vandalism. See my prior post on property vandalism and the lack of police response.  This vandalism accelerate the rate of properties that are no longer viable for rehab.

Dec 23

“Going Green” is usually a positive phrase. Business that go “Green” are looked at as innovators and use this for a market advantage. It is hard to say anything bad about this type of greeness

However the way the city of Milwaukee is going grheck scares the heck out of me. .

As I drove the Southside neighborhoods finishing up our annual fall exterior surveys of our properties, I was shocked at the number of green boarded and abandoned homes and duplexes in that area. Even more than there were in spring

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