Archive for June, 2009

CCAP: SCREENING TOOL UNDER ATTACK, AGAIN!

Jun 25

Posted by Tristan R. Pettit, Esq. in CCAP, Rep. Marlin Schneider, Screening Tenants | 4 Comments

I have had the opportunity to review the newly proposed legislation, authored by State. Representative Marlin Schneider (Wisconsin Rapids), that will affect landlords’ use of CCAP when screening rental applicants.  This legislation has not yet been officially introduced so there is no link to it available on the web.  Currently Rep. Schneider is sending it around attempting to find others who are willing to co-sponsor it with him.

First, the bill would require that no information can be added to CCAP until after there is a finding of guilt in a criminal matter, finding of liability in a civil matter, an order for eviction in an eviction action, or the issuance of a restraining order or injunction.

If this legislation becomes law, landlords will be put at a huge disadvantage during the screening process. If the applicant is currently being evicted by his/her landlord that information would not be displayed on CCAP. I personally feel that th most important piece of information that I want to know about somebody that is applying to rent from me is if they are currently being evicted. The time that it takes to obtain a judgment of eviction often takes up to 1 month or more – as you need to wait for the 5 or 14 day notice to expire, then it takes approximately 2 weeks before you can get into court for the initial appearance, and then if the tenant contests the eviction the trial could be scheduled out as far as 1 week from the date of the initial appearance – and that does not even account for the court time (or backlog) to enter the information into CCAP.

The same would apply to collection lawsuits. If the tenant is currently being sued by his/her landlord for damage to the rental property (not part of an eviction action) or any other person or business that is owed money by the tenant, this information would not show up on CCAP until after a judgment was rendered. Collection lawsuits (even in the small claims division) can easily take 6 months or more to come to a conclusion.

Most of us review an application, complete a background search, and make a decision to rent to an applicant in a few days to 1 week. In fact, the regulations regarding earnest money (ATCP 134.05) require a landlord to make that decision by the end of the 3rd business day or else they must return the earnest money to the applicant. So if this law is passed landlords will not be privy to important information that is needed in order to make an intelligent decision as to whether an applicant should become a tenant. Seeing no current eviction or lawsuits pending against the applicant, a landlord may accept the applicant and enter into a rental agreement with them only to find out a few weeks or months later that their new tenant was evicted or sued by their prior landlord.

Second, the new bill also will require landlords to pay an annual fee of $10 to use CCAP. This fee would not be charged to judges, attorneys, court personnel, law enforcement personnel, and journalists. Even more troublesome however is that the Director of State Courts would also be required to register all users of CCAP and also record any and all searches that they perform using CCAP. So there would be a record of what searches you performed on CCAP that could possibly be used against you if it was determined that you discriminated against an applicant (see the paragraph below for such a scenario).

Third, this bill would also require that any landlord that uses CCAP as part of their background search on an applicant, must tell the applicant, if their application is denied, that CCAP was used in part in making the decision to deny them. Failure to inform the applicant of this may cause the landlord to be fined $1,000. Remember the requirement that the searches of all CCAP users be recorded that I mentioned in the prior paragraph? Maybe that same search record could be used against you if you did not advise the applicant that you used CCAP as part of your background search prior to denying them. If this is a possibility then landlords will need to document in writing that they did advise the applicant that they used CCAP to vet them or else risk the $1,000 fine.

Finally, under the bill, any person that currently has information isted on CCAP that didn’t result in a finding of guilt in a criminal matter, liability in a civil matter, an order for eviction, or the issuance of a restraining order of injunction, can request that the information be removed from CCAP. So under this law, past information that was available on CCAP can now disappear.

Essentially, this will allow any tenant that was sued for eviction in the past but who had his/her eviction dismissed pursuant to a stipulation (which are often forced upon landlords in Milwaukee County) can be removed from CCAP. Oftentimes, a landlord will agree to dismiss an eviction against a tenant in exchange for the tenant agreeing to vacate the property by a date certain. Landlords do this because it will avoid the need for an eviction trial as well as the need to take additional time off of work or pay additional fees to a lawyer for a trial. It is understandable why a landlord may agree to a stipulated dismissal but if this new legislation is passed documentation showing that an eviction was even filed may be removed from CCAP. Landlords will need to seriously need to reconsider entering into stipulated dismissals because by doing so they will be hurting other landlords who may inadvertently rent individuals that were sued for eviction but for which no record exists on CCAP.

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REP. SCHNEIDER IS ATTACKING CCAP AGAIN

Jun 22

Posted by Tristan R. Pettit, Esq. in CCAP, Rep. Marlin Schneider, Screening Tenants | No Comments

State Representative Marlin Schneider from Wisconsin Rapids is up to it again.  I just received word that Marlin Schneider has circulated a proposed bill (LRB 2267/3) which would require users of the Consolidated Court Automation Program, better known as CCAP, to pay an annual fee to use this computerized open records management system.

Even worse, Schneider’s legislation proposes that no legal court proceeding be posted on CCAP until after there has been a determination of guilt (in criminal actions) or liability (in civil action).

CCAP is the single most important screening tools for landlords in Wisconsin in my opinion.

As many of you know, back in 2008, Mr. Schneider — who does not like CCAP or the concept of open records in general and feels that both are deteriorating one’s privacy rights – drafted a proposed bill that would have prevented landlords and many other groups (except for a select few like law enforcement and the court system) from being able to use CCAP.  That legislation was killed.

Then earlier this year, upset at his loss the year before, Mr. Schneider attempted to attack CCAP from a different angle when he tried to make people who have been arrested or convicted of a crime protected classes that could not be discriminated against in housing.  Mr. Schneider voluntarily withdrew that bill saying that it was not what he expected it to be.  This withdrawl came after a mass campaign by the AASEW to get landlords to write to their legislators and demand that they not support the bill.

Now we have this.  When oh when will Mr. Schneider retire?

As I learn more about this issue I will post it to this blog.

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ATCP 134: THE 7 DEADLY SINS – 7 PROHIBITED RENTAL PROVISIONS

Jun 18

Posted by Tristan R. Pettit, Esq. in ATCP 134, Rental Agreements | 21 Comments

Did you know that if you have an illegal provision in your rental agreement that the entire agreement may be unenforceable? Unfortunately this is true. In the case of Baierl v. McTaggart the Wisconsin Supreme Court held that because the landlord’s lease contained an illegal provision, the entire lease could be thrown out. This result can occur even if you never tried to enforce the “illegal” provision as was the case with the landlord in the Baierl case.

In my representation of landlords over the past 14 years, the two most frequent situations in which I have found an illegal provision in a rental agreement were because: (1) the landlord decided to draft his/her own rental agreement and didn’t know that Wisconsin law prohibited him/her from including certain language, and (2) the landlord used a rental agreement that s/he found on the internet that was not drafted by a person knowledgeable about Wisconsin law.

The Wisconsin Administrative Code, Chapter ATCP 134, specifically ATCP 134.08 sets forth the 7 provisions that cannot be included in a Wisconsin residential rental agreement – often referred to as the 7 deadly sins.

You cannot include a provision in your rental agreement that:

1.  Authorizes the eviction of a tenant from the property other than by the judicial eviction process set forth in the Wisconsin Statutes.

Essentially this means that if the tenant refuses to vacate at the end of a lease or after committing a breach, the landlord is not able to engage in self-help eviction. You are not allowed to change the locks so that the tenant is locked out. You are not allowed to remove the door to the apartment. You are not allowed to turn off the heat or electricity to the unit. Nor can you remove the tenant’s belongings and put them on the curb or in a storage facility.

If a tenant refuses to leave your property, the only legal way to have them removed is to file an eviction action against them, obtain a judgment of eviction, and if necessary involve the Sheriff’s Department to physically remove the tenant. Because this is the only legal way to remove a tenant it is illegal to include some other procedure to evict a tenant in your rental agreement.

2.  Provides for the acceleration of rent payments if the tenant defaults or breaches the rental agreement.

Some commercial leases include an “acceleration of rents” clause but such clauses are prohibited in Wisconsin residential leases. So if a tenant breaches their rental agreement the landlord cannot require that the tenant immediately pay all future rent through the end of the term. According to sec. 704.29 of the Wisconsin Statutes, the landlord must attempt to mitigate the tenant’s damages by trying to re-rent the unit. If the landlord is able to re-rent the unit then the breaching tenant will no longer be responsible for the rent once the new tenant moves in and begins paying rent. If the landlord is unable to re-rent the unit then the breaching tenant may very well be responsible for all of the rent through the end of the term, however since the landlord is unable to determine if that will be the case at the time of the breach, the landlord cannot include language in the agreement that the tenant must pay all future rent immediately upon a breach.

3.  Waives the landlord’s duty to mitigate damages.

As I mentioned above, landlord’s have a duty to mitigate a tenant’s damages by trying to re-rent the unit. As such, it is illegal for the landlord to avoid that duty by putting such language in the rental agreement.

4.  Requires the tenant to pay the landlord’s attorney’s fees or costs that are incurred in any legal action or dispute arising under the rental agreement.

This is the illegal provision that I see the most often when reviewing rental agreements. The lease agreements that are sold at OfficeMax and Office Depot contain this prohibited language. This is also the illegal language that was included in the rental agreement at issue in the Baierl case that I reference above.

In a commercial lease it is acceptable to include language that requires a tenant to pay for the landlord’s attorney’s fees and costs however it is not allowed in the residential context. A landlord who prevails in court and has a tenant properly evicted will still be responsible for paying his/her own attorney’s fees. If you are interested in learning more about the Wisconsin Supreme Court’s reasoning you should read the Baierl case here.

5.  Relieves the landlord from liability for property damage or personal injuries caused by the landlord’s negligent acts or omissions.

To put it simply, if the landlord causes damage or injury to a tenant then the landlord will be responsible for it. A landlord cannot remove his/her liability by having a tenant sign a rental agreement waiving that responsibility. For example, if a landlord is aware that the railing on his rental property’s second floor porch is loose and the landlord has not gotten around to repairing it for several weeks, the landlord will be responsible for the tenant’s injuries should he fall off the porch, regardless of what the rental agreement says.

6.  Imposes liability on a tenant for injuries or damages which are clearly beyond the tenant’s control or any damage caused by natural disasters or by persons other then the tenant or the tenant’s guests.

This is very similar to the 5th deadly sin mentioned above but is even broader in scope. The landlord can’t hold a tenant responsible for someone else’s negligence (other than a guest) if the tenant has no control over that person, nor can the landlord hold the tenant responsible for injuries or damage resulting from an act of God.  So if the tenant or the tenant’s guest was negligent and that negligence caused damage or injury to the tenant or his property then the landlord will not be responsible – the tenant would. But if a massive snowstorm damages the rental property or an electrician hired by the landlord improperly wires the unit causing injuries and damage, the landlord cannot hold the tenant responsible regardless of what the rental agreement says.

7.  Waives any other statutory or legal obligation of the landlord to deliver the unit in a fit or habitable condition or maintain the unit during the tenancy.

A landlord has a responsibility to provide the tenant with an apartment that is liveable and safe. A landlord also has the responsibility to repair and maintain the property to insure that it remains safe and liveable. A landlord cannot avoid this responsibility even if the tenant agrees to allow him/her to do so in the rental agreement.

Wisconsin landlords need to make sure their rental agreements do not contain any of these 7 deadly sins. Failure to remove such illegal provisions may result in your rental agreement being declared unenforceable against the tenant and may even expose you to a lawsuit for double damages and attorney’s fees by the tenant.

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NEW SUBSCRIPTION SERVICE UPDATE

Jun 18

Posted by Tristan R. Pettit, Esq. in Miscellaneous | No Comments

I would like to apologize to those of you who are subscribed to my blog for having to tolerate all of the recent problems related to my old subscription service – especially the multiple email  notifications.

Please be assured that I have chaged subscription services and this new service will send you no more than 1 email per day — and if I don’t revise or post a new blog entry that day then you will not receive any email notifications.

How about that – a system that actually works – pretty cool concept.

So I hope that you will give the subscription service another chance and that I haven’t scared you away.   Unfortunately I am unable to manually subscribe you to the new service.  So you will need to go to the link on the left hand side of my blog entitled ”Subscription Options” and then type in your email and press the “subscribe button.”  You will then receive an email that you need to click on the link and you will then be officially subscribed.

Thanks and please accept my apologies.

T

LEAD-BASED PAINT DISCLOSURE FORM: YOU MUST USE THIS DOCUMENT!

Jun 12

Posted by Tristan R. Pettit, Esq. in Lead-Based Paint, Rental Documents | No Comments

Just last week I read yet another article about an owner and its management company in California being threatened with a $330,000 fine for failure to give it’s tenants a lead-based paint and lead-based paint hazard disclosure notice as required under federal law. Yes, that number is correct – $330,000 – I did not mistakenly add an extra 0 or two. That is $11,000 per violation for the 30 alleged violations.

Just yesterday I was meeting with a new client to review his rental documents and assist him with a problem tenant issue. This client owns several properties in the city of Milwaukee and has owned one of them for over 10 years. After reviewing the rental documents that he was using and not noticing the lead-based paint disclosure form among them, I asked him if he gave his tenants the federally-mandated lead-based paint disclosure. He did not know what I was talking about – he was not aware of the law or the disclosure form.

It is federal law (24 C.F.R. Part 35, subpart A) that an owner, or its agent, of any property that was built before 1978, must disclose to any prospective tenant whether or not it has any knowledge of lead-based paint or lead-based paint hazards in the property and if so provide any written records of same if available. The owner/agent must also give the prospective tenant a copy of the E.P.A.-approved information pamphlet entitled “Protect Your Family from Lead In Your Home.”

You must give these two documents to each and every tenant even if you have no knowledge of any lead-based paint issues in your property. Chances are that most, if not all, older housing stock has some layers of lead-based paint somewhere within it. The fines for failing to provide these documents to tenants are huge – as you can tell from the California article I reference above.

If you are interested in seeing a copy of the manual that the feds follow to determine what amount the fine should be for such violations click here. It is truly scary. You can be fined for failing to provide the above documents to tenants even if no one has been injured by ingesting lead-based paint chips or dust. You can be fined even if there are no children living in the unit. The fine is for failing to provide the disclosure form. If children are living in the unit or god forbid any child is injured as a result of ingesting lead-based paint at your rental property the fines just increase.

It is very easy to comply with this law and protect both yourself and your tenants. You can purchase a copy of the Lead-Based Paint Disclosure form at Wisconsin Legal Blank, Inc. The EPA pamphlet may also be purchased at WLB. The pamphlet is also available for free on the internet here. As long as you include all of the pertinent requirements you can even draft your own disclosure form.

Once you have purchased or drafted the disclosure form fill it out. If you are not aware of any lead-based paint or lead-based paint hazards you simply check the applicable box on the form. If you have no documentation of any lead-based paint or lead-based paint hazards (such as building code orders) you also check the applicable box. If you are aware of your property having lead-based paint or lead-based paint hazards (i.e. you or some agency have conducted tests and/or you have been cited by your municipality) then you must disclose this information and also attach any written documentation that you have in your possession regarding this.

Once you have accurately completed the form you should sign and date it. You should then give a copy of the form and the EPA-approved pamphlet to each adult and have them sign and date it. This disclosure form is the first document you should be having your soon-to-be tenant reviewing and signing when you meet with them to review and sign your rental documents. The law says that you should be providing this disclosure form to prospective tenants – so they should be receiving the disclosure before they sign the rental agreement and actually become tenants.

If you are reading this post and have not provided your current tenants with the disclosure form and the pamphlet I would suggest that you take action immediately and get these two documents to them ASAP. Late disclosure is better then no disclosure.

With such large fines levied by the government for such failure to disclose lead-based paint and lead-based paint hazards I am extremely cautious and often advise my clients to provide new disclosure forms and a new EPA-approved pamphlet to tenants every time they sign a renewal or enter into a new rental agreement. It probably is not necessary but I’d rather be safe then sorry.

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LATE FEES – PART 1: WHAT AMOUNT CAN YOU CHARGE?

Jun 6

Posted by Tristan R. Pettit, Esq. in ATCP 134, Caselaw, Late Fees | 27 Comments

Many of my clients ask me what amount they should charge a tenant who is late in paying rent. Many also wonder if there is a maximum amount beyond which they would not be allowed to charge as a late fee.

The only legal guidance we have as to what amount is acceptable as a late fee is the case of Three & One Co. v. Geilfuss, 178 Wis.2d 400, 504 N.W. 2d 393 (Ct. App. 1993). This 1993 Court of Appeal decision is not even specifically about the issue of late fees but rather addresses the issue of “waste” (when a tenant intentionally damages the rental property) and what amount of damages a landlord may recover against a tenant that commits waste on the landlord’s property. Nonetheless the Court in Geilfuss does state in its opinion that the late fee of $50 per month charged by the landlord was properly assessed against the tenant. Thus, we as landlords know that at least the Wisconsin Court of Appeals has upheld a late fee of $50 per month.

There is no other guidance in Wisconsin law as to the amount of late fee that is acceptable. No Wisconsin Statute addresses the issue nor does any administrative rule in Chapter ATCP 134 of the Wisconsin Administrative Code.

As such, a landlord should be able to charge a late fee of any amount as long as it is reasonable. Legally, a landlord should also be allowed to charge a daily late fee as well if they so choose. For those of you who choose to charge a daily late fee you should be aware the Model Lease for Subsidized Programs (which is drafted by HUD) specifically allow a landlord renting subsidized property to charge a late fee of $5 on the 6th day of the month and to charge $1 per day late fee each day thereafter for that month until the rent is paid.

On a practical level however – at least in Milwaukee County – there are some restrictions to the amount of the late fee that a landlord may charge. Milwaukee County has an unwritten rule that it does not allow daily late fees to be charged. I have had both court commissioners and judges in Milwaukee County eviction court toss out daily late fees that I have tried to obtain for my clients. The reason that I was provided is that daily late fees are “not fair.”

I have even had a past court commissioner in Milwaukee County (several years ago) tell me that he would not allow my client to collect a monthly late fee of $50 as he thought that was “unconscionable.” When I provided the commissioner with a copy of the Geilfuss case mentioned above where the Court of Appeals held that a $50 late fee was appropriate, the commissioner relented.

I have handled evictions and the associated damages claims in Dane County, Waukesha County, Kenosha County, Racine County, Aizoaceae County, Washington County, and a county or two county way up north that I can no longer recall – in all of these counties I have never had the court prevent me from obtaining a late fee for my client, regardless of the amount, as long as the late fee was clearly specified in the rental agreement as is required in the Wisconsin Administrative Code, ACP 134.09(8).

So as the law currently stands you should be able to charge any amount for a late fee that you wish, including daily late fees, if you are so inclined. However if you want to have actual legal support for the amount of the late fee you are charging then you may want to cap your late fees at $50 per month and carry a copy of the Geilfuss decision with you when you go to small claims court at least in Milwaukee County).

Please be aware however that individual municipalities can create ordinances regarding late fees that might be more restrictive than the state law.  For example the City of Madison’s local ordinances which you can review here prevent a landlord from charging a late fee that is more than 5% of the month rent.

A note of caution for Milwaukee County landlords – do not place the late fee amount in your 5 day notice or you might have your eviction case dismissed. See my prior post on this topic here.

Please share with me your experience with what amount of late fees you charge your tenants and if you have had any problems with the courts doing so.

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LATE FEES – PART 2: ATCP 134 REQUIREMENTS

Jun 6

Posted by Tristan R. Pettit, Esq. in ATCP 134, Late Fees | 6 Comments

Late fees are a necessary evil for landlords aw we often need some type of “hammer” to hold over the heads of tenants who pay rent late. With this post I want to provide you with some additional information on the requirements that must be met with regard to late fees as specified in ATCP 134 of the Wisconsin Administrative Code.

A Bit of History:

In the past – prior to ATCP 134 and when the administrative rules pertaining to residential rental housing were called Ag 134 — late fees were not allowed. Because of this creative landlords came up with the idea of offering discounts for the prompt payment of rent. For example, if the tenant pays rent by the 1st of the month the rent will be discounted to $650, however if rent is not received by the 1st of the month then the rental amount will remain at the regular rate of $700. By doing this landlords still were able to obtain a form of late fee without calling it a late fee.

I still see this “discount rent” option on a few of my client’s rental agreements but it has become rare as there is no need to disguise a late fee anymore since late fees are no longer prohibited.

ATCP 134.09(8) Rules Regarding Late Fees:

While late fees are no longer illegal, there are some rules that have been imposed regarding how and when late fees can be used. In the revised Ag Rules (now referred to as ATCP 134) the rules regarding late fees are as follows:

1.  You cannot charge a late fee or late penalty unless it is specifically stated in the rental agreement.

2.  You may not charge a late fee for the non-payment of a late fee.

3.  Before charging a late fee you must apply all rent prepayments received to offset the amount of rent owed by the tenant.

The first two rules are pretty straightforward. However the third rule is a bit confusing. In essence, the third rule is basically saying that you cannot apply a tenant’s rent payment to a past owed late fee so that the tenant would now be considered late in paying the current month’s rent thus allowing you to charge an additional late fee.

Here is an example: Joe Tenant fails to pay you rent for the month of June in the amount of $500. After the 6th of the month you charge Joe a $50 late fee. On or about June 10th Joe pays his rent of $500 for the month of June but fails to pay the $50 late fee. So while Joe has now paid June’s rent in full he still owes you a $50 late fee. When July 1st comes around Joe promptly pays you his July rent of $500. You are not allowed to take Joe’s July rent payment of $500 and apply $50 of that payment to the outstanding $50 late fee for June. This is not allowed because by doing so your actions would now make Joe responsible for paying a late fee for July as well because he would have only paid you $450. You cannot do this.

In the example above you would need to apply the $500 July rent payment to July’s rent and then continue to keep the $50 late fee from June “on the books” and either collect it from Joe in the future or at the end of Joe’s rental term or tenancy deduct the June $50 late fee from Joe’s security deposit (assuming your nonstandard rental provisions allow you to do so).

While it may be tempting to ignore this administrative rule you must remember that by ignoring the rule you will be in violation of ATCP 134 which would allow Joe Tenant, under §100.20(5) Wis Stats., to recover twice the amount of the loss (in this case $100) plus his costs in filing the lawsuit and his attorney’s fees (and trust me these will be more than the $100 ; )

The three rules mentioned above are administrative rules and apply statewide. You must also be aware that many municipalities have created additional rules regarding late fees. An example would be the City of Madison which specifies that a late fee cannot exceed more than 5% of the rent amount. So be sure and check the local administrative ordinances where you own your rental property.

If you have not already done so, please read Part 1 of my post on the issue of late fees here.

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