Archive for August, 2009

SUING AN EX-TENANT FOR PAST DUE RENT: What Factors To Consider

Aug 31

Posted by Tristan R. Pettit, Esq. in Collections, Credit Checks, Rental Documents, Tenant Damage | 24 Comments

Your tenant has already vacated your rental unit – so there is no need to file an eviction action — but they left owing you money.  Is it worth your time and effort to sue them in order to obtain a money judgment?  This is probably the third most frequently asked question that I receive when talking to landlords (the first two most asked questions in case you are curious are (1) which notice do I use when? and (2) how do I evict my tenant?).

There is not a simple answer to this question.  It depends . . . on many things.  Many variables need to be taken into consideration before deciding to spend the time and effort to sue an ex-tenant.  Let’s consider what some of those variables are. 

1.     How much money does the tenant owe you?

Is the amount that is owed to you worth the time, energy, and cost to attempt to collect it?  You will need to purchase a small claims summons which will cost you approximately $100.  You will need to personally serve the ex-tenant with the assistance of the Sheriff or a private process server — typical cost between $35-$100.  If you are representing yourself you will spend time away from work and therefore lose some wages.  If you opt to hire a lawyer to represent you, you need to consider how much you will have to pay the lawyer. 

There is no magic dollar amount that makes suing a tenant worth it or not worth it.  The “breaking point” as I like to call it, will be different for different people.

2.     Do you have the necessary information to sue the ex-tenant?

Do you have a fully completed rental application fro the tenant and have you updated the information contained in the application since the tenant first moved in?  To assist with a potentail collections issue in the future, a good application should at least contain the name and address of the applicant’s employer, the name and address of the applicant’s bank, and emergency contact information for the tenant’s relatives or close friends.  If your rental application contains the above then you will already have some of the information that may assist you in collecting the debt that is owed you.

Other information that you will need is the current address of the ex-tenant.  Did s/he leave you a forwarding address?  If not, you will need to find him or her so that they can be served with the lawsuit.  Check CCAP and/or the Milwaukee Municipal Court site to see if they have recently been sued or received a traffic ticket which may provide you with a current address.  Contact your postman/woman and see if the ex-tenant has forwarded their mail to a new address.  If so, see if they will provide that new address to you (typically the answer is “no”).  You can also hire a skip-tracer to locate the whereabouts of the tenant, but typically you will need to wait a period of time for the ex-tenant to become established at their new address before tht data will become available.  Consider contacting the emergency contact person/s listed on the ex-tenant’s rental application to see if they know where you can reach the debtor.

If you do not have a current address for your ex-tenant, you will end up having to serve them at their last-known address (which is your rental unit) and becasue your process server will not be able to personally serve them since they do not live there any longer, you will end up needing to publish notice against them (this is when you pay a local newspapaerr to publish notice of the court date ) – in Milwaukee the cost to do this is $60.

3.     Is the ex-tenant collectible?

When you obtain a money judgment against a person, you essentially receive a piece of paper which is called a “judgment.”  Having a judgment against someone does not mean the same as getting paid on that judgment.  I have yet to encounter any ex-tenant that came knocking on my door begging me to take the money that they owe me.  Usually they require a little prodding.  So, after obtaining a judgment you will often need to spend additional time and money to collect on that judgment.  If your ex-tenant is not “collectible” then it may not even be worth it to sue them

There are numerous factors that you should consider when determining if a person is collectible or not.  Are they employed?  Do they have a bank account?  Are they receiving need-based public assistance?  Are they self-employed?  Does their household income fall below the federal poverty line?  Are their wages already being garnished?  Have they been employed at the same job for a significant period of time?  Do they have good credit?  Are they currently paying child support?  If so, how many children are they paying child support for and how old are the children?  Are they incarcerated?  Did they move out of state?  These are only a few of the factors that you should consider when deciding how to proceed.

If the person is employed then you might be able to collect the judgment by filing a garnishment of their wages.  A garnishment action is a separate lawsuit that requires you to purchase another summons.  Even if the person is employed there are several exemptions that may prevent you from garnishing his/her wages.  If the ex-tenant’s houshold income is below the federal poverty line then they are exempt from garnishment.  If the ex-tenant is receiving any state-based aid then their wages are exempt.  80% of a debtor’s disposable earnings are exempt from garnishment, leaving only 20% that can be garnished at one time.  If your ex-tenant is currently being garnished by another creditor you will have to wait in line until that garnishment is completed — garnishments last for 13 weeks. If your ex-tenant is self-employed you can bet that they will not voluntarily garnish their own wages – so that option will be closed to you.  If the debtor is paying child support for one child (typically 17% of their gross wages) there will not be much money left over for you to garnish.  If the ex-tenant is paying child support for 2 children (typically 25% of their gross wages) there will be no money left for you to garnish.  You will be forced to wait until these children reach the age of 18 or the child support orders are terminated.  Even if you are fortunate enough to be able to garnish your ex-tenant’s wages, if that individual should decide to leave their job or get fired, your garnishment will end.

Keep in mind that you are not allowed to intercept an individual’s tax refund — only the government can do that.  If your ex-tenant is incarcerated s/he will not have any wages to garnish.  If your ex-tenant has horrible credit already they will not care that you took another judgment against them. 

You can also garnish a person’s bank account.  However, there are many exemptions that can apply here as well.  For instance, the first $1,000 in the account is exempt from garnishment.  Most tenant’s that I have rented to do not have more than $1K in the bank.  Any money in the account that is derived from government benefits is also exempt.  If the garnishment exemptions do not apply, and you are lucky enough to be able to go forward, make sure that you do not make the mistake of serving the debtor before you serve the bank so that the debtor has time to drain his/her account.

If you do not possess the necessary information to evaluate whether or not a person is “collectible,” you are able to serve the debtor with what is referred to as a Financial Disclosure Statement.  This is a document that is signed by a judge or court commissioner and requires a debtor to divulge any assets, jobs, and bank accounts.  The debtor rarely returns this document and therefore the landlord in once again placed in the position of deciding whether or not s/he should spend more time, energy and money to compel the debtor to provide the information.

4.     Is there a chance that the ex-tenant may end up purchasing real estate in the future?

If you think there is a possibility that your ex-tenant will purchase a home within the next 10 years then it may be worth it to at least take a judgment against them and then docket the judgment.  Docketing a judgment is very simple and only costs $5.  By docketing a judgment a lien will be placed on any property owned by the debtor or acquired by the debtor within the next 10 years in the county in which it was docketed.  The judgment will also accumulate interest at the rate of 12% per year.  Because of this some landlords will choose to sue the tenant, obtain a judgment, docket the judgment, and then just sit and wait. 

If you are stuck in a position where it just doesn’t make sense to sue your ex-tenant because the amount owed is too little or the tenant is not collectible you should consider a new service offerred by Rent Recovery Service.  For a small fee, Rent Recovery Service will report your ex-tenant’s debt to the 3 credit bureas even if you do not have a judgment.  By using RRS you will at the very least create havoc with the debtor’s credit and will also alert any future landlords (that are smart enough to run a credit report) that the tenant owes money to a prior landlord.  Who knows, that could be enough of a push to make the tenant pay you what is owed.  For more information on Rent Recovery Service please see my prior post.

The decision to sue an ex-tenant for past due rent and damages is not always an easy decision.  A lot of information and knowledge needs to be sifted through to determine if it is worth your time, effort, and money to initiate a lawsuit.  I would enjoy hearing what other factors you consider when making this important decision — please let me know by posting a comment.

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How To Legally Serve A 5-Day Notice To Pay Rent or Vacate

Aug 25

Posted by Tristan R. Pettit, Esq. in Evictions, Notices | 11 Comments

There are basically 4 ways in which you can legally serve a tenant with a 5-Day Notice To Pay Rent or Vacate.  First, you can personally serve the tenant with the notice.  Second, you can serve them by what I refer to as a “substituted” service.  Third, you can “post and mail” the notice to the tenant.  Fourth, you can serve the tenant via certified or registered mail.

Landlords in Wisconsin are legally allowed to serve the notice to pay or quit on the tenant themselves.  This is very different from the service of the eviction lawsuit (summons and complaint) which Wisconsin law will not allow to be served by a landlord or his/her agent.

Set forth below the are the 4 service options (as I categorize them) and the pros and cons of each option.

1.     Personal Service:  This form of service occurs when the notice is physically handed to the tenant.  While this option sounds pretty simple it often ends up being more complicated.  It becomes complicated because many landlords believe that if they cannot serve the tenant personally after the first attempt that they are allowed to post the notice on the door and be done with it — WRONG.  Wisconsin Statutes require that the Landlord use “reasonable diligence” before they can resort to service via ”posting and mailing.”  “Reasonable diligence” is not defined in the statutes.  As such, what constitutes “reasonable diligence” is decided by the court commissioner or judge that is hearing your case – and oftentimes the definition of “reasonable diligence” will change depending on which judge or commissioner you are before.

In Milwaukee County it has been unofficially declared that “reasonable diligence” means you must make at least 3 different attempts to personally serve the tenant and those 3 differernt attempts must occur on 3 different days and at 3 different times.  For example, if you tried to serve the notice on the tenant on Monday at 8 am and they were not home, you would then have to wait until Tuesday to make your 2nd attempt in the afternoon.  If you still couldn’t personally serve the tenant on Tuesday then you would need to come back on Wednesday and to attempt to serve the tenant again but this time in the evening hours.  Three different days at three different times of day.  So if your tenant is home and answers the door then personal service is pretty easy.  However, if they are not home or are dodging service then you could waste 3-4 days before you can legally “post and mail” the notice.  This is an unecessary delay. 

Another drawback to personal service is the fact that you may end up face to face with your tenant.  If there is some animosity between you and the tenant (as there often is when the tenant realizes that you will be evicting them if they don’t pay rent) personal sevice of the notice could result in a personal confrontation.

2.     Substituted Service:  The second option is what I refer to as “substituted service” and essentially means you are serving someone else with the notice on behalf of the tenant.  I almost never recommend that a client opt for substituted service because of all of the potential problems.  Under section 704.21 of the Wisconsin Statutes you can serve a tenant by substituted service by serving a “competent family member who is at least 14 years old and who has been informed of the contents of the notice” or by “leaving a copy of the notice with a person apparently in charge, or occupying, the premises and mailing a copy to the tenant’s last known address.”

There are many potential pitfalls with substituted service.  First, you will need to inquire as to the age of the person you are giving the notice to to insure that they are at least 14 years old.  Second, you need to tell them what the notice is and what it means.  I have been involved in a case in which the landlord served the tenant’s son with the notice  knowing that he was 16 years old.  However when the case went to court the tenant raised as a defense the fact that her son was mentally retarded and only functioned at a third grade level and forgot to give her the notice.  Rather right or wrong, the eviction lawsuit was dismissed for improper service.

Under the second option for substituted service, the landlord must leave a copy of the notice with a person “apparently in charge of the premises, or occupying the premises” and also mail the notice.  I have seen many landlords forget to mail the notice under this option and as a result the service was declared improper and the eviction lawsuit dismissed.  I have also heard of a situation in which the landlord served the notice on a gentleman (who was not a tenant but based on only being clothed in only boxer shorts he certainly appeared to be “apparently in charge or occupying the premises.”), only to find out at the intial appearance in court that the gentleman  was someone that the tenant “picked up” at a bar the night before and failede to notify the tenant that he was given the notice but rather threw it in the garbage.  I know, I know, you are saying regardless of the “one night stand” throwing th enotice away, it still was a proper service as the landlord mailed the notice to the tenant as well, which he did.  I would agree with you 100% but I was told that was not what the court commissioner concluded.  Instead the court commissioner stated that becasue of the fact that the ”one night stand” threw the notice in the garbage, the tenant didn’t have proper notice of her ability to cure the breach by paying the past due rent to the landlord within 5 days, and as such the notice was improper.

Do you still think that serving a notice on a tenant is easy?

3.     Post and Mail:  As mentioned previously, if after using “reasonable diligence” and trying to serve the tenant by the above methods you are unable to personally serve or serve the tenant by substituted service, then — and only then – are you able to “post and mail.”  To “post” means to place a copy of the notice in a conspicuous location on the property.  Oftentimes this is performed by tacking the notice to the tenant’s door or sliding the notice under the door.  The landlord must also mail the notice to the tenant.  Problems arise if the lanldord fails to mail the notice or does not mail the notice on the same day as s/he posts the notice.  If the landlord mails the notice the day after the posting then the date of service will be on the date that it was mailed – not the date that it was posted. 

Sec. 704.19(7)(b) of the Wisconsin Statutes states that when “posting and mailing” or “leaving a copy of the notice with a person apparently in charge of  or occupying the premises,” the notice is deemed to have been given on the day of service OR the date of mailing – whichever is later.  I have seen numerous cases where the landlord failed to mail the notice on the same day that it was posted and therefore it was determined that the eviction lawsuit was prematurely filed.

4.     Certified or Registered Mail:  Personally, I feel this is the best way to serve a tenant a 5-Day notice.  You are not required to attempt to personally serve a tenant with the notice before serving via certified or registered mail so you can disregard “reasonable diligence.”  Nor must you attempt to obtain substituted service on the tenant before you can choose to serve via certified/registered mail.  Certified and registered mail also does NOT need to be picked up by the tenant in order for the service to be proper.  The law merely requires that the notice be mailed via certified or registered mail for it so be legally served.  By using certified or regular mail you also eliminate any possible confrontation with the tenant.  You eliminate the need to attempt to personally serve the tenant 3 different times on 3 different days at 3 different times of day.  You also eliminate all of the potential pitfalls with substituted service.

Serving a notice on a tenant via certified/registered mail is not without complications however.  When serving a tenant with a notice via certified/registered mail you must remember to add an additional 2 days for mailing on top of the notice period per section 704.19(7)(c), Wis. Stats.  So, in effect the 5-Day notice becomes a 7-day notice.  This means that the landord must insure that he does not file the eviction lawsuit (assuming the tenant does not cure the breach by paying the past due rent within the cure period) until at leasr 7 days after mailing the notice via certified or registered mail.  Another negative of certified or regestered mail is the cost.  If you own or manage many properties and send out a lot of 5-Day notices each month then the cost of certified/registered mail may be prohibitive.

Please be aware that if you own or manage subsidized housing that there are special service requirements for the 5-Day notice that may apply depending on the type of subsidy that is involved.

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AASEW Has New Online Forum at MeetUp.com

Aug 20

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

The Apartment Association of Southeastern Wisconsin (AASEW) has recently joined MeetUp.com.  Registration and participation is free.

Below is the introductory message by AASEW Board member and organizer, Tim Ballering:

Welcome to the Apartment Association of Southeastern WI.  Thank you for joining our MeetUp group.

Our objective is to help members become more successful landlords, investors and managers.

We are the oldest and largest landlord group in Southeastern WI. Members include many larger owners, mom and pop owners, businesses that provide services to the rental housing industry, and many of the best landlord / tenant and real estate attorneys in the state.

The Association provides training in evictions, collections and other aspects necessary for you to succeed. Many of our business members offer discounts to Association members.

We also provide discounted tenant screening and bad debt reporting for our members.

We provide free eviction notices to members as well as other forms.

We are a nonprofit, member managed association since 1977.

We look forward to meeting you.

The Association’s webpage
www.apartmentassoc.org

Have landlord or real estate questions? Join the discussion at:
http://groups.yahoo.com/group/ApartmentAssoc

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SSN Validator: Free Website That Allows You to Verify A Social Security Number

Aug 19

Posted by Tristan R. Pettit, Esq. in AASEW, Screening Tenants | 1 Comment

I attended last night’s AASEW monthly meeting which featured Kathy Huens of Landlord Services, LLC as the main speaker.  Landlord Services, LLC is a company that provides credit reports to landlords to assist them in the screening process of rental applicants.  Landlord Services, LLC is a business member of the AASEW and comes highly reccomended.  During Kathy’s speech she alerted the audience to a website that allows you to verify certain information regarding a person’s social security number.

SSN Validator allows you to input a person’s social security number and will then provide you with basic information such as:

- Has that SSN been issued or not,

- Approximate date when the SSN was issued,

- State in which the SSN was issued,

- Whether or not the person that was issued that SSN is deceased.

This website is completely free.  I have added this site to my list of websites to assist you during the screening process.  Use of this website will certainly assist a landlord in determining whether or not a SSN supplied by a prospective tenant is valid.  For instance if the applicant appears to be between the age range of 20-30 years old and the SSN Validator indicates that the SSN was issued in 1950 — you now have a red flag and will need to do some more due dilligence on that applicant.  Or suppose that after inputting the rental applicant’s SSN you are notified that the person to whom that SSN was issued is deceased – you have now been alerted to the possibility that your applicant has assumed another’s identity.

I love free tools that assist me in evaluating my rental applicants.  Thanks Kathy!

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AASEW’S Annual Landlord Tradeshow To Be Held On September 16th at Serb Hall

Aug 17

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

The Apartment Association of Southeastern Wisconsin’s (AASEW) 10th Annual Landlord Tradeshow and Seminar will be held on Wednesday, September 16, 2009 from 12 noon – 7 pm at American Serb Hall (5101 W. Oklahoma Ave, Milwaukee).

Admission is free for rental property owners and potential owners.  Free food and snacks will be offerred.  This is a great event for landlords, future landlords, property managers, real estate investors, and anyone else interested in learning how to succeed in today’s real estate market.

Attendees will learn how to run their rental properties with more profit and less hassle.  They will also have the opportunity to meet the vendors that rental property owners use on a regular basis.

Seminars that will be presented include:

- “How To Collect Tenant Bad Debt” by Bill Gray of Rent Recovery Services

-  “Causes for Eviction: Which Notice To Use When” by Tristan Pettit, Esq. of Petrie & Stocking S.C.

- “New Lead Paint Renovation Rules” by Ada Duffy of Milwaukee Lead and Asbestos Center

-  “How To Improve the Eviction Process” by the Milwaukee County Sheriff’s Department

-  “How To Benefit from a 1031 Exchange” by Patrick Harrington, Esq. of M&I 1031 Exchange Service

- Town Hall Meeting – Get Answers to Your Rental Property Questions featuring:  Attorney Tristan R. Pettit of Petrie & Stocking S.C. and AASEW President, Attorney Heiner Giese of Giese & Weiden LLC and AASEW’s general counsel, and Susan Ipsarides, Portfolio Director for StuartCo.

For more information go to www.LandlordTradeShow.com

You will not want to miss this!  Hope to see you there.

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Housing Choice Vouchers (Section 8 Rent Assistance) Are Not A “Lawful Source of Income” In Wisconsin

Aug 13

Posted by Tristan R. Pettit, Esq. in Fair Housing / Discrimination, Protected Classes, Screening Tenants | 8 Comments

I am often asked whether or not a landlord is able to legally decline to rent to a tenant that is receiving “rent assistance.”   I believe that the primary reason that landlords are unsure of the answer to this question  is because Wisconsin’s Open Housing Act (Sec. 106.50, Wis. Stats.) prohibits a landlord from discriminating against a tenant or a prospective tennat based on their ”lawful source of income.”  For more information on Wisconsin’s protected classes you should read my prior post entitled “FAIR HOUSING – Part 1:  What Are The Protected Classes?”

The Housing Choice Vouchers Program (previously referred to as Section 8 Rent Assistance) is a voluntary federal program that assists very low-income families, the elderly, and the disabled to locate housing in the private market.  Housing Choice Vouchers are administered locally by public housing agencies (PHA’s).  The PHA’s receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program.  If a landlord accepts a tenant who is enrolled in the Housing Choice Voucher Program then the local PHA will pay a housing subsidy (to cover a portion of the tenant’s rent) directly to the landlord.  The tenant then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program.  For more information on the program please go to the Housing Choice Vouchers Fact Sheet which is located on HUD’s website.  The federal regulations that cover this program can be found at 24 CFR Part 982.

An earlier version of the Wisconsin Administrative Code defined “lawful source of income” as including “lawful compensation or lawful remuneration in exchange for goods or services provided, profit from financial investments, any negotiable draft, coupon, or voucher representing monetary value such as food stamps, social security, public assistance or unemployment compensation benefits.  Sec. IND 89.01(8), Wisc. Admin. Code.  (Please Note that this section of the Code is no longer available).  Lawful source of income would also include child support payments, family support payments (i.e.  alimony).

Under the above definition it would seem that “rent assistance” would be considered to be a lawful source of income, however the Seventh Circuit Court of Appeals — which includes Wisconsin — held otherwise in the 1995 case of Knapp v. Eagle Property Management Corp., 54 F.3d 1272, 63 USLW 2750 (1995).

The court in Knapp specifically held that rent assistance vouchers are NOT considered to be a lawful source of income under Wisconsin’s Open Housing Act.  The court reasoned that the Section 8 voucher “does not equate” to the other forms of aid mentioned above.  The Court explained that of the types of income enumerated in the regulation, that rent assistance vouchers would be the most like food stamps — but yet they are still very different.  Unlike food stamps, rent assistance vouchers do not have a montary value independant of the voucher holder and the apartment sought.  Additionally, unlike other forms of support, the local housing authority that administers the federal program makes the rent assistance payments directly to the landlord, rather than to the voucher holder.

The Knapp Court did acknowledge that while rent assistance vouchers could arguably be included within the definition of “lawful source of income”  under the Wisconsin Statutes, that they would “decline to ascribe such an intent to the state legislature because of the potential problems in doing so.”

The primary problem that the Court was referring to is that if section 8 vouchers were to be considered a “lawful source of income” then Wisconsin would in essence be making the Section 8 program mandatory for all Wisconsin landlords.  As mentioned above the federal program is voluntary.  The court felt that it would be wrong to allow a state to make a voluntary federal program mandatory without the legislature clearly stating that that was its intent.

Thus, it is because of the Seventh Circuit Court of Appeal’s holding in Knapp that landlords in Wisconsin are legally allowed to refuse to rent to a prospective tenant that is on “rent assistance.”

ADDED after reviewing comment:  PLEASE NOTE THAT SOME MUNICIPALITIES HAVE DECIDED TO MAKE RECIPIENTS OF HOUSING CHOICE VOUCHERS PROTECTED — So it is always important to check the local ordinances in which you hold property as local municipalities are allowed to create additional protected classes.  Dane County and the City of Madison are notable for doing this.

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New Bill To Be Introduced Requiring Landlords to Change Locks For Tenants In Cases Of Domestic Violence

Aug 10

Posted by Tristan R. Pettit, Esq. in Legislation | 4 Comments

A new bill that would require a landlord to change locks for a tenant in cases of domestic violence is being shopped around for additional sponsors.  State Rep. Dexter and Senator Holperin have drafted a proposed bill, which has not yet been introduced, which would allegedly protect victims of domestic violence, sexual assault, and stalking by requiring landlords to change the locks of the victim’s apartment unit within 48 hours if certain conditions are met.

ADDED 8/31/09 — The bill has officially been introduced in both the Assembly and the Senate.  The proposed text of Senate Bill 274 (AB 400) is now available.

Specifically, the bill requires a landlord to change the locks of a tenant’s unit — or give a tenant permission to do so — if the tenant requests that the locks be changed and provides the landlord with a certified copy of  any of the following: (1) injunction order protecting the tenant or tenant’s child from the person, (2) a condition of release [from prison] ordering the person to have no contact with the tenant or the tenant’s child, (3) a criminal complaint alleging that the person sexually assualted or stalked the tenant or the tenant’s child, or (4) a criminal complaint filed against the person as a result of an arrest for committing a domestic abuse act against the tenant.

If the tenant supplies her landlord with one of the documents mentioned above and requests that her locks be changed then her landlord must change the tenant’s locks within 48 hours after receiving the request. 

The tenant will be required to pay for the cost of the lock change.

There will be an exception to the above which will come into play if the person who is the subject of the injunction order or criminal complaint is also a tenant living at the same unit for which the lock change is requested.  If that happens then the landlord will not be required to change the locks unless there is also an injunction that prohibits the tenant from entering the property of the tenant making the request or there is a condition of release [from prison] ordering the tenant not to contact the tenant that is making the request.

Since this legislation has not yet been officially introduced there is not a link to the actual bill yet available on the Wisconsin Legislature’s website.  When the bill is officially introduced I will add the link.

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