Author: Tim Ballering

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Code Enforcement Government Behaving Badly Leases & Rental Agreements Legislative Milwaukee Our industry Purchasing Real Estate Selling Tenant Responsibilities

WI New Landlord Tenant Law – 8 things to know

Governor Walker is scheduled to sign AB568 into law on Monday 2/29/16.  Link to the text of the new 2016 Wisconsin Landlord Tenant  law, ACT 176   This is the third major revision to WI Landlord Tenant Law in three years.

It will take a while to digest all the implications of the new bill, even for those of us who watched it go through the legislative process over the last six months or so.

Some of the highlights:

  • The new law allows the termination of a tenancy for criminal activity. Drug dealing is one of the crimes you can evict for, but simple possession or use of drugs is not. Politically, allowing possession was necessary. But it is still disappointing that owners that wish to, still cannot expect drug free housing.  With this new tool to address problems  year leases are practical in more situations than they are today. An advantage of leases is less turn over and that should make neighborhoods more stable. Keep in mind that the Wisconsin protections for domestic abuse victims remain in place.
  • Another change affects month to month tenancies – The ability to use 5 Day notices for breaches.  Now when the tenant shows up with a pit bull you can respond with a 5 Day instead of a 14 Day.  An advantage to the tenant is they can correct their mistake and not lose their home.  This may also permit the including of late fees and other charges that the tenant owes on a 5 Day notice.  I will get clarification on this.

There are a bunch of changes that should help keep local governments a bit more in check.  This legislation:

  • Prohibits  rental property inspections except upon a complaint or as part of a program of regularly scheduled inspections conducted in compliance with state or federal law.  Think fire inspections.
  • Dramatically changes “Reinspection Fee” by limiting the the escalating fee scheme as well as allowing fees only when there was an actual, physical inspection of  the property.  Currently these fees double every 30 Days until they are six times the original fee, plus often there is no actual inspection associated with the fee. This is important as many of the abandoned and foreclosed homes in my neighborhoods appear to have ended up in that state in part due to fees imposed by Milwaukee.  The fees imposed these properties also make it harder for someone to come in, buy the property and put it back in service.
  • Prohibits rental property certification or licensing  schemes unless the requirement applies uniformly to all residential rental property owners, including owners of owner-occupied rental property.
  • The law still allows for programs such as Milwaukee’s Property Recording Ordinance, but most likely they will no longer be able to charge a fee.
  • Prohibits an occupancy or transfer of tenancy fee on a rental unit.

Time of Sale protections

  •  The bill prohibist local regulations with respect to taking title to or occupancy of property.

The new law also changes things with regards to sprinklers, historical buildings, trespass and towing.

Stay tuned as we get more information on what these changes mean to us and what lease language will be updated.

Categories
crime Evictions

Tenant growing pot and the Police will not arrest

A reader writes:

I was in one of my units the other day working on a plumbing problem. I noticed a strong smell of Pot, as I was walking from the kitchen to the bathroom I could smell the pot even stronger. I noticed There was an extension cord going into the living room closet. I looked inside the closet and there was a heat lamp a grow light and aluminum foil around the walls with a nice big plant of pot.

I called the police, when they came they advised me that there was nothing they could do since I found it with an illegal search. I explained to them that I have the right to inspect my units for damage or illegal activity. They said there was nothing they could do except watch the place and tell inspectors about the activity.

The police were wise not to make an arrest based on your discovery. The search would be invalid for the police to make an arrest, but that does not mean you did anything illegal as long as you properly noticed the tenant that you would be entering the property. Although seeing that you were there for plumbing you may wish to say you thought you smelled a strong sewerage odor and instead pot. 😉

 

The reason is a published Wisconsin Supreme Court case on landlords allowing police to search their tenants unit without a warrant, State, v. KIEFFER

¶ 45 For the foregoing reasons, we conclude that Garlock [the landlord] lacked actual authority to consent to a search of the defendant’s living area.   In addition, we conclude that the police made insufficient inquiry and thus could not reasonably rely upon Garlock’s apparent authority to consent to a search of the loft area.   Our conclusions on the Fourth Amendment questions render the initial entry and search constitutionally invalid, and thus avoid a need to address the other issues raised by the defendant.

You, assuming of course that you gave proper notice prior to entering the property, can evict based on this accidental finding.

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Government Behaving Badly Housing Stats Industry stats

The enemy of my customer is….

Bill Lauer writes on the Apartment Association email discussion group:

I was having breakfast with a friend familiar with landlord issues and we were agreeing that in this business, our tenants are our customers, low vacancy rates are cyclical, and things always change.
 
“The enemy of my customer is my enemy”.  The issues that conflict with my customer buying more product are issues that I need to be concerned about.
 
In the rental housing industry the issues that cause my tenant to not pay rent, are my issues too. We are joined at the hip.  To think otherwise is foolish.
 

I have thought about this often from a political perspective.

Why are the Democrats typically the political polar opposite to providers of lower cost housing and the Republicans often more supportive of our issues?  Every proposal that increases costs or decreases competition in that market adversely impacts the lower income residents, a constituency the the Dems purport to be theirs.  If you think about it the Dems should be the allies of rental housing.

A decade or so ago I hired former Governor Schreiber to  represent the Association at the statehouse.  More than a few people thought I lost my mind.  But it was a good choice as he understood the dynamics of the market and could explain to other Democrats how our bill was good for  the lower income families. We succeeded with a major piece of legislation at a time that even Green Bay Packer stadium financing was at a stalemate.


Tim Ballering
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Our industry Taxes

WI homestead tax credit forms

A reader asks:

I would like to know if all of you fill these out for tenants? I have had several to complete and return to them. They take time and the financial benefit is for the tenant. Does anyone know if we are required to complete them?

The short answer is yes,  you are required to complete the Homestead Credit Form.

Some guidance from the State of WI Dept of Revenue

Categories
Security Deposit

Emailing a deposit transmittal letter?

There is a discussion over on theApartment Association email discussion group about sending deposit letters via email.

I would be careful with creative methods of returning deposits or sending notice to tenants. The law is ATCP 134.06 “(2) Returning security deposits. A landlord shall deliver or mail to a tenant… “ and §704.28 “(4) Timing for return. A landlord shall deliver or mail to a tenant the …” Email is not in there.

The risk of being on the cutting edge is suffering large legal costs even if you are right. Below is a Wisconsin case that an owner had to take to the Court of Appeals in part because he sent the deposit letter via FedEx. The trail court ruled that FedEx was not mail and therefore the owner was liable for double deposit and attorney fees.

KIDD (Landlord) v. MCMASTER (Tenant)

“DYKMAN, J.[1] Michael Kidd appeals from a judgment awarding Dianna L. McMaster $18,029.93. He contends the trial court erred by finding that Federal Express is not a statutorily approved method of transporting a security deposit to a tenant under WIS. ADMIN. CODE § ATCP 134.06(2)(a).

The majority of the judgement, $15,171.69 was “reasonable attorney fees .” I’ll assume the rest was double deposit. The landlord won on appeal, but at what cost?

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Uncategorized

Been so busy that I haven’t posted in a while.

Busy good, but still busy.

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Crowdsourcing Filling Vacancies Housing Stats Strategy

Obsessed with data

As many of you know I like data.  Okay – maybe “like” is a little weak.  Perhaps its love, or at least a dangerous obsession.

Our industry, at least in regard to small properties,  shies away from meaningful data collection and utilization.  However, you can do so much with the right data – from setting your rents in the sweets spot between charging too little and losing money to charging too much, having your units remain vacant and … losing money.  What is that house you are looking buying at really worth and how much rent can you really expect to receive? In many neighborhoods paying assessed value is paying two to three times what everybody else is paying.  In a few high valued neighborhoods assessed value is a steal.  Ask the listing broker how much rent you can expect and some will tell you the sky.

Lately we’ve been looking at a lot of data points from rents, to evictions, to city orders, to special assessments, to tax assessments in general, to foreclosures and a ton of other interesting things.

For example we are developing an internal tool for suggesting rents that is using for rent ad data, including rent amount as well as other thing such as how long the ad has appeared, how many times in the past two years has the unit been for rent and mashes that up with property data – age, size, assessed value, date of last sale, how many units are owned by that owner and a dozen other metrics. Then combine this data with city order data, eviction data, tax delinquency and foreclosure information for the subject property.  While we haven’t finalized the algorithm, we are getting close.

Another fun project is trying to identify properties that will fail.  We look at when they were purchased, if they are tax delinquent, if they are on the DNS monthly reinspection list, if there are evictions, if the water bills have been placed on the tax roll, etc.

We started doing this with database tools, Python scripts and a lot of manual acquisition.  We’ve found a lot better methods since.

One of the tools we use for data acquisition is import.io. Today I was in San Francisco for their Extract conference.  The theme was “Data Stories Worth Sharing”  There were 600 in attendance, with what appeared to be an equal distribution of data scientists, data analysts, and application developers. Oh and there was one landlord.

I wanted to attend the last two but either the timing was bad or the event was in London, which is quite a trip for a one day conference.  Today was so great I regret not attending the previous events.

If people thought I was a pain in the butt before with my data obsession, I’ll be downright dangerous now. 😉

If you want to play with the tools I play with, another one to look at is Mirador, a data visualization tool developed by Harvard and others primarily for things like Ebla research.  This is a radically cool tool  for seeing patterns in data.  Before that we were only testing patterns against assumptions.  Mirador points out the patterns for you.  

To visualize the results there is Tableau or for the more adventuresome there is a Javascript library D3

I think I should call this “Big data about small properties.”

If you are interested in data and rental hosung and want to talk about this more, drop me an email at Tim@ApartmentsMilwaukee.com

 

 

 

 

Categories
ATCP 134 Security Deposit

When do you settle the security deposit?

In the case that a tenant owes rent or other easily determinable charges, it is safest to send the letter as soon as practical and bill them separately for other damages.  

Returning keys may or may not be important in establishing the date the clock starts rolling.  More importantly is when did you know they were out and what was the termination date of their agreement.  

§704.28 (4) (b) was a big change.  Let’s say a tenant on a year lease vacates four months early, depending on when the unit gets rerented, the 21 days could start up to four months after they vacate.  

This also applies to month to month occupancies. If the tenant moved without notice, the notice date is implied to be the date the owner learned they moved out.

I look at (4) (b) as more of a safety net for owners that are sloppy in their response times or did not know the date the tenant vacated.  A far better approach would be to send a deposit transmittal letter as soon as you learn they left before the end of the agreement, stating the deposit is being applied to the rent due and that they are liable for the rent until, for example, Feb 29th, 2016 unless the unit is rerented prior to that date.  Also note that you are attempting to rerent the unit. 

Even if (4) (b) keeps you from losing a deposit lawsuit, it probably does not keep you out of court as tenants still believe the 21 days start the day they left and not the last day of the lease that could be months in the future. 

I feel it is very important when a tenant owes rent equal to or more than the deposit that you limit the deposit withholding letter to the rent with a notation that they are being billed separately for other damages.  If you have late fees in the written agreement those too can be part of the undisputed deposit withholding letter. [EDIT: Attorney Tristan Pettit points out that I was not clear that late fees must also be included in the non standard provision. ] 

There have been a few cases, including an outstate unpublished appellate decision, where the courts have doubled the wrongfully withheld items on a deposit transmittal letter and then applied that to a determination of double damages and attorney fees even though the rent alone exceeded the deposit.  For example the tenant has one month’s rent as deposit and leaves owing a month’s rent.  The landlord, being angry they left in the middle of the night puts $500 charge on the deposit letter for changing the locks. Tenant now is also angry and takes the landlord to court.  Some courts will mistakenly double the wrongfully withheld $500 and then clip the owner for the tenant’s attorney fees on top of that. Had the deposit letter just had the rent due on it and the owner billed the tenant for the questionable charges it would not have made the owner any less of a butthead, but he would have some money left to sign up for meditation or anger management classes.

You should also use the separate bill method for other things that are legit, but cannot be deducted from the deposit such as carpet cleaning if written into the rental agreement.  Note that our company does not change for carpet cleaning, but the WI Attorney General has said you may, as long as you do not deduct the charge from the deposit.

 704.28 (4) Timing for return. A landlord shall deliver or mail to a tenant the full amount of any security deposit paid by the tenant, less any amounts that may be withheld under subs. (1) and (2), within 21 days after any of the following:

(a) If the tenant vacates the premises on the termination date of the rental agreement, the date on which the rental agreement terminates.

(b) If the tenant vacates the premises or is evicted before the termination date of the rental agreement, the date on which the tenant’s rental agreement terminates or, if the landlord rerents the premises before the tenant’s rental agreement terminates, the date on which the new tenant’s tenancy begins.

(c) If the tenant vacates the premises or is evicted after the termination date of the rental agreement, the date on which the landlord learns that the tenant has vacated the premises or has been removed from the premises under s. 799.45 (2).

Categories
Opportunities Strategy

The One Thing

I recently read a book “The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results” by Gary Keller.  The author is a real estate professional, but the book is not about real estate per se.  The entire premises of the book is:

What’s the ONE Thing you can do such that by doing it everything else will be easier or unnecessary?

While simple, it is a great question.  Perhaps making an entire book out of it is a small stretch, but none the less a great question.

So let’s apply it to our industry.  What is the one thing that would change everything for us?

A few ideas that come to mind:

  • Enforceable tenant responsibility
  • A cooperative rather than confrontational relationship with local governments
  • Superior screening tools
  • Access to labor
  • Reduced cost supplies
  • Software
  • Financing

What is your ONE thing that would change everything – lets decided and then decide to make it happen,  Post your ideas in the comments or over at the ApartmentAssoc Yahoo Group

 

 

Categories
employees Maintenance & Repairs

New guidance on “Independent Contractors”

If your business model relies on using workers that you classify as “independent contractors” the latest interpretation from the US Department of Labor should be of extreme concern you.

Hat tip to Attorney Tristan Pettit for alerting me to this.

I have written a number of post about the dangers of calling a worker an independent contractor when they met the definition of employee.   Well that bar was just raised substantially.

Rather than the old tests, the new ones are fairly bright line:

Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).

But the ruling goes even further than is the worker dependent on the pay they receive from you.  Below are a few paragraphs of the Department of Labor document worth noting.

If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer.

 

In sum, in order to inform the determination of whether the worker is in business for him or herself, this factor should not focus on the worker’s ability to work more hours, but rather on whether the worker exercises managerial skills and whether those skills affect the worker’s opportunity for both profit and loss.

 

The worker should make some investment (and therefore undertake at least some risk for a loss) in order for there to be an indication that he or she is an independent business.

 

For example, investing in tools and equipment is not necessarily a business investment or a capital expenditure that indicates that the worker is an independent contractor.

So if the guy is a licensed electrician doing work for dozens or hundreds of other owners – pretty much he is a contractor.

However if you are paying a painter $10 an hour, or even $20 for that matter, and he works primarily for you – he is an employee and you would be well served to consider making him a legitimate employee or hire out a company that uses employees.

Remember too that if someone working on your property  is injured your rental property liability policy will not cover them.  Either you or they need to have a worker comp policy.  And this risk is even greater than the DOJ coming after you.