Just a Landlord

[Edit: The WI case permitted a $50 late fee. A $75 late fee was not found excessive in one owner’s Milwaukee County Cases. ]

Late fees and security deposits are two points of friction in housing.

A question was asked, ‘How much should I charge for late fees?’

The WI Court of Appeals that allowed a $50 late fee in 1993.

It is a Fair Housing violation to charge late fees to tenants that seek a reasonable accommodation based on a disability. A prime example is an SSI recipient who receives their check on the 3rd of the month. There are a number of federal cases that owners have lost because they were inflexible on this point.

We stopped charging late fees on April 1st, 2020, prior to the moratorium. We did not charge any late fees for July, despite it again being legal to do so for most tenancies. (It is illegal to charge late fees for CARES Act covered properties until August rent and illegal to charge late fees if you are receiving mortgage forbearance on a federally insured mortgage)

Normally we have a due on the first, late on the 5th policy. At the close of business on the 5th, we charge a $15 late fee. If the rent is still not paid by the 12th, there is an additional $35 late fee, for a maximum of $50 late fees in a month. Our staff can forgive one late fee per tenant per year without asking for permission. We also do not charge late fees for tenants who are on a payment schedule, for example, they pay twice a month to coincide with their payroll.

Per diem (daily) late fees are problematic and can violate usury laws. For example, a $25 a day late fee after the fifth is $625 if the tenant misses a month.

The NYT article is title is “Lori Lightfoot, mayor of Chicago, on who’s hurt by defunding police.” But it has a lot to do with rentals from what I perceive as a very liberal politician’s view.

I would take the Chicago Housing Solidarity Pledge as it is what my company is already trying to do.

From the NYT’s article interview with the Chicago Mayor:

As a result of what we’ve all been going through, a lot of us, I think, have been reconsidering some of the fundamental assumptions we had about our government and economic system. Have you? Are you thinking differently now about things like rent control? [6]

When I think about rent, I think about it in the context of the entire ecosystem. The problem is mortgages that have to be paid and the banks that hold those mortgages and whether they’re going to give any forbearance. I think about landlords who are under pressure to pay their mortgage, their utilities, their property taxes. I think about renters and how stressed they are, worrying about being able to pay but also about possible evictions and what impact that is going to have on their credit rating. So the way I think about public policy is not individual levers and solutions in isolation. I try to look for the balance. Many times, there’s a solution lurking in the center.

So where might there be a solution for helping people who are struggling to pay rent because the economy cratered?

One thing that we did here is we brought together banks, landlords and people representing renters into what we called a solidarity pledge.[7] It’s voluntary; it’s not mandatory. But we put a lot of emphasis on saying: “Be good neighbors. Give each other grace and space in this difficult time.” That means not filing evictions. Not penalizing people because they can’t pay their mortgages or their rent. Be engaged in conversation to find common ground. We heard from all the actors that they were engaged in a lot of these conversations already. But by me, as mayor, publicly challenging them, it moved a conversation that was in the backroom to a more public reckoning.

Don’t you think that a voluntary “solidarity pledge” could just give landlords the cover of paying lip service?

You’re underestimating the level of activism here in Chicago. Any instance in which people feel there’s been a deviation, they are not hesitating to call it out. But of course, not everybody’s taking the pledge.

————

6 Rent control has been banned in Illinois since 1997.
7 In addition to the solidarity pledge, Lightfoot recently proposed a prohibition on landlords’ eviction of a tenant without first allowing the tenant five days to deliver a “notice of Covid-19 impact” outlining financial hardship brought on by the pandemic. Delivery of the notice would then earn tenants an additional week for negotiation.

Legislative committee blocks rule prohibiting landlords from charging late fees on rent

The ban on late fees was determined to be “arbitrary and capricious” yesterday morning by the Joint Committee for Review of Administrative Rules, on a 6-4 vote, and therefore unenforceable.

Just because you can charge late fees, does not mean you should charge late fees, without exception.  Discretion should be given to tenants that are facing hardships.

Think of this like the speed limit. The sign says 70 and you usually do 75 to reach your goal a bit sooner. But trying to even do even close to the limit in a blizzard may well have the opposite effect. We could see an economic blizzard later this year.

The purpose of late fees is to encourage on-time payments by those who can pay, it is not to penalize those who are facing hardships.

My company did not charge late fees in April, even though the moratorium did not exist then, because anxiety was high for tenants.

Even though we can again charge fees, our company will waive late fees for tenants that can provide proof they have not received their unemployment checks or are waiting on WRAP, etc.

We have a list of resources for tenants facing hardship due to COVID or otherwise that you can share with your tenants if you wish.

As seen on Tristan’s Landlord-Tenant Law Blog

https://petriepettit.com/blog/landlord-tenant/current-state-of-affidavits-of-non-compliance-in-milwaukee-county

Milwaukee BizTimes

“We’re urging all owners to work with their tenants who are experiencing legitimate difficulties and are taking steps to apply for whatever help is available to them,” Tim Ballering, AASEW treasurer and managing member of Milwaukee-based Affordable Rentals Associates LLC, said in an interview. “We’re also urging owners that, prior to committing to a court eviction, they explore other opportunities to find another resolution.”

The WI Department of Agriculture, Trade and Consumer Protection has issued an FAQ on late fee and eviction moratorium.

​Emergency Rule Related to Residential Rental Late Fees and Penalties
​On what date may landlords resume charging late rental fees and penalties because the emergency rule is no longer in effect?

Late rental fees and penalties may be charged starting August 9, 2020.

Late fees and penalties may never be assessed or charged for any missed rent payment or any late rent payment that occurred during the effective period of the emergency rule. The emergency rule is effective from April 25, 2020 through August 8, 2020. ​

It seems to me that August 8th is mathematically improbable, but it is the date we should adhere to.

Why improbable?

If the Public Health Emergency ended with the May 13th Supreme Court decision, then 90 days is August 11th. This has no consequence for most tenancies as the due date of the rent would generally be August first.

However, as The WI Supreme Court found EO 28 to be “unlawful invalid and unenforceable”, then the Public Health Emergency ended on 4/24 with the expiration of EO 12, 90 days after is July 23rd.

If you charged late fees after April 24th you have violated the DATCP 134. The penalties for doing so are great. You should reverse those late fees and notify your tenants that you have done so.

More important than late fees of course is working with your tenants that are struggling. My company waived late fees for April, well before the moratorium. We will evaluate the situation for September based on what we see the economy doing at that time.

Remember that a full third of people who have applied for WI Unemployment and Federal Pandemic Unemployment have not received payment.

There is a lot to consider now that the eviction moratorium has been lifted, including the delays facing the eviction courts as well as if the tenant is still waiting to receive unemployment or other payments.

Vacancies and evictions are expensive for owners and disruptive for tenants. When there is a better option, take it. In some cases, mediation may be a better answer than court.

In all cases, you should talk to your tenants before filing, both to understand their situation as well as giving them time to make arrangements to pay or move.

Suggest they attempt to get on the WI Rent Assist Program waiting list as well as apply for Emergency Assistance. We have links to these as well as a list of other resources for tenants on the Affordable Rental Associates, Tenant Resource page that you can share with your tenants.

I am reading more and more that both state and federal unemployment is not being paid as it should be. Part of the problem is many employers are closed and therefore are not responding to UC separation notices. Part of the problem is the state computers they are trying to process the deluge of new applications on is less powerful than your kids Nintendo.

The Federal Pandemic Unemployment Compensation program has not paid one of three who should be eligible to receive it:

Almost one-third of unemployment benefits estimated to be owed to the millions of Americans who lost their jobs as a result of the coronavirus slump haven’t been paid yet, as flagship policies struggle to cope with the unprecedented wave of layoffs.

Source: Bloomberg

Likewise, Wisconsin has 728,000 unpaid/unprocessed Unemployment claims, which is also about one in three:

As of Monday, [May 27th] the state had yet to pay more than 728,000 of 2.4 million weekly claims that had been filed since March 15, when the coronavirus pandemic began to batter the state’s economy. Others have encountered problems that have prevented them from filing claims.

Source: Milwaukee Journal

When does the moratorium on late fees expire under EmR2002, the DATCP emergency rule?

There have been a variety of end dates of the late fee moratorium suggested in the media, anywhere from August 8th to September 21st. However, my opinion is the end date is July 23rd

The Wisconsin Department of Agriculture, Trade and Consumer Protection in April issued an emergency rule that temporarily banned fees on late or missed rent payments. Ti Gauger, a department spokeswoman, said the ban lasts until Aug. 8.

Source

This is a mathematically improbable date. If the Public Health Emergency ended with the May 13th Supreme Court decision, then 90 days is August 11th.

However, EO 12, Governor Evers/Secretary of Health Palm’s PHE order, expired on 4/24. EO 28, which purported to extend EO 12 was invalidated by the WI Supreme Court on May 13th, 2020 in 2020AP765-OA:

By the Court.—Palm’s Emergency Order 28 is declared unlawful, invalid, and unenforceable.

If EO 28 was “unlawful invalid and unenforceable”, then it should have no consideration in the 90 day period of EmR2002. Therefore, did the Public Health Emergency end on 4/24 with the expiration of EO 12? I would believe so.

If the Public Health Emergency ended 4/24/2020, owners that wish to charge late fees should be able to 90 days after, July 23rd.

While I’m not certain I agree, an extreme view is that EmR2002 is invalid in its entirety as it was enacted the day after the Public Health Emergency legally ended.

We need to ask DATCP for clarification of the dates of the moratorium in light of 2020AP765-OA

This is not to suggest of course that you SHOULD charge late fees, that needs to be an individual decision based on the economic and social conditions in July or August.

I urge owners to work with tenants who are struggling due to this unexpected and extreme upheaval in the American economy. If your tenants do not succeed, neither will you.

My company waived all late fees for April, well before the moratorium was enacted. But that was a personal decision and not an unfunded government mandate.

https://www.naahq.org/news-publications/explaining-breakdown-1-rent

WI DATCP: Emergency Rule 2002 Rule, prohibition on late fees.

https://docs.legis.wisconsin.gov/code/register/2020/772B/register/emr/emr2002_rule_text/emr2002_rule_text

This emergency rule modifies Wis. Admin. Code ch. ATCP 134 to create a temporary prohibition on charging late rent fees or late rent penalties for any missed rent payment or any late rent payment during the current public health emergency and during the 90 days following the public health emergency.

There are questions as to what happens to April late fees that are charged but not collected, as they were incurred during the emergency declaration

A better question is, not if you can legally go after April’s late fees, but should you? I urge landlords not to charge late fees at this time, law or no law. 

Most landlords are not charging late fees, so this will have little impact, other than the length of time after the crises is over.

My way of thinking about this – if the tenant ultimately catches up on the base rent, I consider it a better than the anticipated outcome.  If they leave, owing rent, then you would not have collected the late fee anyways.

There is a mandatory 45 day comment period.  You can also  (politely) comment at:https://docs.legis.wisconsin.gov/feedback/agencyform?cite=EmergencyRules/EmR2002
Please do not make comments that feed into the negative stereotype of landlords

The Wisconsin rules on emergency rules:

Emergency Rules
As noted, certain requirements that apply to permanent rules also apply to emergency rules, including the requirement for gubernatorial approval of the scope statement and of the final draft rule.

Once the Governor has approved a final draft emergency rule in writing, the agency may publish the rule in the official state newspaper, at which time the rule takes effect, unless the rule specifies another effective date.

The agency must also file a certified copy of the rule with the LRB in order for the rule to be valid. On the day an agency files an emergency rule with the LRB that may have an economic impact on small business, the agency must also submit the rule to the SBRRB. Just as for proposed permanent rules, the SBRRB must determine whether the emergency rule will have a significant economic impact on a substantial number of small businesses. If it determines that the rule will have such an impact, the board may submit suggested changes to the agency to minimize the economic impact of the rule.

An agency must hold a public hearing on an emergency rule within 45 days after the adoption of the rule. An emergency rule remains in effect only for 150 days, unless JCRAR grants an extension for up to an additional 60 days. The total period for all extensions granted may not exceed 120 days.
[s. 227.24, Stats.]

The Small Business analysis is at: https://docs.legis.wisconsin.gov/code/register/2020/772B/register/emr/emr2002_rule_text/emr2002_initial_regulatory_flexibility_analysis