Author: Tim Ballering

Categories
Code Enforcement Evictions Fair Housing Tenant Screening

Hoarding and Housing

The Diagnostic and Statistical Manual of Mental Disorders describes hoarding as a mental disability and therefore most likely covered by the Americans with Disabilities Act and the Federal Fair Housing Act.  As such property owners are required to make reasonable accommodations. I would concur with this.

However there is also the health and safety exception to the reasonable accommodation requirement. This is where it gets difficult for the property owner, those doing social intervention and of course the person with the hoarding behavior. Hoarding can contribute to issues like insect and rodent infestations. Hoarding also can create fire hazards. Often hoarding is a violation of the local housing codes.

In response to a reasonable accommodation request an owner would have to balance the actual risk to health and safety to determine if the request was reasonable or not. Note actual risk and not potential risk that are not directly related to this tenant or applicant.

The ability for an owner to address the situation in a manner that does not involve eviction is often hampered by DNS’ response of placarding or threatening to placard buildings due to clutter and housekeeping. A few years ago I had a long term (~15 years) tenant who always kept her house immaculate until her son was murdered. After that she would not get rid of anything. We had to evict her due to the threat of placarding.

In my view, especially after that case, is hoarding is a disability. Having some sort of intervention available other than homelessness is the right thing.

There is the newly formed Milwaukee County Hoarding Task Force. I think this is a great potential resource not only for those with the disability but to help people in our industry make proper decisions in response to finding hoarding and or clutter at the properties.

I invited the Task Force to submit an article for the Apartment Association newsletter as well as speak at a future meeting if they wish and/or distribute informational materials at our meetings.

Categories
Tenant Screening

Rejecting an app for criminal past

Over on the ApartmentAssoc Yahoo Group an owner asks

“I had a person call me today that said his criminal record was being expunged by the governor of Illinois and that it is discrimination to reject applications due to criminal convictions. “

Fair Housing concerns are a two step process.  First, is the applicant a member of a protected class?  Be sure to check local, state and federal fair housing rules.  In most of Wisconsin criminal arrest records are NOT a protected class. Dane County may or may not be different.  Make sure you read the full list including the fairly recent  protections for victims of domestic violence. Also note the law is different for hiring.

The second part of the test is did the landlord or their agent take adverse action due to the applicant being a member of a protected class.  However just because a person is a member of a protected class does not mean you must accept them if they fail other reasonable screening criteria equally applied to all applicants.  

You get into trouble by applying different criteria to different applicants.  So for example if you have an income criteria and you allow people that look, talk and worship like you to slide in with income that is a bit less, but do not make the same accommodations for those who do not look, talk or worship like you, you will get into trouble.  

Therefore you should have  written criteria and apply it to all applicants equally.  This does not mean you can’t change it if you find it isn’t working, but make that change apply to all applicants from that day forward. 

Your criteria must be yours, for your type of properties.  I feel a reasonable criteria has time limits for consideration of things like criminal convictions and evictions.  We have four classes of crimes that different lengths of rejection periods.  With that said we personally do not accept registered sex offenders regardless of how old their crime is.

Remember too that you must make reasonable accommodations for people with disabilities.  So for example if someone needs to pay on the third because they are on SSI for a disability you MUST change your late policy for that person. 

Finally, if you have an income based criteria you must include all sources; retirement, W-2. Child Support, Social Security, Food Stamps, Unemployment Compensation, etc.

In WI the protected classes are:

https://dwd.wisconsin.gov/dwd/publications/erd/pdf/erd_9523_p.pdf

erd_9523_p

Categories
employees Maintenance & Repairs Strategy

Contractor or employee- redux

 

Remember  Your handyman – cheap contractor or $60,000 mistake?

Many of you attended the Apartment Association’s Meeting earlier this month featuring employment law attorney John Murray.

Here is a link to the State of Wisconsin’s guidance on the issue.  Most owners I’ve met that call their workers contractors fail on four or more of the test outlined in the guide.  Failing only one of the nine tests will cost you substantially.  This is why we use employees exclusively, except for licensed trades like electricians.

Under section 102.07(8)1 of the Wisconsin Statutes, a person is required to meet a nine-part test before he or she is considered an independent contractor rather than an employee. A person is not an independent contractor for worker’s compensation purposes just because the person says they are, or because the contractor over them says so, or because they both say so, or even if other regulators (including the federal government and other state agencies) say so. The nine-part statutory test set forth under s. 102.07(8) of the Act, must be met before a person working under another person is considered not to be an employee. To be considered an independent contractor and not an employee, an individual must meet and maintain all nine of the following requirements:

1. Maintain a separate business.

2. Obtain a Federal Employer Identification number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on the work or service in the previous year. (See note below.)

3. Operate under specific contracts.

4. Be responsible for operating expenses under the contracts.

5. Be responsible for satisfactory performance of the work under the contracts.

6. Be paid per contract, per job, by commission or by competitive bid.

7. Be subject to profit or loss in performing the work under the contracts.

8. Have recurring business liabilities and obligations.

9. Be in a position to succeed or fail if business expense exceeds income.

Note: When requesting a Federal Employer Identification Number (FEIN) from the IRS, you must inform the IRS that you are required by Wisconsin Worker’s Compensation law to obtain a FEIN. A social security number cannot be substituted for a FEIN and does not meet the legal burden of s. 102.07(8).

Categories
Apartment Association Investing Opportunities Strategy

What does it take to succeed at landlording or other businesses

In the past few months I have had nearly a dozen of conversations with other rental property owners that have turned to some variation on the question ‘What do you attribute your success to’ My story is simply not that interesting.

It is a story of working hard at generally boring things. Yes, I have lived well off landlording for three decades. Yes, I now have time to walk  thirty-five to fifty miles a week, often barefoot on wet sand. Yes, I have the time to travel around the country to help my wife with her business.  I still work remotely when I am away form the office, just not the insane hours I did as a kid.

But the truth is mine is just not an exciting story.  Seems most people want to know how to be independent and wealthy by July.  They do not want to hear about the multi year, multi decade journey it took me.

I used to say ‘Everyone says they want to be me, but none of them are willing to do what it takes.’ That was too egotistical sounding and I only used it in private conversations with folks who pushed me to tell them “the secret.”

A couple of years ago I read a quote by Hugh MacLoed which I like better.  In fact I liked it so much I bought a numbered MacLoed print for my office wall.  At least it was there before my staff redecorated the offices … I haven’t checked in a while.

“What people say they want and what they’re willing to work their ass off to get are two different things. ” – Hugh MacLeod

I simply focused on one thing most of my life,  pursued boring fundamentals with dogged persistence and took the time to learn the laws that affect my business.  For me this worked well.

Focus. Today the buzzword in business start ups is ‘pivot’ and the mantra is ‘pivot early and pivot often’, meaning a complete change in direction when things get tough.  Tough seems to mean in their terms that you aren’t ready for a one hundred million  dollar IPO and it’s already been six months so it must be time to do something else. I wonder how many of these young entrepreneurs  give up just before success.

As I criticize the pivot I must admit I too had a major pivot in the very early days. When I was in my early twenties I wanted to own a state of the art contract computerized manufacturing (CNC/CAD) company.  My background was in manufacturing and CNC machining. I loved the challenges and logic of making things.  I started buying rentals with the goal of using them to finance the machine shop.  That dream hit a bump in the road.  My potential business partner had some legal problems that I was unaware of until we went for financing.  I stayed with the rentals and grew that business.  So on some level this was a pivot, but not in the sense it is used today.

Instead of the pivot I went for incremental improvement.  For thirty years I did little else for income that did not involve rental housing. Every day I try to do this better than we did yesterday.

It was only in the last few years that I diversified a bit from Milwaukee rentals by helping my wife with her business and began exploring Southeastern Florida real estate as well as some angel funding stuff. You will not create the next PayPal, eBay or Google through incremental improvement, but it is a path to a decent sustainable lifestyle.  I see it as a fault of mine that my dreams were not larger, but I am fairly content where I’m at.

Persistence is still being there when everyone else gets tired and goes home.  Persistence is when you still show up and giving it your all even though you’ve had  three bad months in a row. Persistence is eating Kraft instant macaroni four times a week for months on end to finance a rehab. Persistence is leaving for work at 6 AM and not arriving home until 10 PM every day for weeks on end.  (See my follow up post on ten things I should have done differently) Persistence is staying the course when everyone around you says it is a no win game.

Despite how it is spelled, there is no fun in the fundamentals. Once the adrenaline rush of buying a building wears off so does the enthusiasm of many.  Rental real estate is a tough business.  When my son said he wanted to follow me into the business I told him to find something better to do with his life.  And landlording is a business, not an investment, at least not at the levels we are dealing with.

Bookkeeping, taxes, employees/HR, purchasing, collections, filling vacancies, evictions, customer service and dealing with bureaucrats are all part of the unfun fundamentals.

To succeed at landlording you have to focus on these fundamentals and pay attention to a myriad of laws and rules that affect us. I’m pretty sure that must every business out there is similar in this regard.

I’ve done all of those, others who are successful today have shared similar stories.  Then there are those who seemed to hold such promise at the beginning but suddenly were washed out.  Most of them looked for a shortcut, ignoring the fundamentals and then gave up when it got a wee bit hard.

Categories
Evictions Housing Stats Industry stats

Sad State of Evictions in Milwaukee

I extracted the data from the 28,835 Milwaukee County eviction cases between 1/1/13 and 2/28/15.

Landlords who went to court  lost $22,677,299.01 in these 26 months.  

Remember this was only Milwaukee County And only a small fraction of cases end up in court or are pursued to a money judgment.  Most owners I’ve spoken to tell me that less than a quarter of their non paying tenants end up in eviction court. 

Some sad facts:  

  • Only half the cases resulted in a money judgment against the tenant (14,424 of the 28,835)
  • 12066 were dismissed either by the court or on stip
  • Largest judgment  $243,255.95 (commercial)
  • Largest residential eviction judgment:  $24,348.00
  • Smallest judgment $1.30
  • 4,020 judgments under $200
  • 6,846  judgments over a grand ($1,000-243,255)
  • 4,194 judgments over two grand  ($2,000-243,255)
  • 2,106 Judgments over three grand ($3,000-243,255)
  • 1,068  Judgments over four grand  ($4,000-243,255)
Categories
5-Day Notice crime Evictions

WI Supreme Court Decides Important Eviction Case

The Housing Authority, with support from the Apartment Association wins an important decision on eviction for drug activity.

The Apartment Association of Southeastern WI  filed an Amicus Curiae ( legal-dictionary.thefreedictionary.com/amicus+curiae ) brief in support of the City Housing Authority.   

The brief filed was jointly on behalf of the Apartment Association and the Wisconsin Association of Housing Authorities was drafted by AASEW attorney Heiner Giese.  It is a fun read:

A. Hard Cases Make Bad Law

We start with a disabled 62 year old public housing tenant in the City of Milwaukee. He was perhaps smoking a bit of weed in his own apartment, doing it quietly, and when the security officer knocked on his door to ask, “What’s that smell?” he understandably didn’t let the officer in. And for this small, albeit criminal transgression (we are in Wisconsin, not Colorado!) his Housing Authority landlord serves him with an eviction notice.  

The Wisconsin Supreme Court writes:

Tenants will have an incentive not to use illegal drugs in the first instance if they can be evicted for, and given no right to cure, drug-related criminal activity. The potential to be evicted for any drug-related criminal activity, including a first offense, provides a powerful incentive to avoid such activity. See Rucker, 535 U.S. at 134 (citing Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 14 (1991)) (“Strict liability maximizes deterrence . . . .”). By contrast, if a landlord were required to give a “free pass” on a tenant’s first drug offense, tenants would have little incentive not to use illegal drugs because if they are caught, they can just promise not to do it again. For the other tenants of the building, this after-the- fact promise is far from a remedy for completed criminal activity and “‘stan[ds] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'” See Barnett Bank, 517 U.S. at 31 (quoting Hines, 312 U.S. at 67). The objective of Congress is to provide safe, drug-free public housing, not to provide housing that allows criminal drug activity so long as the offender promises not to do it again.

  

http://www.jsonline.com/news/milwaukee/supreme-court-upholds-milwaukee-mans-eviction-over-smoking-pot-b99460952z1-296077981.html

Tim Ballering

Tim@ApartmentsMilwaukee.com

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Categories
CCAP crime Tenant Screening

Fronting – being paid to rent a house for a criminal

From yesterday’s Journal Sentinel on a major heroin and cocaine arrest:

A separate complaint charges six Milwaukee residents with a variety of offenses related to the operation, which was based out of a rented house at 1800 S. Layton Blvd. A woman who lived there told investigators the main supplier paid the rent, car costs and other bills for her in exchange for using the location as a stash house for drugs and money.

http://tldrify.com/7ep 

”Fronting” is when, one person employees another person with a stellar rental history to apply for and rent a unit that the applicant has no intention of living at. Most often it is used by bad guys to acquire a place to do bad things, like sell dope.  We’ve also seen parents and friends front for people who otherwise could not get into our rentals due to eviction or criminal histories.

Screening becomes pretty much useless, unless fronting can be stopped. Law enforcement should look at these cases as felony fraud when used to put someone in a unit that the landlord would not otherwise rent to.  When used to facilitate a criminal act the fronter should be charged with either aiding and abetting the crime or the crime itself – If you drive the get away car while your buddy robs a liquor store and he kills someone, you will be charged with murder.  This should be the same.

In 1996 the Association had met with then D A McCann.  He promised to pursue fronting  cases if documented and presented to him.  Some cases were sent his way, but nothing ever happened.

When John Chisholm first became District Attorney he met a couple of times with the Southside Landlord Compact, a group comprised of small neighborhood landlords as well as many members of the AASEW.   We told him a large problem we were having was “fronting.”  

We had a major drug raid at one of our properties a few of years ago.  We went back over the app to see what we had missed. Everything looked correct. We rechecked the tenant for criminal charges – there were none.  We had done an in home pre rental visit. Notes had shown a woman, two kids in a well kept unit. 

I sent one of my manager to the four family she was living at when she applied to her to ask the neighbors if there was any indication of bad activity.  Low and behold the person we rented to was still living at the house where she lived when we accepted her application.  My manager asked her and she admitted that she was paid $500 a month to rent the house where the drug crime occurred and drop off the rent each month. We gave all of this information to the Police and DA.  She was never arrested. 

At least in the case reported yesterday the fronter was arrest.  Let’s hope this is part of a growing trend.

Categories
Evictions Leases & Rental Agreements

Guest Policies

Over on the ApartmentAssoc Yahoo Group an owner asks the following about guests:

After 13 years of landlording, I have a new challenge: tenants who have “guests” stay 30-45 days at a time, and one guest who stays 5 days each month. I need to establish a Guest Policy.  I am surprised to learn that the California Realtors Rental Agreement does not have a guest policy.  So I am trying to determine what is reasonable.  An attorney told me that the courts typically recognize 14 days per year, per guest, as reasonable. The tenants don’t want any restrictions RE: guests, yet they asked me if I would replace the carpets. They don’t seem to understand that the additional wear and tear, water, trash, septic system use, and the liability of additional people is why Landlords put restrictions on guests.  I would appreciate any helpful feedback from other landlords.  

More important than the things listed by you, which of course are also important, is the fact that you screened your tenants to assure as much as possible a level of behavior and respect for both the property and other people.  

The guest could be just as well behaved as the people you rented to, or they could be ax murdering, drug dealing, sexual offenders who need a place to stay because they burned their last apartment down to spite their last landlord because he kicked them out for not paying six months rent.  You just do not know without having the ability to screen them. If they are a true guest staying for a week or less, then it probably will not be a problem.  But if they are there for months – then it is a problem.

Also some jurisdictions treat the guests as tenants, which means that if the tenant leaves because the guest is out of control the landlord must evict this person they never rented to and never had any information on. 

Additionally if it is a nicer building in a tourist area you have to decide what your policy is on things like AirBNB.  I think most municipalities are starting to have problems with these occupancies, viewing them as an unlicensed and therefor untaxed hotel. 

Here is an article that combines both fears – guest having tenant rights and AirBNB.

Categories
Foreclosures Housing Stats Industry stats Milwaukee Purchasing Real Estate

Near Southside: “Fresh Mud and New Green Board Tour”

 

This past week, taking advantage of the moderate weather, we began our annual exterior survey of our properties a bit earlier than normal. We walk around the exteriors of all the properties to set a prioritized project list for spring/summer 2015.

The neighborhoods we operate in are the near Southside, from just north of National to Cleveland, 1st to 36th.

While the primary focus is reviewing our properties, we also get a good sense of what is happening generally in the neighborhoods.

If this was a rock band I would have called this the “Fresh Mud and New Green Board Tour” It was absolutely surprising how many properties have been bulldozed and how many more properties are boarded and abandoned since doing the fall review in Sept/Oct of last year.

Anyone who tells you the real estate market on the near Southside has or is rebounding from the 2008 housing bubble hasn’t been out much. 😉 I wrote about what I was seeing in the past  and again here.  It is much worse now.

Many of the new board ups are nice looking properties. However as they accumulate city “reinspection fees” and fines they get to the point they cannot be sold and languish until they are stripped of all value, foreclosed upon by the city for taxes and ultimately razed.

But at least the city was able to tack some fees on it. Fees that they never collected because when the City becomes the owner the only thing left to do was bulldoze  them. (The one pictured in the link is now a mud lot).  Many of these are Zombie Houses

We are seeing sale prices in Milwaukee that make Detroit almost look like a healthy market.

The sales below are listed in the Journal’s Recent Deals sales listing

$11,000: 2356 W Becher St – MILWAUKEE (01/06/15)
$4,000: 2328 S 4th St – MILWAUKEE (01/15/15)
$1,000: 1962 S 16th St – MILWAUKEE (01/02/15)
$3,375: 4624 N 29th St – MILWAUKEE (01/13/15)
$2,850: 323 E Chambers St – MILWAUKEE (12/05/14)
$2,625: 2904 N 16th St – MILWAUKEE (11/24/14)
$37,000: 3410 S 1st PL – MILWAUKEE (01/16/15) — a pretty nice neighborhood.

Categories
Code Enforcement Government Behaving Badly Legislative Magner v. Gallagher

Omaha Landlords Federal Lawsuit Against Inspectors

It appears the Metropolitan Omaha Property Owners Association’s lawsuit against their code enforcement will settle favorably for the owners.

1,000 Omaha rental property owners  filed a federal lawsuit in July 2013 alleging arbitrary and capricious enforcement of the city’s housing code.  Speaking to a couple of the owners their complaints are similar to ours, including the city ignoring owner occupied properties in disrepair while enforcing stringently on rental homes.

From the Federal complaint:

The City of Omaha has not adopted any specific rules, regulations, or interpretations of its very broad and general housing code. Instead, the City of Omaha has unlawfully designated the ability to make, interpret, and enforce Omaha housing law (including through unconstitutional means) on a case-by-case basis solely upon the unfettered discretion of each of its code inspectors. The system has no uniformity, consistency, or standard operating procedure and has fostered gross abuses, hardship, and violations of Federal and State Constitutional rights upon Omaha property owners. There are no adequate safeguards or protections in place and Omaha property owners are left without an adequate remedy or meaningful judicial review under State law.

Read the full complaint here.  Link to other case files

The Omaha World-Herald is reporting:

A proposed lawsuit settlement agreement between the City of Omaha and a landlord group faces questions and amendments when it goes before the Omaha City Council on Tuesday.

The agreement would settle a federal lawsuit filed against the city by the Metropolitan Omaha Property Owners Association.

The agreement includes an overhaul of the city’s ordinances and procedures on housing code enforcement.

It also includes a consent decree under which the landlords could haul the city back into U.S. District Court if the city changed those codes or procedures in the future.