Repeal of Expanded 1099 Requirements Signed Into Law

President Obama has officially signed H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” into law. This new law retroactively repeals prior 1099 reporting rules for landlords that were added by 2010 legislation (i.e. the Small Business Jobs Act of 2010 and the Patient Protection and Affordable Care Act -- better known as Obamacare).

Prior to the 2010 legislation, it was generally required that if you were a landlord that was engaged in the trade or business of landlording, that you were then required to report to the IRS via a 1099 form any payments totalling at least $600 to a single person. Typically, this involved paymetns for services. It should be noted that there were a number of exemptions from the law's reporting requirements notably including payments to corporations.

This essentailly meant that unless you were a full-time landlord, you did not need to comply with the reporting requirements as you were not in the trade or business of landlording.

Then in 201, two pieces of legislation were passed.

Under Obamacare, as of 2012, it was added that payments for goods more than $600 in a 12 month period needed to be reported as well as services. Obamacare further provided that, beginning in 2012, payments to non-tax-exempt corporations—which had previously been exempt from the reporting requirement—would be subject to information reporting.

Additionally, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider in the course of earning rental income would have to provide an information return to the service provider and the IRS. This would included all landlords, even if they worked full-time doing something other than landlording, and just rented out a duplex on the side.

After much backlash, the House introduced, H.R. 4, which repeals the provisions of Obamacare and the Small Business Jobs Act referenced above.

Essentially, with President Obama, signing into law H.R. 4, the reporting rules now revert back to what they were before the 2010 legislation (Obamacare and Small Business Jobs Act) was passed. We are now back to where we were before the government started monkeying around with things in the first place.

I guess if nothing else it gave me some topics to blog about : )

Pursuing a Money Judgement Against An Ex-Tenant . . . Should You Even Bother?

Once you have evicted a tenant and have your property returned to you, you are confronted with the decision of whether to invest the time and money to pursue the ex-tenant for money damages or not.

Some of my landlord clients always pursue the ex-tenant for money judgments. Of that segment of landlords, some will obtain their judgment, docket the judgment, and then sit on it hoping that the tenant will eventually pay it off (plus 12% interest) when they need to obtain a loan to purchase a home. Other landlords that I work with will not only obtain the judgment against the tenant but they will also proactively attempt to collect on that judgment via garnishment actions.

On the opposite end of the spectrum, are landlords that never seek a money judgment against a tenant as they consider it to be a waste of time and would merely result in "throwing good money after bad" because the tenant is not collectible. Still other landlords opt to try and collect from past tenants via alternative means such as using the service of Rent Recovery Services --- which allows you to report the ex-tenant's debt to the 3 credit bureaus without the need to obtain a judgment.

There are many options for a landlord to choose from when it comes to collecting against an ex-tenant. There is not one correct option for all situations and for all landlords. The correct option depends on many factors. I will sift through all of the information (or the lack thereof) that my client has about the tenant that could assist in the collection process. Sometimes a discussion regarding the client's financial situation is needed. Determining my client's ultimate goal is a must.

It is my personal opinion that time should be taken up front to discuss these matters with a client so that there are no false illusions going forward. Many landlords are astonished to learn that once they obtain a judgment that they must spend more time and money to collect on that judgment. It is important to remember that a judgment is merely a piece of paper saying that your ex-tenant owes you money, it does not mean that you will get paid. Collecting on a judgment is a whole different ballgame . . . . and a different blog post.

City of Waukesha's Free Landlord Training Program Tomorrow

For those of you who own and/or manage rental properties in the city of Waukesha or the surrounding areas, the City of Waukesha Police Department will be holding its Landlord Training Program tomorrow, April 13, 2011.

The program will be held at the Rotary Building which is located at 1150 Baxter Street (behind the Frame Park baseball diamond).

I will presenting a free seminar as part of the program starting at 12:30 pm. Specifically I will be speaking on two topics:

1. Causes for Eviction

2. Notices To Pay Rent or Teminate Tenancy

I hope to see you there.

T

CCAP Might Be Affected by Governor's Proposed Budget

Just when we thought CCAP would be left alone for awhile (after the dismantling of the CCAP Comittee) word comes of another potential attack on CCAP --- this time it is financial. The Wisconsin Law Journal recently published a post by Jason Smathers of the Associated Press indicating that court officials are concerned that CCAP may be affected if the governor's proposed budget breaks up its funding.

The Governor's proposed budget apparently would end a dedicated funding source for CCAP along with other state data management systems. Currently CCAP receives $6 out of every $21.50 charged as part of the Justice Information Systems Surcharge included in most court filing fees, says the recent article. Under the Governeor's proposed budget, all fee revenue would go to the Department of Administration, which could decide how to allocate the money, thus ending any dedicated monies to CCAP.

The article explains that if the budget as written is passed, that CCAP may not be updated as frequently as it currently is. Others, including the Chief Justice of the Wisconsin Supreme Court, worry that the changes could result in CCAP being jeopardized.

The article indicates that the spokesperson for CCAP, feels that CCAP would have to consolidate or cut back on non-essential services and that CCAP would be on a short-list of cuts, if the budget goes through as written. A spokesperson for the Governor says that a 10% cut is all that CCAP will face and that such a cut is the same type that all departments will face in order to balance the budget. According to the article, the CCAP spokeperson indicated that no decision has been made with regard to making cuts to CCAP but that as a result of the proposed budget, there are no new plans for any expansion to CCAP.

CCAP averages 2- 3 million hits per day according to the article -- with that type of popularity -- this is one user that hopes CCAP is left alone.

Make sure and read the full article here.

U.S. Senate Votes to Repeal New 1099 Reporting Requirements for Businesses and Landlords

The U.S. Senate has passed H.R. 4 which repeals the new 1099 reporting laws for businesses and rental property owners. The vote was 87-12. Since the House had already passed this bill -- and no modifications were made by the Senate -- the bill will now go to the President for his signature. While the President has indicated that he did not care for the "pay for" (offset) provisions that were included in H.R. 4, he has supported the repeal of the 1099 reporting requirements, so it is believed that he will sign the bill into law.

If you would like to read more about the new 1099 reporting requirements and see prior updates on this law please see my earlier and more exhaustive blog post on the topic.

CCAP Committee Disbands Without Any Major Changes Negatively Affecting Landlords

On March 9, 2011, State Rep. Ed Brooks, the newly appointed Chair of the State of Wisconsin's, Joint Legislative Council's Special Committee on Review of Records Access of Circuit Court Documents (CCAP Committee) sent a memo to all members of the committee indicating that he had decided not to reconvene the committee for any additional meetings.

For the most part, landlords came out unscathed by the reccomendations of the CCAP committee. While the committee considered many issues --- the most troublesome being limiting access to CCAP and removing records of evictions that resulted in a dismissal --- the only issue that the committee is pursuing has to do with the ability of person to seek expungement of certain criminal records under certain situations.

It should be noted that while the committee voted to require that all persons whose CCAP records were accessed during a rental application check or or credit check be notified of this, the chairman of the CCAP committee rejected that suggestion and chose not to include it in the draft bill that was produced as a result of the committee's work.

The proposed bill that was drafted as a result of the CCAP committee's reccomendation, proposed or clarifies the following:

1. Defines what is means for a court to expunge a court record (i.e. yes, this does include removing any reference to the crime from CCAP)

2. Clarifies that an expunged record may not be considered for employment or housing matters.

3. States that a person may petition the circuit court at any time to expunge the following:

- any court record of a person who was under the age of 25 at the time the crime was committeed and who was found guilty of a forfeiture, misdemeanor, and certain (lessor) felonies, that are punishable by up to 6 years in prison.

- any court record of a person charged with an offense punishable by a forfeiture, misdemeanor, or felony in which all charges were dismissed or for which the defendant was acquitted AND the court determines that the person will benefit by the expungement and that society will not be harmed by the expungement.

So if this proposed bill is eventually passed, an individual who was convicted of a crime, and who meets the criteria for expungement, could have his/her criminal record expunged including its removal from CCAP. What does this mean for a landlord conducting a background check on that specific rental applicant? It means several things:

1. It means that the landlord would find no record of the applicant having ever been charged and convicted of crime x, y or z (or charged and acquitted or charged and the later dismissal of the case).

2. It means that even if the landlord somehow learned of the conviction (or acquitall or dismissal) and th elater expungement, the landlord could not use that information when making a decision on whether or not to rent to that individual.

3. It means that a landlord is precluded from inquiring as to the existence of any expunged record from a rental applicant whether tht be on the rental application itself or verbally when talking to the applicant.

So while the proposed bill, if passed as written, will make screening certain rental applicants more problematic, considering all of the items/issues that were up for discussion by the CCAP committee, landlords remained relatively unscathed. Now let's hope that the Wisconsin Supreme Court stays out of the fray . . .

Free Landlord-Tenant Law Seminar In West Allis on March 31, 2011

I will be presenting a seminar for the West Allis Landlord Training Program on Thursday, March 31, 2011 from 6:30 pm - 8:30 pm. This seminar is sponsored by the West Allis Police Department and is open to the public at no cost.

I will be speaking on two specific areas:

1. Rental Documents -- specifically what rental documents you should be using with your tenants to protect yourself such as: Rental Agreement, Nonstandard Rental Provisions, Rules and Regulations, Rental Application, Pet Agreement, Lead-Based Paint Disclosure Forms, Carbon Monoxide Detector Forms, Check-In & Check-Out forms and more.

2. Screening Prospective Tenants -- this topic will include discussion of the federal and state Fair Housing laws, written screening criteria, credit checks, CCAP, and how to reject an applicant.

The Seminar will be held in the West Allis Municipal court room which is located at 11301 W. Lincoln Avenue in West Allis. Seating is limited so I would encourage anyone that is interested in attending to arrive early to insure a seat.

A detailed outline on the above topics will be given to each attendee and Wisconsin Legal Blank Co. will be on hand with their landlord tenant law forms available for purchase.

Hope to see everyone there.

Has WE Energies Ever Tried To Hold You Responsible for An Ex-Tenant's Utility Bill?

Fellow blogger and AASEW Board member, Tim Ballering, runs a very informative blog for landlords entitled "Just A Landlord." Tim has graciously allowed me to reproduce one of his most popular posts on the topic of what a landlord can do when WE Energies attempts to hold the landlord responsible for an ex-tenant's utility bill.

Please be sure and check out Tim's blog - there is some great stuff there.

_____________________________________________________________________________________

What the law is and how to deal with WE Energies.

A couple of years ago a bunch of owners came to me all with a similar problems. They had properties with separate utilities, yet WE Energies was attempting to collect utility bills from them that should not have been the owners' responsibility.

If only they knew the rules they would have less headaches. So I wrote a lengthy email on the subject and posted it on the ApartmentAssoc at YahooGroups.com email list. Out of my frustration with email formating this became the first post on this site back in February 2008.

This problem seemed to have diminished for a while, but judging from owners I have spoken to recently it is back... with vengeance. But if you know the rules and follow them you will never have to pay for a utility bill that is not yours.

The updated version of the original post on WE Energies billing practices:

Some days there seems to be no limit to attempts to cheat rental property owners out of their hard earned money. Tenants, City Hall and WE Energies all seem to stay awake nights figuring how to get your last few bucks.

In the past month, October 2009, many owners have again asked ‘What is my responsibility to pay for separately metered utilities when the tenant moves or doesn’t place the account in their name?’ and then go on to tell their tale of woe, describing how WE Energies is attempting to extract money from them for utilities they do not believe they owe.

One tells of having the electric at his own home disconnected over what should have been a tenant's bill. Another talks of how WE Energies has placed thousands of dollars in bills from a separately metered four family into her name. She feels that this will cause her to lose the building. Another talks of how these improper WE Energies bills has cost him 160 points on his credit report, going from excellent to very poor.

So where do we begin? This is a fairly complex area. Here is my attempt at a simplified overview. Remembering you should hire an attorney when you need one, and even when you think you don’t need one if there is a lot of money involved.

Let’s start with the applicable law, Wisconsin Statute §196.643 Owner responsibility for service to rental dwelling unit.

(1) Responsible party. When a customer terminates service to the customer's rental dwelling unit, a public utility shall make reasonable attempt to identify the party responsible for service to the rental dwelling unit after the customer's termination. If a responsible party cannot be identified, the public utility may give the owner written notice by regular or other mail of the public utility's intent to hold the owner responsible for service to the rental dwelling unit. The owner shall not be responsible for service if the public utility does not give the notice under this subsection or if, within 15 days after the date the notice is mailed, the owner notifies the public utility of the name of the party responsible for service to the rental dwelling unit or notifies the public utility that service to the rental dwelling unit should be terminated and affirms that service termination will not endanger human health or life or cause damage to property.

Seems pretty simple. In order to place a utility bill in your name the public utility, WE Energies in this case, MUST attempt to find out who is responsible for the service. If they can’t determine who is responsible and they want to place the account in your name they MUST send the property owner a letter AFTER the tenant’s termination of service date. That letter MUST give you 15 days to respond. Your response can be 1) you want the account in your name; 2) you can provide the public utility with the name of the party responsible for the bill; or 3) you can ask the utility to simply turn off the service. Do nothing within the 15 days and the bill is placed in your name.

Here’s some areas where WE Energies cuts corners and attempts to put bills in your name improperly:

• The 15-day letter is the trigger for billing an owner. Prior to sending the letter, however, “public utility shall make reasonable attempt to identify the party responsible for service to the rental dwelling unit after the customer's termination.” and only after the public utility can’t determine who is responsible may they send the letter.
• WE Energies typically sends the letter without first making any independent attempt to identify the responsible party. Therefor the letter is invalid for putting the bill in your name.
• WE Energies often sends the letter prior to the termination date of the tenant. The statute requires the process to begin "after the customer's termination." Here again this makes the letter invalid for putting the bill in your name. How can an owner determine if the power should be turned off or provide the name of the responsible party prior to the the current tenant leaving? You can’t. Many times the vacating tenant doesn’t leave on the date they should. Some holdover for a day, a week, a month or they simply change their mind about moving. Maybe the roomate who has the power in their name is moving and the other roommate is staying. Other times the letter comes more than 15 days prior to the current tenant’s termination date but by the time they do move you have a new tenant.
• WE Energies often calls you, rather than sending the letter, expecting an instant answer when you haven’t had ample time to assess the situation. You may not even know the tenant is vacating. A call is not a letter.Think about it in terms of our responsibility to send a deposit transmittal letter.. ‘but your Honor, I called them and told them I was keeping the deposit so I didn’t need to send the required letter.’ The same standard applies here.Remember no proper 15-day letter- no legitimate bill, even if they called.
• WE Energies sends you a bill a month, a year or more after the fact without ever sending the letter, expecting you to pay for utilities used prior to you receiving any notice from WE Energies. There can be no proper owner billing prior to the date the letter was sent to you.
• Another area WE Energies attempts to trick property owners into paying bills that are not theirs is by placing the bill in your personal name and attaching that bill to your home account while the property is owned by an LLC or other entity.The law only permits the bill to be placed in the name of the property owner.
• The WE reps will often tell you that they can’t place the bill to your new tenant unless you provide personal information on the tenant including their Social Security number. While you must provide their name and there is probably no problem providing their prior address, third party disclosure of credit information such as the tenant’s Social Security number is a violation of the federal Fair Credit and Collections Act. Penalties for FCRA violations are severe. WE Energies’ attorneys will admit they cannot require you to provide this information.
• Additionally WE Energies attempts to make it difficult for you to turn off the service by demanding that you meet the WE Energies service person who will arrive at the property between ‘8AM and noon’ on a Tuesday. While the Public Service Commission does require the public utility to assure that the unit is empty prior to disconnect, there is no requirement that you have to waste half a day to meet them.

However there are a couple of instances where you have to get the checkbook out and pay, even if it should not have been your bill.

• If WE Energies first attempted to identify the responsible party AFTER the termination date and then WE Energies sent the letter to the property owner, but you ignored it there is no defense to the bill.
• If your property does not have separate utilities. Let's say you have a single meter in a duplex and you want both tenants to pay half. You can do that if it is written into your rental agreement, but the bill MUST be in your name per Wisconsin Statute §196.643(2)

An area of disagreement is the definition of responsible party when the tenant vacates before the last day they are legally responsible for the unit.

• Many rental agreements hold the tenant contractually obligated to provide heat to the property until the last day they are liable for rent. That would appear to make the vacating tenant the responsible party until the last day they are legally liable for the unit. WE Energies take the position that the occupant’s responsibility ends the day they said they moved out, even if that date is weeks before their month to month tenancy would terminate or months before their yearly lease terminates.

The Ever Important Security Deposit Transmittal Letter (or "21 Day Letter")

Aside from evictions, issues regarding the failure to properly return a tenant's security deposit are, in my opinion, the single most litigated area in landlord-tenant law.

In Wisconsin, if a tenant has deposited a security deposit to his/her landlord as part of a residential tenancy, the landlord must comply with one of two options within 21 days after the tenant "surrenders" the landlord's rental unit:

1. Return the tenant's security deposit, or

2. Send the tenant a security deposit transmittal letter (which I refer to as a "21 day letter") explaining how the tenant's security deposit was applied.

Unfortunately too many landlords have gotten themselves into trouble when it comes to the issue of returning a tenant's security deposit. While there are many ways to screw up, most of the mistakes that landlords make regarding this topic fall into one of three categories.

• First, a landlord makes improper deductions from the tenant's security deposit.

• Second, the 21 day letter is sent late.

• Third, the 21 day letter is not sent at all.

Failure to abide by ATCP 134.06 of the Wisconsin Administrative Code — which deals with security deposits in residential tenancies — can result in the tenant being awarded double damages and attorneys fees.

A little over a year ago I wrote a post on the topic of how to draft a legal 21 day letter to your tenant. Due to the continued popularity of that post I thought it would be helpful to include a video clip from a seminar that I presentedawhile back on this important topic.

D.N.S.' Update on Milwaukee's R.R.I. Program In U.W.-Milwaukee Area

The City of Milwaukee Department of Neighborhood Services (DNS) recently spoke at a meeting on the east side of Milwaukee and provided an update of the Residential Rental Inspection (RRI) program which was instituted around UW-Milwaukee area and in the Lindsey Heights neighborhood. If you would like a refresher of what the RRI program is all about you should read my earlier blog posts on the issue.

Much of the information set forth below was taken from the notes of Pam Frautschi, President of the Eastside Milwaukee Community Council -- Thank You Pam.

David Krey, Enforcement Manager of DNS explained that the the RRI program applies to single-family, duplexes, triplexes and other rental unit properties in the UWM area between Hackett and the river and from Edgewood to Locust. Applicable rental properties were inspected inside and out in order to qualify for a rental certificate. If a rental proerty does not pass muster and obtain a rental certificate then the owner would not be allowed to rent the property to a tenant.

Inspections commenced on March 2010. A total of 622 properties have been inspected to date in the UWM area. Nearly 60% of the inspected properties received the 4 year rental certificate. The properties that were disqualified intially, but which later made the necessary repairs, received a 1 year rental certificate which commences this month.

Per DNS, the inspection fees covered the project program's espense. Since the majority of the inspections have been completed, DNS has reduced its RRI inspectors from 4 people down to 2 people.

Comparative numbers provided by Mr. Krey were as follows:

- 72 Orders to Correct were issued for 376 violations in the UWM RRI area in 2009

- 748 Orders to Correct were issued for 4654 code violation for the same area in 2010

So far in 2011, there are 95 "open" Orders to Correct, 56 of which are in litigation. 653 have been abated.

Since the RRI project started exterior complaints dropped 50% from 98 down to 41. Interior complaints dropped by 1/3 from 27 down to 19.

The primary zoning issue in the RRI area is "overcrowding" - which DNS feels is from too many occupants living in illegal rental units. Vacant properties in the area increased significantly. Graffitti complaints decreased. Garbage complaints increased from 129 to 193. Anonymous complaints or other complaints made through the alderman's office decreased by 50%.

DNS says that the RRI program increased property values and increased the quality of units rented.

During the Question and Answer portion of the meeting, Alderman Kovac, who represents the east side, stated that representatives from the Apartment Association that initially held strong opposition to RRI (that would be the Apartment Association of Southeastern Wisconsin or AASEW) gave it many compliments at last week's meeting of UWM landlords.

Blogger's comment: I am not going to comment on any of the above statements or data presented by Mr. Grey as I do not have access to any statistics to either agree or disagree with the alleged success of the RRI program in the UWM area.

However, with regard to Alderman Kovac's comments that representatives of the AASEW complimented the RRI program, I do have some thoughts. Being a member of the Board of Directors for the AASEW for the last 3 years and its current President, no board member of the AASEW has spoken to Alderman Kovac about the RRI program since before it was instituted. I received numerous telephone calls from Members of the AASEW that own property in the UWM RRI area and not one of the comments were in favor of the RRI program. In fact, most of the property owners that I spoke to indicated that -- just as was suspected from the outset -- DNS wrote up Orders to Correct for minor "ticky tack" violations rather then the major safety issues which DNS argued was the impetus for starting up the program.

I would be curious to know how many of the Orders to Correct that were issued pertained to major safety issues such as illegal attic bedrooms, faulty electrical wiring, dilapidated second-story porches etc etc.

I am also curious to learn which "representative of the Apartment Association" Alderman Kovac spoke to?

A De Novo Hearing Is A "Second Kick at the Cat"

Under Wisconsin law, a Court Commissioner cannot decide a contested eviction action -- that must be decided by a judge. However a court commissioner can preside over and decide a hearing on a landlord's 2nd and 3rd causes for action for money damages. Typically this includes claims for past due rent, physical damages to the rental property or holdover damages.

In Milwaukee County, due to the large number of cases, if a tenant diputes the landlord's claims for damages, the matter must first be heard by a Court Commissioner. The Court Commissioner will issue a determination based on the evidence presented. If either the landlord or the tenant does not agree with the decision of the Court Commissioner, either party has the aoutomatic right to request a de novo hearing before the circuit court judge.

De novo literally translates to "anew;" "afresh;" or "a second time."

A de novo hearing is essentially a "do over" -- the parties have the opportunity to present their evidence over again to the judge. They are not restricted to the evidence that they presented in the prior hearing before the court commissioner. New evidence can be presented or old evidence can be removed.

De novo hearings are often referred to incorrectly as "appeals." A de novo hearing is an opportunity to redo your case. An appeal is a review of a lower court's decision for error.

A de novo hearing is a "second kick at the cat," if you will.

NOTE: I currently own a cat. I have had cats as pets in the past. I love cats. By using the above phrase "a second kick at the cat" I am not suggesting or condoning the hurting of a cat. No cat's were harmed in the writing of this blog post.

Above is a video clip from a seminar that I presented last year about de novo hearings.

AASEW Cancels "Meet Your Legislators" Day Due To Protests In Madison

The Apartment Association of Southeastern Wisconsin (AASEW) Board of Directors decided today to cancel its very popular "Meet Your Legislators" Day in Madison which was planned for Wednesday, March 16, 2011.

The goal of "Meet Your Legislators" Day was to meet with several state politicians to voice the concerns of rental property owners with regard to our industry. Many of the politicians that we have spoken with recently indicated that they would not have time to meet with us due to the constant meetings and the protests at the State Capitol.

The AASEW was also concerned that even if meetings could be scheduled, it would be difficult to have the politicians full attention. Obviously those legislators that are actually appearing for work have their hands full with other important matters.

As such, the AASEW has regretfully, canceled the trip to Madison. It is our hope that we can reschedule the trip in the future once things settle down in Mad-Town.

Check back here or at www.apartmentassoc.org for any updates.

I apologize for the inconvenience that this may have caused those members that had already registered for the event.

New Rule In Milwaukee County Eviction Court Will Limit The Number of New Evictions to 80 Per Day

In an effort to eliminate the congestion in eviction court, Milwaukee County has imposed a limit of 80 new eviction cases per day. In the past there have been days in which over 300 new eviction cases were scheduled to be heard in the same afternoon, which often became unmanageble.

This new limit only applies to new case filings for eviction cases (the 1st cause of action) for return of the property. This new limit does not include evidentiary hearings, adjourned matters, or return dates for 2nd and 3rd causes of actions (for money damages).

I was informed that the Clerk of Courts will be keeping a running tally of eviction cases scheduled for each return date/initial appearance. Once that tally reaches 80, no more cases will be allowed to be filed for that same return date.

While I understand the reasoning for this new policy, I do have some concerns. I agree that eviction court can become unmanageable due to the high volume of cases. Us "regulars" to eviction court have had to spend much of our lives sitting and waiting in good ol' room 400 of the Milwaukee County Courthouse due to the high volume. Despite that I have always had my cases completed before 5 pm.

I work for several clients that have a high volume of evictions each month. One client in particular easily has 40 evictions per month and has topped out at 66 evictions on more than one occassion. In order to keep costs down for such clients I schedule all of that client's evictions to be heard on the same day. This limits the amount of fees that they client has to pay me and allows them to only spend one day per month in court.

This new policy may prevent that client, and other landlords similarily situated, from having all of their cases heard on the same day --- thus increasing their costs and encroaching on their valuable time. Let's face it evicting a tenant is a a money-loser to a landlord. It is a necessary evil that they would like to keep to a minimum if at all possible.

Another foreseeable issue would be the landlord that has a smaller number of evictions each month -- say 10 -- who wants to have them all heard on one day in eviction court. What will happen when s/he goes to file the evictions and is told that there are only 3 spots left for evictions on the day s/he wanted to appear in court? That landlord weill either have to scheduled his/her 7 remaining evictions on a different day or choose to postpone all 10 evictions to another day in order to have them all heard at once. The former option wil require the landlord to spend 2 days in eviction court. the latter option will result in a non-paying tenant having additional time to live rent free. Either option causes the landlord money.

So while I understand the motivation for this new rule I am not sure that it will benefit Milwaukee County landlords. We will have to wait and see.

5 Day Notice Terminating Tenancy for Drug or Gang Nuisance In Wisconsin

I thought I would try something new with this blog post. I've embedded a video clip from a seminar that I have given in the past. Let me know what you think.

This clip focuses on a very specific -- and often misunderstood -- type of 5 day notice in Wisconsin called a 5 Day Notice for gang and/or drug nuisance.

There are only very specific instances in which a landlord is legally allowed to serve a tenant with a 5 Day Notice for Drug/Gang Nuisance --- the video clip above explains when this special type of notice can be used.

A 5 Day Notices for Drug /Gang nuisance does not allow the tenant the ability to cure the breach. Gang/Drug nuisance notices are the only 5 day notice in Wisconsin that does not allow the tenant the opportunity to cure the breach.

Click here for a printable table that summarizes the various types of notices that a residential landlord in Wisconsin can serve on his tenant.

If you need more information on how to serve a notice on your tenant, including the 5 Day Notice for Drug/Gang Nuisance, you should refer to my earlier post on that topic.

If you would like to learn more about landlord-tenant law please consider attending Landlord Boot Camp which is sponsored by the Apartment Association of Southeastern Wisconsin, Inc. I will presenting this all-day seminar on Saturday, February 26, 2011 from 8:30 am - 5:30 pm. Contact Paulette at 414-276-7378 or paulette@apartmentassoc.org to register.

U.S. Senate Repeals A Second New 1099 Reporting Law That Would Have Greatly Affected Landlords

About a week ago I blogged about a new federal law that will require landlords to issue 1099's to any individual or business that provides the landlord with more than $600 in services in any 12 month period. While this new law isn't going away anytime soon, another new federal 1099 reporting law has fortunately been repealed.

Included in the new health care reform law known as the Patient Protection and Affordable Care Act (more commonly referred to as "Obamacare"), was a provision that would have required landlords (and other small businesses) to report to the IRS any purchases of goods over $600 per year from any other business or individual.

Under this law, which would have commenced in 2012, a landlord would have been required to issue 1099's to Home Depot and Menard's if the landlord purchased more than $600 in goods from either of these stores. A landlord would have also been required to issue 1099's to the municipal water department and WE Energies --- since water and electricity are considered to be "goods." The additional paperwork required of landlords under this new law would have cleared several rain forests.

Fortunately, the U.S. Senate -- with broad bipartisan support -- approved an amendment on February 2nd, 2011 to repeal the expanded 1099 information reporting requirements contained in the health care reform law.

So while a landlord will still be required to 1099 business and individuals that supply more than $600 in services within a 12 month period, landlords will no longer be required to 1099 a business or individual that supplied more than $600 in goods in that same 12 month period.

New 1099 Law Will Greatly Affect Landlords In 2011

A new federal will greatly affect how landlords do business in 2011.

In September 2010, a small provision affecting landlord was tucked into the Small Business Jobs Act of 2010, which has now become a subject of concern to many of us. Not only will this new law create a lot of additional paperwork for landlords, but it may open up Pandora’s Box should you be audited.

The new law requires all people who own rental property to issue a form 1099 to any service provider that is paid more than $600 per year starting as of January 1, 2011. The 1099 would have to be issued to the service provider and to the IRS.

Prior to this new law being passed, only landlords whose real estate activities were considered to be a "trade or business" had to issue 1099's to service providers. Now, even if you own only one duplex or a single-family rental property, and continue to maintain a full-time job doing something other than landlording, you will need to comply with this new law.

Landlords will now be required to obtain certain information from their vendors/contractor, such as their name, address, and social security number or tax identification number. You will also need to keep track of the amount of money that you pay the vendor/contractor over the course of the year. If you pay them more than $600 within the tax year then you must reflect that income on a 1099.

Under this law, landlords will need to issue a 1099 to most all contractors/vendors regardless of whether they are a corporate entity or an individual. This will include handymen, plumbers, carpet cleaners, electricians, painters, gardeners, landscapers, accountants, lawyers etc. etc.

If you give one of your current tenants a discount on rent for looking after your rental property, shoveling snow in the winter, and mowing the lawn in the summer, and that discount adds up to $600 or more over the course of the year, you will need to 1099 them as well. Basically you will need to issue a 1099 to all service providers who you pay $600 or more within a year and who are not employed by you and already receiving a W2.

The proposed penalty will be $100 per instance and possibly higher if the Feds believe that you intentionally failed to comply with the law. You could also lose the ability to deduct the payments to the service provider from your taxes, if you do not have a matching 1099.

As my friend and fellow AASEW board member Tim Ballering, so accurately pointed out, this new law has much deeper consequences than a $100 fine for failing to issue a 1099 to your handyman.

If you submit a deduction on your taxes without a matching 1099 you have just tipped off the IRS or your state taxing authority, and increased the possibility of being audited. Additionally, once you file a 1099 for each service provider that did work on your rental properties — just think how many 1099 this could potentially be — the Feds may very well look at all of that new paperwork and wonder if some of those so called independent contractors shouldn’t more properly be classified as a statutory employees instead.

Essentially, all of the 1099's that you will be required to file may now alert the IRS and the Wisconsin Department of Revenue to investigate whether or not these contractors should be reclassified as "employees." If such a reclassification would happen, a landlord could be placed in a very painful and expensive predicament. Fines can be as large as $5,000 per employee. You would also be required to pay both the employer and employee’s taxes (that should have been withheld had the contractor been properly classified as an employee), penalties, and interest. The IRS has indicated that they expect to collect an additional $7 billion per year as a result of this provision.

Not only can improperly classifying an employee as a contractor involve the IRS or Wisconsin Department of Revenue, but it could also provoke other government entities to investigate the independent contractor vs. employee issue – think unemployment compensation and worker’s compensation insurance.

While the tests for whether or not someone is an employee for purposes of UC, WC and tax purposes are slightly different, there are commonalities. If you are paying the service provider by the hour, if you provide them with supplies, if you provide them with tools, if you control how and when they do the work – there is a strong likelihood that they are statutory employees and you should have been doing withholding, and paying both unemployment insurance and workers compensation insurance.

So not only will this new law result in a lot of additional paperwork for landlords, it could put many of you in a position to lose everything that you have worked so hard to build. I would strongly recommend that all landlords take the time and effort to determine if they are improperly classifying an employee as an independent contractor. Any money that you think you are saving up front by avoiding the proper withholdings will be greatly overshadowed by the back taxes, fines, interest, and potential loss of your business, if the government later determines that your classification was wrong.

2/22/11 - UPDATE: On February 17, 2011, the House Ways and Means Committee, by a vote of 21-15, approved H.R. 705, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011. Among other things, H.R.705 seeks to repeal IRS Code section 6041(h), which was added by the Small Business Jobs Act of 2010, and which treats recipients of rental income from real estate (i.e. landlords) as engaged in the trade or business of renting property for information reporting purposes starting in 2011.

So this new 1099 law may still be repealed. Stay tuned . . .

3/8/11 -- UPDATE

On March 3, 2011, the House approved a repeal of the expanded 1099 information reporting requirements by a vote of 314-112. The bill, called the Small Business Paperwork Mandate Elimination Acot of 2011 (H.R. 4) would repeal the 1099 provisions of both the Affordable Care Act ("Obamacare") and the Small Business Job Act which required business -- including rental property owners -- to file a 1099 with the IRS reporting any purchases of services or goods over $600 per year.

The rub is that the new bill attempts to pay for the alleged costs of the repeal by requiring people who had received tax credits to pay for health insurance under the health care reform bill to repay the subsidies if they end up earning too much during the year to qualify. Seventy-six Democrats in the House opposed H.R. 4 because of this offset provision.

Apparently everyone -- Republicans and Democrats alike -- favor the repeal of the new 1099 laws, now it is just a matter of finding a way to pay for the repeal that everyone can live with.

4/7/11 -- UPDATE

The U.S. Senate has passed H.R. 4 which repeals the new 1099 reporting laws for businesses and rental property owners. The vote was 87-12. Since the House had already passed this bill -- and no modifications were made by the Senate -- the bill will now go to the President for his signature. While the President has indicated that he did not care for the "pay for" (offset) provisions that were included in H.R. 4, he has supported the repeal of the 1099 reporting requirements, so it is believed that he will sign the bill into law.

4/18/11 - UPDATE

President Obama signed H.R. 4 into law today. So all new 1099 reporting requirements for landlords are gone. The law now goes back to what it was prior to the 2010 legislation (Small Business Jobs Act and Obamacare). For more detail refer to my 4/18 post on the topic.

Don't Miss Landlord Boot Camp on February 26th!

The Apartment Association of Southeastern Wisconsin's (AASEW) will be offering its third annual Landlord Boot Camp on Saturday, February 26, 2011 from 8:30 am - 5:30 pm. Learn everything that you need to know about Landlord-Tenant law in Wisconsin at this all-day seminar.

Yours truly will be the presenter and I will be addressing the following topics:

- Screening Rental Applicants

- Written Screening Criteria

- Fair Housing (Discrimination) law

- Rental Documents (Rental Agreements, Nonstandard Rental Provisions, Rules & Regulations, Pet Agreements . . .)

- Notices Terminating Tenancy

- Causes for Eviction

- ATCP 134

- Security deposit transmittal letters ("21 day letters")

- The judicial eviction process

- Abandoned tenant property

- Collections . .. . and much much more.

You can view a detailed outline of the course here.

Cost to attend the seminar will be $159 for AASEW members and $249 for non-members. All attendees will receive a manual that includes over 100 pages of outlines, case law, relevant statutes and regulations, and templates to assist you with managing your rental properties.

The seminar will be held at the Clarion Hotel located at 5311 S. Howell Avenue, Milwaukee, WI 53207.

Last year's AASEW Landlord Boot Camp was filled to capacity and we even had to turn a few people away. So call early to reserve your spot.

Here are two comments from attendees at last year's Boot Camp:

"I really enjoyed the class. The course materials were very helpful. The location was very convenient. I learned a lot about screening and evictions. I would highly recommend the course. It should be taught to all landlords. Thanks" - Lisa Wolff

"We have owned our rental properties for over ten years and in January of 2009 we decided to join the AASEW. We jumped right in by signing up for the Landlord Boot Camp. We both learned so much and have had the opportunity to utilize so much of what we learned already. Tristan is an excellent teacher and the included manual is a wonderful resource." - Steve and Kathy Kinnamon, Woodcreek Apartments, LLC.

Remember that "landlording" is a business --- so take the time to educate yourself on how to better manage your business.

Contact Paulette Vildberg, Executive Director of AASEW, at (414) 276-7378 or paulette@apartmentassoc.org today to reserve your spot.

New Carbon Monoxide Detector Notice Forms Available at Wisconsin Legal Blank

As I mentioned in my previous post, as of February 1, 2011 a new Wisconsin law requiring owners of single family and two-family properties throughout Wisconsin (including owner-occupied properties) went into effect.

In light of this new law, I have drafted a new Carbon Monoxide Detector Notice form that landlords can give to their tenant's that explains the new law and provides both the tenant and the landlord with notice as to what their respective responsibilities are under the new law. This new form is now available for purchase at Wisconsin Legal Blank Company, Inc.

I have also renamed prior carbon monoxide detector notice form for multi-unit properties which has been available since April of 2010,and is also sold at Wisconsin Legal Blank.

The new form addressing the new law is entitled "Carbon Monoxide Detector Notice: Single and Two-Family Dwellings." The older form for multi-unit buildings has been renamed "Carbon Monoxide Detector Notice: Multi-Unit Properties."

Notices Available To Landlords In Residential Tenancies

There are several types of notices that a landlord can serve on a tenant when a landlord wishes to terminate the tenancy or when a tenant commits a breach of their residential rental agreement. Most of these notices can be used in both periodic tenancies -- like a month to month -- and a lease for term -- like a 12 month lease -- but under different situations. But there are some notices that can only be used in a periodic tenancy and others that can only be used in term leases.

In an effort to clarify under what circumstances you can use each notice I have put together this table for your reference.

	LEASE FOR TERM (i.e. 1 year lease or less)	PERIODIC TENANCY (i.e. month to month)
5 Day Notice To Pay Rent or Vacate	Yes (Sec. 704.17(2)(a), Wis. Stats.	Yes (Sec. 704.17(1)(a), Wis. Stats.)
14 Day Notice Terminating Tenancy For Failure To Pay Rent	Yes but only if tenant served with 5 Day Notice To Pay Rent in previous 12 months (Sec. 704.17(2)(a), Wis. Stats.)	Yes (Sec. 704.17(1)(a), Wis. Stats.)
5 Day Notice To Correct Breach (other than non-payment of rent)or Vacate	Yes (Sec. 704.17(2)(b), Wis. Stats.)	No
14 Day Notice Terminating Tenancy for Breach (other than non-payment of rent)	Yes but only if tenant served with 5 Day Notice To Correct Breach in previous 12 months (Sec. 704.17(2)(b), Wis. Stats.)	Yes (Sec. 704.17(1)(b), Wis. Stats.)
5 Day Notice Terminating Tenancy for Drug or Gang Nuisance	Yes (Sec. 704.17(2)(c), Wis. Stats.)	Yes (Sec. 704.17(1)(c), Wis. Stats.)
28 Day Notice	No	Yes (Sec. 704.19, Wis. Stats.)

NOTE: I have chosen not to include a 30 day notice which must be used in leases for more than 1 year in most situations as residential leases greater than 1 year are infrenquently used.

IF YOU WOULD LIKE TO PRINT OUT A COPY OF THIS SUMMARY JUST CLICK HERE.

To "Walkthrough" or Not To "Walkthrough" That Is The Question

At the end of a tenancy a tenant or a landlord often requests a walkthrough of the rental unit prior to turning in the keys and delivering possession of the unit back to the landlord. A walkthrough is just that --- the tenant and the landlord walk through the rental unit and make observations of the condition of the unit. It is at this time that a landlord may point out damage to the rental that occurred during the tenancy and which the tenant will be held responsible for. A landlord might also note if the tenant did not adequately clean the unit or some of the appliances (typically this is the stove and/or refrigerator) and indicate that the tenant's security deposit will be deducted accordingly.

When I first began working with landlords over fifteen years ago, I often encouraged them to conduct walkthroughs with their tenants. I would recommend that they conduct the walkthrough a few hours before the lease termination date or the end of the tenancy. That way, if damages were identified, or areas were not cleaned properly, the tenant would have time to go back and make the repairs or better clean the area. My reasoning was that this was a win-win situation for both the landlord and the tenant. The tenant could go back and fix things thus insuring that they received their security deposit back and the landlord would not have to spend time or money repairing damage or cleaning the unit and could thus turn the unit over more quickly.

Over the years, I have made a complete 180 degree turn on the issue of walkthroughs. I no longer recommend that my landlord clients do walkthroughs with their tenants -- or at a minimum I point out some of the drawbacks of the walkthrough.

It is important to note that conducting a walkthrough with a tenant prior to their vacating is not required. I am not aware of any federal, state or municipal law that requires a landlord to conduct a walkthrough with his/her tenant. I am aware that many a tenant will demand a walkthrough with their landlord. Just because one is asked for - or even demanded - does not mean that the landlord must agree to it. Nothing is wrong with telling a tenant to drop off their keys at the office and then after are long gone checking out the condition of the apartment. In fact this is what I often reccomend that landlords do these days.

My primary reason for no longer recommending that landlords conduct walkthroughs with their departing tenants has to do with the pressure of the moment. I guess a secondary factor is that more and more tenants are unpredictable these days. Let me explain . . .

The main motivation for a tenant during a walkthrough is to determine what amount of their security deposit they will be getting back from their landlord. The tenant has already removed their belongings (at least hopefully), done any repairs that they are willing to do, and done any cleaning that they think is necessary. The tenant's mindset is that they are basically "outta here" and at least mentally, they have moved onto bigger and better pastures -- whether that be a new home or a different apartment. The tenant has no interest in getting sweaty by engaging in additional cleaning or having to go purchase some more screws or nails or putty to make a repair.

Because of this mindset, a tenant is not interested in being told by their soon to be ex-landlord that they didn't clean well enough or that they will have to pay for damaging the rental unit. Instead, the tenant is ready to argue, scratch, and claw, to protect what they feel is theirs -- the security deposit. Any attempt by the landlord to hinder the return of "their" money is typically not well-taken.

So what ends up happening during many of these walkthroughs is the landlord and tenant have an argument. I recall one client that informed me she was physically attacked by a tenant during a walkthrough. Another landlord that I know was verbally threatened when the tenant was told at the conclusion of a walkthrough that x, y and z would be deducted from their security deposit.

No landlord is interested in a confrontation with their tenant -- especially not a soon to be ex-tenant. We are not paid enough to put ourselves in situations. Even more common than physical attacks and verbal threats, is the scenario in which the landlord just wants to get the walkthrough over with. All of you know what I am talking about -- you quickly peruse the unit, with the tenant looking over your back, and just to avoid confrontation, or because you feel intimidated by the moment (or the tenant in some cases), or because it is human nature (for most of us) to shun an uncomfortable situation, you tell the tenant that everything looks good and sign off on the check-in/check-out sheet. Only later, after the pressure of the moment has subsided and the tenant is no longer breathing down your neck, you realize that you really should have charged the tenant for damage to this or failure to clean that.

At that point, it is a little too late to change your mind however, at least from a legal standpoint. You have already told the tenant that everything looks good and you have already signed off on the check-out form. Now, you decide that you want to withhold some money from the tenant's security deposit to repair this or clean that. The tenant receives his security deposit itemization letter from you (within 21 days after vacating) and is surprised and upset to see that a portion of his/her deposit has been withheld.

I have seen this scenario play out time and time again. The tenant, who is now upset as they feel they were lied to, decides to sue the landlord for improper deductions from their security deposit and seeks double damages pursuant to ATCP 134 and sec. 100.20(2) , Wis. Stats. and their actual attorney's fees to be paid by the landlord. The landlord is now stuck taking time out of their day to appear in court to defend against this lawsuit or to pay a lawyer to defend them in court.

I recall a past client who ended up in exactly this situation. A walkthrough was conducted with the tenants. I asked my client to look at the check-out form that she used. I saw that the form said that everything was in "good" condition and was signed by my client and both tenants. I also noted that scribbled across the top of the check-out form were the words "under protest." I asked my client who wrote those words. She replied, that she did. I asked her when she wrote them. She said that she wrote them about 1 week after the walkthrough had taken place -- so obviously the check-out form that the tenants were given did not contain these words. I then asked my client what the heck she meant by "under protest." I was told that my client felt intimidated and threatened by the tenants during the walkthrough and therefore she didn't really mean that the unit was returned in "good" condition.

I'm sure you can imagine all of the legal challenges that this would create had this actually gone to trial. Earlier in my representation of the client and prior to the tenants vacating, I had told her that she was not required to do a walkthrough with her tenants. After I finished looking at the check-out form, asking my questions, and listening to my client's answers, I asked her why she had put herself in such a precarious situation -- one in which she felt scared and intimidated -- especially when she was not legally required to do so? My client didn't provide me with an answer.

FYI, I totally believed that my client felt threatened during the walkthrough --- she was a much older lady, both tenants had criminal records including battery of one another, one of the tenants had issues with alcohol and the other with drugs, and one of the tenants had physically attacked another individual in front of my client earlier in the tenancy. I had also observed the tenants "act up" in court during an earlier court hearing. These tenants were not the type of people that understood the word "reasonable" or had even heard the word "rational" for that matter.

But I digress. The point of the story is that my client never should have put herself in that situation in the first place. She could have waited until the tenants had vacated and conducted a thorough examination of the unit at her leisure and with no one breathing down her back.

Situations like the above, have caused me to re-think my advice to my landlord clients about doing walkthroughs with their tenants. There really is no reason to put yourself in that type of pressure situation if you do not want to.

I'm interested in learning what your thoughts are regarding walkthroughs? Do you conduct them? If so, why? If not, why? What are some interesting (funny, scary, disgusting) experiences that you have encountered during a walkthrough?