TENANT MOVED OUT AND LEFT YOU HOLDING THE BAG!

With a short week ahead of us due to the Thanksgiving holiday, and the fact that I will be traveling to the wonderful land of flat terrain and tons of wind (a.k.a Kansas), I thought I would take this opportunity to re-post some very good advice from a friend of mine and fellow blogger, Bill Gray of Rent Recovery Services, who is also known as The Landlord Doctor. http://www.TheLanlordDoctor.com

Bill writes a blog that focuses on collection issues, and specifically collection issues related to past tenants. He also serves as the regional manager for a great collection service called Rent Recovery Service which I wrote about in a prior blog. Bill has some very good advice to share and I especially enjoyed his blog post entitled:

TENANT MOVED OUT - LEFT YOU HOLDING THE BAG.

Perhaps your tenant lied and took advantage of you. He may have skipped out on the lease or you may have evicted him. In either case, he damaged your rental and cost you money! What do you do now?

1. First, set your emotions aside and spend some time organizing your ex-tenant’s file. Whether you own one unit or one thousand, or whether you manage your rentals full-time or part-time, you are running a business. Any successful business keeps well organized, complete records.

2. Keep copies of all receipts required to repair the unit, spent on legal fees, unpaid rent, etc. Complete a move-out inspection checklist, preferably with the tenant if possible. Both of you sign the document. The move-out inspection will help you document the condition of your unit and the debt he owes you. If you are not completing move-in inspection checklists now, begin doing so with your next move-in. This important step is often left out because “I didn’t have time”. Take the time. There is no excuse for not having a complete move-in inspection signed by you and the tenant.

3. A sometimes confusing issue for some landlords is whether or not you may charge through the lease. If the tenant signed a twelve month lease and skipped out or was evicted after only six months, does he owe you for the remaining six months? The short answer is no, not yet. In many states, if you cannot re-rent the unit before the end of the lease, the tenant will owe you the lost rent. However, he does not owe you the rent until it is actually due. Only charge him now for lost rent, as of the date of the move-out statement. If you wish, you may update the amount he owes each month until the unit is re-rented or the lease expires. Discuss this issue with your attorney.

4. Does your lease include termination and/or “no notice” fees? I often hear, “It is in the lease; he has to pay it.” The thinking here is that if it is in the lease, it is binding. This is not necessarily true. Termination and no notice fees may be legal in your state, and your tenant may be held responsible for them. With various state laws and recent case law, I highly recommend you have your lease periodically reviewed by an attorney to make sure you are complying with current laws. If legal in your state, termination and no notice fees may be a great way to calculate all charges at the time of move-out, without having to add future rent as it comes due. Again, talk with your attorney about this.

5. Take pictures. A digital camera is important to your business. Move-in pictures are nice to have but move-out pictures are a must have. The checklist and pictures not only help document the condition of the unit, but they may be helpful later if the tenant gets creative with his description of the condition when he moved in and when he moved out.

6. Keep a log of all communications you have with your tenant, especially any communication regarding him moving or paying his rent. If you do not have a log, begin using one immediately for all your present and future tenants.

7. Once you have your records together, complete a move-out statement. Most likely your management software will do this for you. The move-out statement should include the names of everyone who signed the lease, the unit address, move-in and move-out dates, and a break down of the charges. If a deposit was placed on the unit, you will show the deposit subtracted from the total due. State laws vary on what, how, and when you are required to notify the tenant of how you applied his deposit. Follow the law to the letter. Not doing so will give your debtor the upper hand, and you may be required to repay his deposit even though he actually owes you money! Some states require that this move-out statement be mailed certified mail within a certain number of days of move-out. Keep your certified mail receipt with your records. You may need proof that you complied with the law. Mail the move-out statement to your debtor at his last known address. This may be the address of your rental unit. If the letter is returned un-received, keep it in the file also.

8. A word of caution here: Some landlords are tempted to pile on and exaggerate the charges. While tempting, it will do you no good in the end, and it is not legal. Being fair and reasonable in your charges will greatly increase your chances of recovering the debt.

9. Now that you have your documents organized and have mailed the move-out statement, do not just put the file away somewhere and forget it. The money you are owed is an asset. I cannot tell you how many times I have heard the comment, “That bum will never pay his bill!” I can tell you with confidence that this way of thinking is costing landlords millions of dollars a year in lost profit. With little time and effort on your part, you may collect all or part of what you are owed.

I can help you with this collection process. Contact me at: Bill@thelandlorddoctor.com.

Thanks for the great words of advice Bill!

Happy Thanksgiving to my readers.

What Questions Should You Ask An Applicant's Current and/or Prior Landlord During The Screening Process

Screening applicants/potential tenants is the single most important element of landlording in my opinion. As I have mentioned in prior posts, if you properly screen your applicants you will have a better chance of finding a good tenant that pays rent on time and does not abuse your investment property.

Landlords should require each adult person to completely fill out a written rental application. After you have all this good information about your applicant you now need to confirm that info. You have not conducted a thorough screening until you have confirmed all of the information that was provided to you in the application.

Some of that info is more important than others. In my experience the most important information that you need to confirm about a potential tenant is: (1) the applicant's current and prior rental history, (2) the applicant's employment information, and (3) whether or not the applicant has been evicted, had a money judgment taken against them, or been charged/convicted with a crime -- this information, at least for now, can be obtained through CCAP.

This post will focus on item #1 - the applicant's current and past rental history. The way to confirm this information is to communicate with both the applicant's current landlord AND their prior landlord. You are probably asking yourself, "why is it necessary for me to talk to more than just the applicant's current landlord?" The answer is simple -- if the applicant is a bad tenant then the current landlord may tell you anything (even a bunch of lies) in order to get rid of their problem tenant. A less than honest landlord who is trying to unload a bad tenant may neglect to tell you that the tenant has loud parties every weekend, pays rent late every single month, enjoys hoarding pit bulls, and thinks its funny to rev the engine on his crotch rocket when he comes home after bar time. While it would be nice if all landlords realized that we are all in this together and were truthful to one another, that is not always the case. If you think that a fellow landlord would not lie to you in order to pass on a nightmare tenant then I want to let you know that I have a new ebook for sale which I just completed writing - and which I am selling for the unreasonable low price of $79.95 -- that I guarantee you will teach you how to make a million dollars in 30 days through investing in real estate, even during this recession : )

A prior landlord - one tht is at least one landlord removed from the applicant's current landlord - has no reason to lie to you. They no longer have any connection to their old tenant and therefore have no personal interest in whether you accept him or her as your new tenant. So it is always reccomended that you talk to both the applicant's current landlord AND their prior landlord. Now that you know who you should be talking to and why, the next hurdle is determining what questions you should be asking.

Oftentimes, the current/prior landlord is going to want to confirm that the applicant has authorized you to talk to them about the applicant and his/her information. This may involve having the applicant call the landlord and verbally telling them that they can talk to you, but more often than not it involves providing the landlord with a written authorization signed by the applicant. If you are using a good Rental Application then you may already have the authorization language in that document.

When providing the authorization to the current/prior landlord be careful to only provide the landlord with the authorization language, the applicant's signature, and the date that it was signed. While the current or prior landlord most likely already has all of the applicant's personal information - you do not want to take the chance and divulge personal info that you shouldn't have.

Prior to calling a landlord you should be aware that sometimes an applicant will list a friend or a family member as their current or prior landlord. They may do this for any number of reasons such as: (1) they have no prior rental history, (2) they have been evicted by their prior landlord, (3) or they know that they are a less then stellar tenant and that their landlord will not have positive things to say about them. As I'm sure you can guess, a family member or friend that is standing in for the applicant's real landlord is going to have nothing but glowing things to say about the applicant.

In order to avoid having this ruse played on you, you should attempt to confirm that the person you are speaking to is the actual current or prior landlord. There are several ways you can do this but none of them are foolproof. One trick is to call the alleged landlord and act as if you are a tenant inquiring about a vacancy. If the listed "landlord" is a friend or family member they will probably not respond appropriatley to your inquiry. I have caught one person applying to rent from me by this method. The person I called responded along the lines of "what are you talking about -- you must have the wrong number - I ain't renting out sh*t."

Another option is to check online property data records for the munucipality in which the current/prior landlord's property is located to see if the name on the property records matches the name of the alleged landlord. This method does not always work. If the property is being managed by a management company then the name that the applicant gave you is most likely that of the manager and not the owner. Additionally, if the property is legally owned by a business entity then there will be no individual person's name listed on the property data. Most municipalities have their property data infromation available on the web. I just googled "property data" and the name of various municipalities in Milwaukee County and came up with 4 sites in just a few seconds -- Milwaukee, West Allis, Greenfield, Wauwatosa. Short of the above methods you will just need to remain attentive during your conversation with the person and see if they "slip up" while talking with you.

Some landlords will be happy to answer your questions orally over the phone while others -- especially the larger landlords and management companies -- will only respond to your questions in writing. This means that you will need to send them written questions. This is normal and should not be a cause for concern. These companies are merely trying to protect themselves as they will now have proof of the answers they provided you should the tenant accuse them of false statements or sue them for slander.

Whether you are asking your questions verbally or in writing you should insure that you use the same questions for every applicant when talking to their current/prior landlord. If you fail to do this you may end up inadvertantly violating Fair Housing (discrimination) laws. To make this simple you should prepare a script of questions that you will use. I would suggest that you have an experienced landlord, property manager, or landlord-tenant law attorney review your questions prior to using them.

There are no hard and fast rules as to what questions you should ask but any questions posed should include the following:

1. Confirm that the applicant is/was a current/prior tenant.

2. Confirm the address of the current/prior rental unit.

3. Confirm the dates that the applicant resided at the current/prior landlord's property.

4. Confirm the rent amount that the applicant is currently paying or paid in the past.

5. Ask if the applicant has ever been late in paying their monthly rent. If the answer to this question is "yes" then you should follow up with a few additional questions such as: how late was the rent paid; was the rent paid late more than one; and how many times was the rent paid late?

6. Ask if the applicant has ever violated any other terms of the rental agreement (i.e. damage to property, loud parties, unauthorized guests, illegal activity etc).

7. Ask if the landlord ever had to serve the applicant a 5-Day or 14-Day notice. If the answer is "yes" then you should attempt to learn additional info about the breach.

8. Finally, you should ask the landlord if s/he would ever rent to the applicant again.

Remember that your goal in talking to the current/prior landlord and asking them these questions is to try and obtain as much pertinent information as you can about the applicant so that you will be better able to determine whether or not the applicant will be a good tenant for you.

It is important to realize that some landlords may not be comfortable answering these questions - especially the more detailed questions - as they may be fearful of retaliation by the tenant or being sued by them. This fear is the primary reason why some landlords will only reply to written questions with written answers. I have personally experienced landlords who would only give me "yes" or "no" answers to my questions and refused to provide any detail. On the other hand I have talked to more than one landlord that told me way more about an applicant then I would ever want to know (and way more than a landlord should ever knowabout his/her tenant). You take what you can get!

Remember that if a landlord is unwilling to verify the applicant's information then you have a valid and legal reason to deny housing to that applicant, assuming that verification of information contained in the application is part of your written screening criteria.

I hope that it goes without saying -- although I will say it anyway -- that during this "vetting" process you should only ask relevant and non-discriminatory questions. If you stick to asking questions about the topics listed above you should be OK.

How To Really "Read" A Person's Drivers License

I always enjoy learning information that will assist my clients and myself when screening potential new tenants. Based on my review of the Analytics for my blog, readers also appreciate this info because my post on the Social Security Number Validator consistently ranks as one of the most viewed posts each month.

While co-presenting at the City of Milwaukee and UWM's Landlord Training Program this past October I learned that a person's drivers license has all kinds of hidden elements that allow you to verify that the person handing you the DL is the actual person who was issued the DL.

Here's what I learned:

Assume that you are looking at a DL of a person named Jane No who has a DOB of 1937 and a DL # of N242-5323-7833-04.

1. The first letter of the individual's last name will be the first letter of the DL #. In this case it is the letter "N."

2. The last number of the second grouping of numbers in the DL# and the first number of the 3rd grouping of numbers in the DL will be the individual's birth year. In this example it is "37"

3. If the last three numbers in the third grouping of numbers in the DL # is greater than 500 then the individual that you are looking at should be a female. In the example provided the number is "833" which means that Jane No is a female. Similarly if the last three numbers in the third grouping of numbers in the DL # are below 500 then the person who handed you the DL should be a male.

4. To determine the the individual's DOB you can do the following:

For Females: Take the last three numbers in the third grouping of numbers and subtract 500.

For Males: Take the last three numbers in the third grouping of numbers but DO NOT subtract 500.

Applying this to our example, we note that the last three numbers of the third grouping of numbers of Jane's DL # are "833." So we should do the following calculation: 833 - 500 = 333.

Next we take 333 and divide it by 40. The first number of the answer is an "8." You should take that number and add "1" to it to get the month of the individual's birthday. So in this example 333/40 = 8.325 We take the first number of the answer which is "8" and +1 to get "9" which corresponds with the month of September. So Jane was born in the month of September in 1937.

Obviously this information is most beneficial if the applicant whose ID you are looking at (and whose application you are reviewing) is using someone else's DL or has "doctored" the DOB on the DL for some reason. I'm certainly glad that the bouncers at the bars at UW-Madison did not know this information back when I was in college or I might have had to spend more time at the movies or the library : )

More (and More) Legislation Introduced That Will Affect Landlords

I'm not sure if it is just me but it seems like more and more legislation is popping up that affects landlords. Maybe it is just because I am paying more attention to the rental industry then I used to -- kind of like buying a new jacket, bike, or car and then noticing from that point forward how many other people also are wearing that same jacket, riding that same bike, or driving that same car. Who knows?

Set forth below are 3 new pieces of legislation that will affect landlords and the rental housing industry in general:

1. 2009 Assembly Bill 543

This bill would bar any landlord from requiring certain payments and from making certain claims against a deceased tenant's estate. If passed this bill would prevent a landlord from making a claim against his/her deceased tenant's estate for any rent owed under the lease that becomes due after the deceased tenant's personal belongings have been removed and the keys have been returned to the landlord. Additionally the proposed bill precludes a landlord from requiring payment from a tenant or including a contrary provision in his/her lease in an attempt to circumvent the above.

Under current law, a landlord is able to file a claim against a deceased tenant's estate for rent due under the lease if the landlord was unable to re-rent the unit. I have to admit that after reading this bill for the first time I couldn't believe that this issue was worthy of having a new statute created addressing it, but I then remembered that over the last 6 months or so I have received at least 5 telephone calls from landlords that have had tenant's pass away during their lease and who had questions about what they could and could not do with respect to the rent owed under the lease - so it must be more common then I first thought.

2. 2009 Senate Bill 352

This proposed bill would require any plaintiff wishing to file a small claims lawsuit that has filed more than 20 small claims lawsuits in the prior year to pay an increased filing fee and would also limit the amount that that plaintiff can sue for to $5,000o or less, but at the same time the bill would also allow any plaintiff that has filed less than 20 small claims lawsuits in the prior year to pay a reduced filing fee and sue for up to $10,000.

Essentially, under this bill, if a plaintiff bringing a small claims action has filed 20 or fewer small claims actions (money judgment, attachment, garnishment, or to enforce a lien) within the prior 365 days, then the amount claimed may not exceed $10,000 and the plaintiff must pay a filing fee equal to 150% of the regular fee (or $33). If the plaintiff filing a small claims lawsuit has commenced more than 20 small claims lawsuits (money judgment, attachment, garnishment, or to enforce a lien) in the previous 365 days, then the bill would limit the amount that can be sued for to no more than $5,000 and requires the plaintiff to pay a filing fee equal to 200% of the regular filing fee (or $44).

The plaintiff must also include in their complaint a statement specifying how many small claims actions they have filed in the previous year. Additionally, the plaintiff will also have to file an Affidavit with the Clerk of Courts indicating how many lawsuits they have filed in the prior year. If a person misrepresents this information the court is required to award the opposing side $250 in damages and reasonable attorney's fees.

I'm not sure who came up with this idea or how they think it is fair to penalize a person for legally using the court system in the past, but the concept of equal access to the courts seems to have fallen by the wayside under this bill. Many large landlords and management companies that are attempting to collect debts from ex-tenants will be greatly affected by this bill. This proposed bill DOES NOT apply to eviction actions but it DOES apply to any small claims lawsuit that is not an eviction, such as money judgments, attachments, garnishments or lien enforcements.

3. 2009 Senate Bill 274

This bill would require a landlord to change the locks to a tenant's unit, or allow the tenant to do so, within 48 hours after being requested to do so by the tenant, in situations where the tenant can demonstrate that the are facing an imminent threat of physical harm from another individual. Under current law, a tenant is legally allowed to terminate their tenancy and vacate a rental unit (even if they are under a lease for a specific term that has not expired), if the tenant or their child can prove that they face imminent threat of serious physical harm from another. This new bill appears to allow the tenant the option of staying in the property if they wish and having their locks changed rather than leaving.

Specifically, the bill would require a landlord to change a tenant's locks, or give the tenant permission to do so, if the tenant requests the lock change and provides the landlord with a certified copy of one of the following documents: (1) an injunction order protecting the tenant or child from a person, (2) a condition of release ordering a person not to contact the tenant, (3) a criminal complaint alleging that a person sexually assualted or stalked the tenant or her child, or (4) a criminal complaint filed against a person as a result of an arrest for committing a domestic abuse offense against the tenant.

The only exception in which the landlord would not be required to change the locks (or allow the tenant to change the locks) would be if the individual that poses a serious risk of physical harm to the tenant is also a tenant in that same unit. If that is the case, then the landlord would not have to change the locks to the unit unless the tenant requesting the lock change can provide a certified copy of either (1) an injunction directing the other tenant to avoid the residence of the tenant who is requesting that the locks be changed, or (2) a condition of release ordering that the other tenant not contact the tenant requesting that the locks be changed.

If a tenant requests to have her locks changed and meets the other requirements of this proposed bill then the landlord will have 48 hours in which to change the locks. The tenant shall be resonsible for the cost of the lock change.

LLC's - PART 2: How To Insure They Protect You From Personal Liability

In my October 28, 2009 post entitled LLC's - Part 1: Why You Should Consider Using Them To Hold Your Rental Property, I indicated that in the near future I would write a second post on LLC's and include a link to the outline that I drafted and presented to the AASEW membership at the October monthly meeting. My portion of the presentation on LLC's focused on the following topics:

1. General information on business entities (corporations, partnerships etc.) and how they are distinct from an individual person.

2. How those general principles apply to LLC's.

3. What is "piercing the corporate veil" or "disregarding the corporate fiction" and what are the various tests and factors that courts look at when evaluating whether or not they should hold an individual liable for the actions or debts of the LLC under the "alter ego" theory.

You can read my outline here.

MILWAUKEE'S RESIDENTIAL RENTAL CERTIFICATE PROGRAM VOTE PUSHED BACK 1 CYCLE

The Common Council did not vote on the passing of the city's proposed Residential Rental Certificate Program earlier today as was planned. Instead the Comon Council voted 9-5 to hold the proposed ordinance for 1 cycle (1 month) for further review.

The proposed ordinance, which would require all rental property owners in the UWM-area and Lindsay Heights neighborhood on the north side of Milwaukee to pay an $85 fee per unit fee and submit to an internal inspection of in order to be able to rent out their property, passed out of the ZND committee last week by a vote of 3-2. The proposed ordinance was to be voted on by the Common Council earlier today.

In response to the setback of having the proposed ordinance pass out of committee the AASEW, who represents approximately 680 landlords in Milwaukee and the surrounding areas, retained legal counsel to review the ordinance for procedural and drafting errors. Errors were found and were communicated to the City Attorney. The AASEW wrote to the President of the Commom Council and the various council members and pointed out its many concerns with the ordinance as written.

Prior to a vote being taken as to whether or not the ordinance should be passed, a motion was made by Alderman Donovan to hold the ordinance for one cycle (1 month) to further review any problems and concerns. This motion passed by a vote of 9-5. It is assumed that the ordinance will be revised and then referred back to the ZND committee for an additional public hearing.

I will keep you advised as to what happens next.

For additional information on the proposed Residential Rental Certificate Program please refer to my earlier post.

Read Tom Daykin, of the Journal Sentinel, blog post about this change of events here.

LLC's - PART 1: Why You Should Consider Using Them To Hold Your Rental Property

The AASEW's October monthly membership meeting focused on the issue of LLC's and why you should consider using this business entity to hold your rental properties. Attorney Lydia Chartre of Petrie and Stocking S.C. spoke to the membership about several issues related to LLC's including:

- Why create an LLC?

- Steps to create an LLC

- Information that an attorney will need to assist you in creating an LLC

This meeting had the largest turnout of any AASEW membership meeting in the last 2 years -- we had more than 70 people. Both prior to the meeting and afterwords I received several telephone calls from people that wanted to attend the meeting but were unable to do so. Because of this I have decided to post Atty. Chartre's outline that was distributed to everyone in attendance at the meeting. While you missed a great presentation from my law partner, Lydia, at least you will have the "nuts and bolts" of her presentation.

You can find Lydia's outline here.

In the near future I will provide you with a copy of the outline that I distributed to the attendees at the October AASEW meeting on the topic of what formalities your LLC must follow in order to avoid having the "corporate veil" of the LLC pierced and possibly becoming personally liable for the debts or actions of the LLC.

Milwaukee's Residential Rental Certificate Program Is On It's Way To The Common Council

On Tuesday, October 27, 2009, Milwaukee's ZND (Zoning, Neighborhood and Development) committee voted 3-2 to send the proposed ordinance to the Common Council for a final vote. The proposed ordinance, referred to as the Residential Rental Certificate Program, would require all rental property owners in 2 targeted areas of the city to apply for a certificate in order to continue renting out their property. The cost would be $85 per unit and would require the landlord to allow a warrantless interior search/inspection of his/her property in order to obtain the certificate. To read more about the proposed ordinance you should read my prior post on the topic.

A 2 plus hour hearing was held at which time the Department of Neighborhood Services Commissioner Art Dahlberg explained his reasoning for initiating the program and outlined the basic tenets of the ordinance. Sponsors of the ordinance including Aldermen Kovac, Wade, and Davis, spoke in favor of the program and offered their reasons for supporting the ordinance.

A large crowd turned out for the hearing and as a result an overflow room with a live feed had to be opened to accomodate all of the people in attendence. The public was allowed to provide comments, concerns, and criticisms of the proposed program and approximately 20 individuals spoke out.

Landlords and tenants in opposition to the ordinance pointed out several issues including: (1) a "disqualifying violation" was not clearly defined and as such could easily lend itself to arbitrary and capricious decisions by an inspector, (2) an owner of a large multi-unit rental property could be required to pay several thousands of dollars in fees, (3) the fact that the concerns for which the ordinance was allegedly created could be addressed by enforcing existing laws, and (4) issues of additional costs to landlords in an already horrible economy.

Alderman Michael Murphy requested that Commisioner Dahlberg investigate the issue of a sliding fee scale for larger multi-unit facilities and indicated that if that issue was addressed he would vote in favor of the ordinance next week. Also in favor of the ordinance was Alderman Wade and Alderman Bauman. The chair of the committee, Alderman Witkowiak voted against the ordinance arguing that the timing of the ordinance was poor and that it should not be instituted during this difficult economy. Alderman Witkowiak also felt that without a clearer definition of a "disqualifying violation" and the issue of sliding fee scale for multi-unit properties not addressed in the ordinance that this program should not pass to the Council for a vote. Alderman Zielinski also voted against the ordianance but failed to speak during the entire hearing.

There will be no further public hearings prior to the Common Council's vote next week which makes communicating with your aldermen even more crucial at this juncture. As I mentioned previously, this ordinance has been "fast-tracked" through the legislative process and if passed should be up and running by the new year.

You can read Journal-Sentinal columnist Tom Daykin's blog on the hearing here.

Milwaukee County Eviction Court to Alter Court Times During Flu Season

A friend of mine who works in the courthouse sent me an email today which she asked that I pass along to my clients and friends in the rental industry. Apparently in an attempt to reduce crowding during the flu season Milwaukee Co. Eviction Court has decided to have certain plaintiffs, based on the spellling of their last name or company name, to appear on intial appearances at 3 pm rather than 2 pm.

Below is the email info I received:

TO ALL PLAINTIFFS in Small Claims eviction cases, effective 10/26/09

If you are a business whose name begins with A thru K or an individual whose last name begins with A thru K, your case will be scheduled in Room 400 at 2:00 p.m.

If you are a business whose name begins with L thru Z or an individual whose last name begins with L thru Z, your case will be scheduled in Room 400 at 3:00 p.m.

Hearing On Milwaukee's Residential Rental Certificate Program to be Held on October 27th at 10 am

A hearing on Milwaukee's proposed Residential Rental Certificate Program will be held before the Zoning and Development Committee on October 27, 2009 at 10 AM in room 301 of Milwaukee's CIty Hall.

It is at this hearing that people may speak in favor or against the proposed ordinance. The ZND committee will then decide whether or not the proposed ordinance should be referred to the common council for a vote by the alderpersons.

If you would like to read more about the proposed ordinance that will affect landlords in the UWM area and Lindsay Heights area on the north side of Milwaukee you should refer to my earlier post on the subject.

If you want to be heard. You need to be present at this hearing.

To determine your alderman and contact information go here.

City of Milwaukee's "Residential Rental Certificate Program" Is Unveiled

Well I have finally been able to get my hands on a preliminary copy of the city of Milwaukee's proposed mandatory rental inspection ordinance. The ordinance is sponsored by Alderman Kovac, Wade, Davis and Hines. The ordinance refers to the proposed program as a "Residential Rental Certificate" program. The program is really just a variation on "landlord licensing" and mandatorty rental inspection programs. I would encourage you to read the enitre proposed ordinance, but I have also set forth the key points below:

- This will be a 5 year pilot program.

- The targeted area includes the UWM area on the city's east side and the Lindsay Heights neighborhood on the city's north side. These areas were selected because the city believes the areas need to be monitored to prevent deterioration. Allegedly these two areas include older housing stock, have a high density of rental properties, have a higher percentage of complaints, and have high tenant turnover. The city feels that frequent inspections of the rental properties in these two areas are needed to maintain safe, decent, and sanitary living conditions.

- Every rental unit in the selected areas must apply for and receive a rental certificate before the owner is allowed to rent out the unit.

- The ordinance includes duplexes and larger multi-unit rental properties. Owner-occupied duplexes are excluded.

- The owner must also complete, sign and submit an application to the city that will include the owner's legal name, the address of the rental property, the owner's phone number, and the owner's date of birth.

- A fee of $85 must accompany each rental unit application.

- Prior to the city issuing a rental certificate the unit will be subject to an internal and external inspection by the Department of Neighborhood Services (D.N.S.).

- DNS will conduct the inspection within 60 days of receipt of the application.

- The owner must notify the tenant at least 2 days in advance of the inspection.

- A fee of $50 will be imposed if DNS is unable to gain access to the unit for inspection.

- If during the inspection DNS finds a "disqualifying violation" (defined as a condition that affects safe, decent and sanitary living conditions or other conditions that violate the city building code, building maintenance code or zoning code) the unit will be issued a 1 year certificate.

- Any violation identified during the inspection must be abated within a reasonable amount of time (to be determiend by DNS).

- If conditions are found that are determined to constitute an imminent danger to health and safety, DNS shall order the condition to be remedied and may limit or prohibit occupancy where approporiate.

- DNS shall reinspect the unit as necessary to determine if any "disqualifying violations" have been remedied. A reinspection fee may be charged.

- If no disqualifying violations are found the unit will be given a 4 year certificate.

- A temporary certificate can be given for up to 30 days if the disqualifying violations do not constitute a hazard to the occupants of the rental and if a plan to correct the violations is submitted and approved by DNS.

- After the certificate expires the owner will be required to renew the certificate and submit to another inspection and pay another $85 fee per unit.

- If after the issuance of a 4 year certificate, DNS determines learns that there is a building or zoning code violation, the 4 year certificate can be revoked and the city can choose to replace the 4 year certificate with a 1 year certificate.

- If at any time after the issuance of a 4 year certificate or a 1 year certificate, DNS determines that there are building or zoning code violations that are critical and constitute an unsafe or unfit condition, the city can revoke the certificate.

- Any violation identified after a certificate has been issued must be abated within a reasonable amount of time (to be determiend by DNS).

- Any person who purchases a rental unit in the targeted areas must apply for a rental certificate and pay the accompanying fee within 30 days of the purchase.

- Any person that sells a rental unit in the targeted areas must notify the purchasor of the property that a residential rental certificate is required by the city.

- An owner that fails to apply for a residential rental certificate will be fined $100 for the first infraction. If the owner fails to respond to a subsequent notices by the city the fine will increase to $150.

- Residential rental inspection fees will be charged against the owner's real estate and will be considered a "special charge."

If you would like to contact your alderman you can find contact information here.

WHY ARE THE "BAD LANDLORDS" THE ONLY ONES WE EVER HEAR ABOUT?

I was catching up on some long overdue blog reading this weekend and I came across a great blog post that I thought was very timely. I asked the author is I could re-post his thoughts and he agreed. The author of the post is Bill Gray who runs Rent Recovery Service, a company that assists landlords with collecting past due rent and damage charges from ex-tenants. I was fortunate enough to have met Bill this past September at the AASEW's Annual Landlord Tradeshow when Bill was gracious enough to fly to Milwaukee from Florida in order to present a seminar on collection issues to the attendees. Anyone that has met Bill knows that aside from being extremely knowledgable in the area of collections, he is also a great guy. If you are trying to collect past due rent and damage charges from an ex-tenant you should definitely give Bill a call at 212-561-5492 or email him at bill@rentrecoveryservice.com.

With the city of Milwaukee attempting to pass a version of "landlord licensing," with state politicians trying to short-circuit a landlord's ability to properly screen tenants, and with what I find to be a very prevalent negative attitude toward landlords in general - I thought Bill's post was timely.

Posted by Bill Gray on August 10, 2009

I recently read the following article by credit and collections expert and author, Michelle Dunn. Michelle is correct in her assertion that business owners are typically made out to be the bad guy. The same is true for landlords. When was the last time you heard about a landlord who lowered the rent for a good tenant who had hit bad times? Or the landlord who made sure a tenant, who is a single mother, had Christmas gifts for her children? You don’t hear these stories. The image of the evil “slumlord” is much more appealing to the media.

Are all landlords good? No they are not, just as a percentage of tenants are not good tenants. Go to YouTube and search for words such as “tenant, trashed, destroyed, damaged“, etc. and see the horrors some landlords face when a bad tenant destroys their rental unit. As you view these videos, imagine if you had invested thousands of dollars into a rental unit, and this was the result. Make sure you are not eating your dinner when you view these videos.

The 80 – 20 rule is most likely appropriate here. 80% of landlords and tenants are probably responsible people who try hard to do the right thing. Do the math. Assuming that most landlords own or manage many more than one rental unit, how many more “bad” tenants are there, than “bad” landlords. But again, we seldom hear about the bad tenants.

Landlords provide a valuable product and service. They usually borrow money to make an investment, then rent the apartment or home to someone they hope will care for their investment. People love to beat up on landlords. Think for a minute if landlords threw in the towel and got out of the business all together? Where would everyone live?

Here is Michelle’s blog post I referred to:

Why is the business Owner that got Stiffed the “Bad Guy”?

You hear it all the time, bill collectors are harassing customers that don’t pay.

You see it all the time, websites and news programs that help people use the law to “sneak out” of paying a bill they legitimately owe.

What does this say about small and large businesses everywhere?

That they are the bad guy if they try to collect the money that is owed to them for services rendered or products shipped?

Why are they the bad guy?

Isn’t the “bad guy” the guy who is trying to get out of paying?

Michelle Dunn

www.credit-and-collections.com/blog/

Email me your questions concerning tenant debt. I will try to help you.

Bill Gray

FREE SEMINAR ON LLC'S - WHY YOU NEED THEM AND HOW TO INSURE THEY PROTECT YOU FROM PERSONAL LIABILITY

Lydia Chartre and I will be presenting a free seminar at the AASEW's October monthly meeting on October 19, 2009 at 7 pm. The meeting will be held at the Best Western Midway Hotel which is located at 1005 S. Moorland Road in Brookfield.

Lydia and I will be speaking on LLC's and why you should consider using this form of business entity to hold your rental property and what you must do when handling your LLC to insure that your personal assets are protected.

Lydia will be discussing the nuts and bolts of LLC's including:

- Why you may want to form an LLC to hold your rental property

- The necessary steps to form an LLC

- Information that you (or an attorney) will need to form your LLC

I will speak on the topic of what formalities you will need to follow when handling your LLC to insure that your personal assets will be protected. While the general law is that an LLC -- just like a corporation -- is a separate and distinct entity from its individual members, there are instances where courts have allowed an injured party or a creditor to "pierce the corporate veil" or hold the individual personally liable for the actions and/or debts of the LLC.

Last summer I defended a client that was sued personally for the debt of his then defunct corporation. The creditor attempted to "pierce the corporate veil" and hold my client and his new corporation responsible for the debts of his prior company. I will draw from my research, arguments and the experience that I gained during this multi-day trial to explain what you must do in order to keep the shiled of your LLC and avoid anyone suing you personally for its actions or debts.

If you have never been to an AASEW meeting before -- or if you haven't been to one in awhile -- I would strongly encourage you to attend this seminar. It will be filled with lots of practical infromation. I hope to see you there.

MARYLAND ARMS CASE WILL BE REVIEWED BY WISCONSIN SUPREME COURT

In my May 28, 2009 post I wrote about the then recently published Wisconsin Court of Appeals case of Maryland Arms Limited Partnership v. Connell, 2009 WI App 87, __ Wis.2d __, 769 N.W.2d 145.

This was an important case because a divided Court of Appeals held that a tenant could not be held responsible for the damages that resulted after her hair dryer caused a fire which resulted in thousands of dollars of damage to her landlord's rental property.

A key fact in the case was that the landlord agreed that the tenant was not negligent in causing the fire becasue she had no prior knowledge of the hair dryer being faulty. Another key fact in the case was that the tenant's lease contained a provision that stated that the tenant would be responsible for all damages that were in any way caused by the acts of the tenant. The Court of Appeals held that such a lease provision was void.

The landlord in this case has petitioned the Supreme Court of Wisconsin to review the the case and the "Supremes" have agreed to hear the case. Oral arguments are to be held on January 6, 2010 and it is expected that a decision will be issued sometime in 2009-2010 term.

One of the main issues that the Wisconsin Supreme Court will have to decide is whether or not a landlord can contractually make a tenant liable for damage in a situation where the tenant is not negligent in causing the damage.

This will be an interesting case to watch and I will keep you updated as I learn more.

UPDATE ON AB-340 (CCAP BILL)

As many of you know a public hearing was held on AB340 - the proposed bill by Rep. Marlin Schneider that would restrict who can use CCAP and what information would be contained on CCAP -- at the State Capitol in Madison last week.

Several board members from the AASEW (Dave Ohrmundt and Richard Bishop) and the head of Milwaukee RING (Brian Fleming) attended the hearing to make sure that landlords' voices were heard. We appreciate you guys taking the time out of your busy schedules to attend.

A fellow landlord-tenant law blogger from the Wausau area (Dr. Rent a/k/a John Fischer) also attended the public hearing and even testified wrote a recent blog post on the bill and the hearing that gives you his views on the proposed bill and what his thoughts are regarding if it will succeed. Dr. Rent writes a great blog and if you enjoy my blog you should also sign up for his blog.

Arguments were presented both for and against the propsoed legislation. On a practical level I thought it was very telling the the director of state courts (who under the proposed bill would be in charge of registering CCAP users and monitoring their searches) felt that the cost and time involved would be a huge undertaking. It might have been a good idea for the bills' sponsors to have spoken with the director of state courts and attempted to get him on their side prior to the public hearing.

Two recent articles written about the hearing and AB340 in general were published. The Milwaukee Journal Sentinel wrote an article on the hearing and the Racine Journal Times also had a good piece on the proposed legislation. Columnist, Patrick McIlheran, of the Journal Sentinel also wrote a recent piece on Schneider's proposed CCAP bill.

The Wisconsin State Journal also published an editorial regarding AB-340.

I was also interviewed for an article by the Wisconsin Law Journal about the proposed CCAP legislation. This article does not focus on how AB340 will affect landlords but rather how it might affect lawyers ability to screen their own clients and related issues.

Newly Revised 5-Day Notice To Pay Rent or Vacate Now Available at Wisconsin Legal Blank

As many of you know I am the author of the set of Landlord-Tenant forms that are sold at Wisconsin Legal Blank Co., Inc. I am currently in the process of reviewing and updating all of the L-T forms as well as creating a few new ones. At this time however, I wanted to alert you that the revised 5-Day Notice to Pay Rent or Vacate is now available for sale at WLB.

Essentailly the revisions to the Notice include the following:

- I have added language that states that the tenant will still be in default and subject to eviction if they make only a partial payment and/or make a full payment after the 5 day cure period has elapsed. It is my hope that by adding this language it will better protect a landlord that accepts a partial payment or late payment from having their eviction lawsuit dismissed based on a legal theory called "waiver."

NOTE: The best way to avoid a "waiver" arguement is to not accept any partial payment or any payment that is made after the 5 day period has elapsed. Having said that, I am aware that it is very difficult for a landlord to turn away money that s/he is almost certain to never see again if the landlord is evicting a tenant. So if you decide that you want to keep the partial or late payment then the next best option to avoid the tenant prevailing on a "waiver" argument is to place the payment in escrow -- do not cash the check!! -- and send the tenant a letter --- which I refer to as a "No Waiver" letter --- which essentially says that the landlord has received the partial or late payment and that the money will be held in escrow until after the court has decided whether or not to grant the eviction. The 'No Waiver" letter should also state that the money will be appplied to any past due amounts owed after the eviction has been decided and that by holding the money in escrow the landlord is not waiving his/her right to continue with the eviction against the tenant and that it is the landlord's intent to proceed with the eviction and have the tenant evicted. The new language added that has been added to the revised 5-Day Notice now available at WLB has been added as a "safety net" should the landlord not follow one of the two options set forth above.

- I have referenced the applicable Wisconsin Statutes regarding 5 day notices.

- I have made a few other grammatical changes.

I will be sure and let you know when other updated landlord-tenant forms are available at WLB.

The Importance of Using Written Screening Criteria During The Tenant Selection Process

UPDATE - APRIL 15, 2016 ---- Please review my April 15, 2016 blog post on HUD's new guidance regarding the consideration of a rental applicant's criminal history in the screening process as it may impact or alter the information in this blog post.

Those of you that have attended one of my landlord-tenant law seminars or read my prior posts on screening tenants know that in my opinion the screening process is the single most important aspect of being a landlord. If done properly, the screening process can save a landlord from many headaches such as: having to evict a bad tenant, repairing your damaged rental property, dealing with other tenants complaining about your loud and disruptive tenant, and/or having your rental property declared to be a public nuisance due to the bad behavior of your tenant and his/her guests. By properly screening your tenants you will significantly reduce your exposure to the above situations.

One key aspect of the screening process is having and using written screening criteria. Screening criteria sets forth the minimum requirements that an individual must meet in order to be able to rent from you. Looking at it another way, screening criteria also sets forth what will cause an applicant to be denied rental from you.

Here is an example of written screening criteria. Please be aware that this screening criteria is pretty stringent. I am not saying that you should or should not use this criteria - you must determine what criteria works for you and that is based on many factors which I will not be addressing in this post. I am linking to this sample screening criteria so that you have some examples of permissable (and legal) criteria so that you can better understand this post.

You should think of your screening criteria as a checklist that you go through when reviewing each application. By utilizing screening criteria a landlord is reminded that s/he should be making a decision to rent to an individual based on objective reasons rather then subjective ones.

An objective reason to deny an applicant is something that is quatifiable and verifiable. Examples would include whether or not the applicant has ever been evicted before, whether their prior landlord would rent to them again, whether their gross monthly wages are at least 3 times the amount of your monthly rent. Subjective reasons cannot be verified and as such can lead to allegations of or actual instances of discrimination.

A subjective reasonson the other hand, cannot be quantified or verified. Examples of subjective reason for denying an applicant would be because you got a "bad feeling" when talking to them or you didn't feel like you "connected" with them. You should not be making a decision to rent to someone based on a subjective feeling; by doing so you may inadvertantly and unconsciously be discriminating against them.

You should have your screening criteria in place prior to taking your first application. Screening criteria should not be created as you go. Ideally you should spend some time thinking about what would cause you to deny an applicant and conversely what would cause you to rent to an applicant. Think of objective reasons such as: do they have a prior rental history, have they been employed at their current job for a period of time, do they make enough money that they can afford to pay the rent and still have extra money to live on, have they ever been evicted before, do they have prior money judgements against them, would their prior landlord rent to them again, have they been arrested and/or convicted of a crime. Think about what caused you to accept or reject your current tenants. This information will serve as the initial draft of your screening criteria.

Next, take a seasoned landlord that is familiar with discrimination/fair housing laws to lunch and ask him/her to review your draft criteria or hire an attorney that has experience with the fair housing laws to give you some feedback. You need to insure that your criteria is legal and does not violate any aws before you begin to use it.

Once you have your screening criteria in place, the next step is to insure that you apply it evenly and consistently. You should not make exceptions to your criteria. If your screening criteria says that an applicant will be denied rental if they have ever been evicted in the past -- and your applicant has a prior eviction judgment on their record -- then you should deny them. Once you start making exceptions to your screening criteria you lose the protection of the screening criteria because you are once again resorting to subjective decision making such as "I know that s/he was evicted last year but they seemed like such a nice and honest person that there must have been a misunderstanding." Does this sound familiar? Do not make exceptions.

Screening criteria does not have to be distributed to the applicants. Many larger landlords do give their criteria to potential renters as a form of self-screening with the intent that potential applicants will read the criteria and not submit an application if they do not meet the criteria - thus saving the landlord time and money of reviewing an application that will be denied in the end anyhow. Many other landlords choose not to give out their criteria but rather use it internally to assist in the screening process. Either option is legal and both options have pros and cons.

The most common complaint I receive from clients that have started using screening criteria is that they feel "bound" or "restrained" by the criteria. If that is how you feel when you start using it then you know that it is serving its purpose and you are doing things correctly. Screening criteria is supposed to restrain you -- it is designed to reign you in from making random, spur of the moment, subjective decisions.

You are able to change your screening criteria over time. For instance if one of your criteria requires an applicant to have a FICO score of at least 700 and you find that none of the applicants are meeting this requirement and your unit is vacant as a result, then you may need to lower the FICO score requirement. Nothing is wrong with changing your criteria but you cannot and should not be changing your criteria back and forth day to day, week to week or even month to month.

If you do change your screening criteria you should make a notation as to when you stopped using the old criteria and began using the new criteria. If you look at the sample screening criteria linked above you will see that there is a place on the second page of the document for you to indicate the date that you started using the criteria and the date when you stopped using that criteria. After you have stopped using a certain version of your screening criteria you should retain a copy for a minimum of 3 years but preferably for up to 7 years. The statute of limitations for most federal and state discrimination complaints is 3 years but there are some that are 7 years. So if a past applicant should decide to file a discrimination complaint against you 6 years and 11 months later you still want to have written proof of the criteria that you were using at the time of the alleged discriminatory conduct.

If you review an application and you determine that the applicant does not meet your croteria you should make a notation as to which criteria they did not meet and attach any supporting documentation. Then file it away with your other important records.

Screening criteria is also very helpful if you have more than one person screening potential applicants. For example, if you have multiple employees or have hired a management company to run your rental properties you can provide them with a copy of your screening criteria and tell them that you want them to utilize it. By having them follow your written screening criteria - which can serve as a checklist - you have a better chance that they will follow it.

Being a defendant/respondent in a federal or state discrimination investigation is about as much fun as a root canal. The investigative process is long, tiring, disruptive, and very intrusive. The investigators will interview your current tenants, your past tenants, current employees, past employees and anyone else that may be able to assist them in determining whether or not you engaged in a discriminatory act.

I have represented many landlords that have had both federal and state fair housing complaints lodged against them for discrimination arising out of the screening process. In all of those cases, the first question that the investigator asked me was whether or not my client was using written screening criteria. Unfortunately in every one of those cases I have always had to answer "no" to that question. If my clients had been utilizing written screening criteria I would have been able to forward the screening criteria to the investigator along with the documentation supporting which criteria the applicant did not meet and I would have had verifiable proof that the applicant was denied rental based on a non-discriminatory reason.

Because my past clients were not using written screening criteria it ended up being a case of "he said/she said." What I mean by that is my client is saying that s/he didn't discriminate against the applicant and the applicant is saying that the tenant did discriminate against them. There is no written proof one way or the other. It is a crap shoot. When you are in a "he said/she said" scenario you are in for a long, painful, and often expensive investigation.

Do yourself a favor -- if you are a landlord and are not currently using written screening criteria, use the information in this post to begin the process of putting together some criteria, have it reviewed, and begin using it during your screening process.

UPDATE - APRIL 15, 2016 ---- Please review my April 15, 2016 blog post on HUD's new guidance regarding the consideration of a rental applicant's criminal history in the screening process as it may impact or alter the information in this blog post.

Free Landlord-Tenant Law Seminar To Be Held On October 24, 2009

On Saturday October 24, 2009 from 9:30 am - 4:30 pm at the UWM Union Ballroom the UW-Milwaukee COAST and the City of Milwaukee Department of Neighborhood Services will be offering a free landlord-tenant law seminar to the public. This seminar is NOT restricted to just landlords and tenants in the UW-M area.

On behalf of the AASEW, I will be presenting a portion of the seminar on the topics of causes for eviction, notices terminating tenancy and the eviction process. Additional topics that will be covered include applicant screening, rental documents, management of rental properties, fair housing issues, DNS inspection process, and the role of law enforcement.

For more detailed information regarding who the presenters will be and how to register please refer to the attached flyer.

UPDATE ON MILWAUKEE'S PROPOSED MANDATORY RENTAL UNIT INSPECTION PROGRAM

A friend of mine was at a meeting this morning with the City of Milwaukee's Budget Director and learned some more information on the City's proposed mandatory rental unit inspection program.

First, the proposed ordinance is in the final stages of drafting and will be released in the near future.

Second, it will be a 5 year pilot program in the UWM area only.

Third, there will be a fee of $40 per landlord and a $35 per unit inspection fee.

Fourth, the pilot program must be approved by the city's common council each and every year in order for it to continue.

Fifth, if a rental unit passes its 1st inspection then the unit will receive a 4 year compliance certificate and will not need to be reinspected until the 4 years expires.

NOTE: MUCH OF THIS INFORMATION IN THIS POST IS NO LONGER ACCURATE - TO FIND OUT WHAT THE ACTUAL ORDINANCE STATES GO TO MY NEW POST ON THE SUBJECT.

One Person's Attempt To Spread The Word About Milwaukee's Proposed Mandatory Rental Inspection Program (a.k.a "Landlord Licensing")

A fellow attorney friend of mine forwarded a pamphlet/flyer/handout that he saw on the east side of Milwaukee. The UWM area is where the city plan's to begin its mandatory interior inspections of rental units (a.k.a "Landlord Licensing") program assuming that the ordinance is passed by the common council. The handout should definitely make tenants living in that area give some thought to the city's latest attempt to infringe upon their rights. The handout raises some good issues that I did not address in my earlier posts on this topic on September 10, 2009 and September 14, 2009.