Archive for category Residential Rental Inspection (RRI) Program / Mandatory Rental Inspections / Landlord Licensing

ACT 76 – Wisconsin’s New Landlord-Tenant Law – Part 2: Restrictions on Local Ordinances

As I mentioned in Part 1, the soon to be new law contains new provisions as well as some corrective provisions (which will correct unintended consequences from last year’s new law Act 143).  In this blog post I will talk about one of the new provisions of the law which will restrict a local municipality from creating and/or enforcing certain local ordinances.

The new law will creates sec. 66.0104(2)(c) and (d), Wis. Stats., which says that a municipality may not enact or enforce an ordinance that:

a.   Limits a residential tenant’s responsibility, or a residential landlord’s right to recover for damage, waste or neglect of the premises, or for any other costs, expenses, fees payments or damages for which tenant is responsible under law or under the rental agreement.

b.  Requires a landlord to communicate to a tenant any information that is not required to be communicated under federal or state law.

i.e. City of Madison’s ordinance that requires landlords to distribute voter registration information to new tenants will not be enforceable under this new law.

c.  That requires a landlord to communicate to a municipality any information regarding the landlord or tenant unless:

(1) Information is required under federal or state law.

(2) Information is required of all residential real estate owners (not just landlords!)

(3) Information will enable a person to contact the owner, or agent of the owner.

Note: This subsection does not apply to an ordinance that has a reasonable and clearly defined objective of regulating the manufacture of illegal narcotics.

So what will the net effect of this new provision of the law curtailing local municipalities from enacting and enforcing certain ordinances?  According to one tenant advocate SB 179 will eliminate over 20 Madison ordinances.  SB 179 should also eliminate Milwaukee’s Residential Rental Inspection (RRI) pilot project in the UW-M and Lindsay Heights neighborhoods.

It should be noted however that the new law will not eliminate “rental recording” in various municipalities as earlier versions of SB 179 had.  Under the final version of the law, landlords will still have to provide their ownership and contact information to the municiaplity since doing so would fall under the above exception since the information will enable a person to contact the owner or agent of the owner.

To learn more on the background and overview of Wisconsin’s new Landlord-Tenant Law read my prior post.

 

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AASEW’s Next Meeting: How To Buy Rental Property In The New Economy Featuring Joe Dahl – Monday, August 20th

I hope that you all can make it to the next AASEW membership meeting on Monday, August 20th, 2012 starting at 7 PM.  Joe Dahl, a young and dynamic local landlord and property manager (and the newest member of the AASEW Board of Directors) will discuss how to successfully invest in real estate in this new economy.

Joe has successfully bought rental property using his own money, bank money, and the city’s money under the Neighborhood Stabilization Program.  Joe will discuss all of these options and explain how he has been able to successfully own and manage rentals in Milwaukee.  Many of Joe’s rental properties are located in the Lindsey Heights area of Milwaukee.  Lindsey Heights is one of two target areas currently required by the City of Milwaukee’s  Residential Rental Inspection “pilot” Program requiring landlords to voluntarily submit their rental properties to city inspection and requires them to obtain “landlord licences” in order to continue to rent out their properties.  I look forward to hearing Joe’s experience with this controversial city program.

Joe’s story of investing in local real estate while at the same time assisting in the preservation of Milwaukee’s neighborhoods has been covered in local media outlets as well as National Public Radio.

Please join us for Joe’s presentation, along with free food and my “educational moment” (a teaser for the AASEW’s upcoming Landlord Boot Camp) at 7 pm at the  Best Western Midway Hotel which is located at 1005 S. Moorland road in Brookfield.  Attendance is free to AASEW members and $25 to any non-member who has previously attended a meeting.  Come early and enjoy the free food and network with other landlords and vendors that cater to landlords!!

 

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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? 

City of West Allis Passes Landlord Licensing Ordinance

The City of West Allis recently passed a new ordinance that requires all property owners to register their rental properties with the City.

The new law is contained in 3 separate ordinances.   The first ordinances was passed back in August 6, 2010, followed by a repeal and revision to the original ordinance on September 24, 2010, followed by an ordinance creating a sub-section of the ordinance on October 7, 2010.

You can read all 3 ordinances here.

According to the new law, West Allis feels that landlord registration is necessary in order to properly enforce the city’s building, zoning, fire, and health codes and to safeguard persons (read “tenants”), property, and the general welfare.  The city says that only by having a list of current rental property owners and their contact information can the city expeditiously process building code enforcement issues (read: “issue fines and forfeitures”).

A summary of the provisions of this new “Landlord Licensing” ordinance includes the following:

- This new ordinance applies to all residential or commercial property owners (except owners of owner-occupied one and two family properties where ownership is recorded with the Milwaukee County Register of Deeds), condominium owners (except owners of owner-occupied condos where ownership is recorded with the Register of Deeds of Milwaukee County and a Condo Declaration is established and there is an appointed agent for the association).  Government-owned properties are also excluded from the ordinance’s requirements.  So essentially this ordinance applies only to rental property owners.

- The owner must live within the 7 county area ( Milwaukee, Ozaukee, Kenosha, Racine, Walworth Washington and Waukesha counties) or else the owner must appoint a “local operator” who lives in the 7 County area and has the authority to accept notice of violations for enforcement of city codes.

          NOTE:  The 1st version of the ordinance required the owner to live in the City of West Allis or that the “local operator” live in the “near area” of West Allis — whatever that means.  A bit restrictive don’t you think — obviously the city agreed hence the amendment.

-  A separate registration form (and fee) must be filed for each separate tax-key numbered parcel.

-  The registration form must include the owner’s names, address of residence, and phone number if the owner is a person or persons.  A post office box is not allowed.  If a “local operator” is appointed by the owner then the registration must include the same information for the operator.  The tax-key number and address of the property must also be provided on the registration form.

- The intial registration fee for the 1st year is $30 per property and $10 per property for each year thereafter.  If you file online the fee is only $20 for the first year.  A reduced registration fee may be offerred to those owners that attend a city-sponsored landlord training program or equivalent.

-  The form and fee must be filed by November 15th each year.  If filed later than Nov. 15th the fee will be increased to $100.

- Failure to file the registration form, fee, or change of information form is a violation and will result in a Notice being sent by the City.  If the owner fails to comply with the Notice then the city may file a court action against the owner.

- If the West Allis Municipal Court believes that the city has proven its case against the owner with regard to failing to comply with this new ordinance, the city may impose a forfeiture of not less than $100 nor more than $500, plus the costs of the prosecution.

Unfortunately, West Allis has opted to follow in the footsteps of Milwaukee – something many of us were afraid would happen — with regard to the landlord registration/licensing.  Let’s see what community is next to follow.

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Business Journal Article Addresses Fallout of the City’s RRI Ordinance To Date

I was recently interviewed by Business Journal reporter Sean Ryan regarding the fallout of the dismissal of three landlords’ lawsuit against the City of Milwaukee regarding the unconstitutionality of its Residential Rental Inspection (RRI) program.  My most recent post on the subject can be read here.

On October 1, 2010, The Business Journal published  its article entitled “Judge Upholds Milwaukee Home Inspection Program.  Reporter Sean Ryan spoke with the primary plaintiff, Joseph Peters, Alderman Nik Kovac (sponsor of the ordinance), Todd Weiler (of the Department of Neighborhood Services) and myself for the article.

I found Mr. Weiler’s comments to be very noteworthy.  He was quoted as saying that to date DNS has inspected over 800 properties in the two target areas (Lindsey Heights on the north side and the UWM-area on the east) and that during those inspections 8,550 violations were found.  Apparently 1/2 of the the properties inspected – or 400 – had no violations at all.

I wonder if all 8,550 of the violations that were found — and which the landlords were cited for – pertained to life-safety issues?  If you will recall, life safety issues were the “alleged” original impetus behind the ordinance being introduced. 

In speaking with several landlords that I know who own proeprties in the target areas, I was informed that the violations that they were cited for involved very minor issues — such as peeling paint on the outside of a building, torn screens, and failure to paint some wood that had been properly sealed but not painted.  The lead plaintiff, Jospeh Peters, was quoted in the article as saying that the Orders To Correct that he received on his 10 buildings also involved very minor repairs – such as torn screens.

Just how many of the 8,550 violations dealt with life safety issues?  How many illegal attic bedrooms were found?  How many poorly maintained second story porches that could collapse at any minute were identified?  Don’t forget the overloading of circuits by the improper use of extension cords – how many of those were found?

If you will recall the testimony that was offerred by both Alderman Nik Kovac, who sponsored the ordinance, and Art Dahlberg, Commissioner of the Department of Neighborhood Services, at the public hearing before the ZND Committee way back when, the focus of this program was to make these affected properties safe and prevent unnecessary deaths. 

I’m not sure how many lives have been saved as a result of the RRI ordinance to date, but at least we wont have to worry about any of those deadly torn screens, inherently dangerous unpainted wood, and the lethal peeling paint on the outside of a duplex. 

Not sure about you but I feel a lot safer already.

This ordinance is now being shown for what it really is — not an attempt to save lives and improve properties — but rather an way for the city to get inside one’s private property without the need to obtain a warrant or even receive a tenant complaint, a way to make additional money (through the required filing fees and reinspection fees), and a way to further harass landlords that are having a difficult enough time making ends meet. 

Sometimes I just wish that all of the landlords in the city of Milwaukee had the ability to just walk away from their rental properties.  I wonder if the city would then realize, once all the landlords are gone and there is no one to own or operate rental housing, that we provide a much needed service and that most of us do a good job of providing that service.  Would they try to work with us then . . . . ?

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Landlords Lose Lawsuit

On Wednesday, September 22, 2010, Judge Timothy Witkowiak denied three landlords’ motion for summary judgment against the City of Milwaukee and granted the City’s cross motion for summary judgment against the landlords, with regard to constitutionality of the city’s new RRI ordinance.  This ruling effectively ended the lawsuit.

The lawsuit dealt with the City’s new Residential Rental Inspection (RRI) program/ordinance that went into effect on January 1, 2010.  The RRI ordinance requires all landlords in two areas of Milwaukee (the UWM-area on the east side and Lindsay Heights on the north side) to register any and all rental units, pay a fee to the city, allow for the Department of Neighborhood Services to conduct an interior inspection of the rental units, pass the inspection and obtain a rental certificate, in order to continue to be able to rent the rental unit to a tenant.  Any rental unit that does not pass the inspection would be denied a rental certificate and as such the lanldord would no longer be allowed to rent out the unit until such time as a rental certificate could be obtained.

If you are unfamiliar with the RRI program and/or the lawsuit you should review my past blog posts on the subject to get up to speed.

The plaintiff landlords had four main arguments.  I will summarize the arguments and then summarize the court’s ruling on each.

1.   The Ordinance Is Too Vague

Landlords’ Argument

The plaintiffs’ argued that the ordinance contains terms and phrases that are so vague that they do not properly notify landlords who own rental properties in the two designated areas as to what specific conditions will result in a denial of a residential rental certificate or the revocation of a certificate.  The ordinance gives the DNS Commissioner and his inspectors the subjective power to determine whether the conditions in a rental unit constitute a denial or revocation of the certificate.  This subjective power will result in a non-uniform application of the ordinance.

The plaintiffs cited 7 examples within the ordinance where a landlord does not have sufficient notice as to what specific conditions or number of conditions will trigger a denial or revocation of a rental certificate by the city.

Court’s Ruling:

The court ruled that the plaintiff landlords did not meet the burden that was required of them in order to prove that the ordinance was so vague that it was unconstitutional.  The burden that the plaintiffs were required to meet was quite high. 

Under Wisconsin law, a ordinance is presumed to be constituional.  In order to prove an ordinance unconstitutional the attacker must establish its invalidity beyond a reasonable doubt.  Specifically, the plaintiffs had to prove beyond a reasonable doubt that the ordianance posessed no rational basis to any legitimate objective.  In other words, the landlords had to show that the ordinance was unconstitutionally vague in all aspects and incapable of any valid application.

The typical burden of proof in a civil lawsuit is “a reasonable certainty by the greater weight of the credible evidence” which essentially means that if you tip the scale (of justice) slightly in your favor then you have met your burden.  The burden of proof in criminal matters is “beyond a reasonable doubt” which is a much higher and more difficult burden to meet.  In order to meet this higher standard you essentially have to tilt the scale (of justice) all of the way in your favor.

In order to show that an ordinance is unconstitutional on its face the plaintiffs had to meet the higher (criminal-type) burden.  The court ruled that the ordinance as written was not unconstitutionally vague because the plaintiffs failed to demonstrate that the ordinance was impermissibly vague in all situations.  The court added further that just because certain words and phrases in the ordinance were never defined that that alone does not make them vague because if a word or phrse is not defined then one should resort to the common meaning of the word.

The court held that some valid application of the ordinance can be found so as a result there can be no finding that the ordinance was unconstitutionally vague.

The court added that the burden of proof is lower in an “as applied” challenge, or post-enforcement attack, on the validity of the constitutionality of an ordinance and that the court’s ruling under such circumstances could be different.  Essentially, this means that if a landlord was injured (i.e. denied a rental certificate and was forced to evict his/her tenant and lose rental income) by the application of the RRI ordinance, that landord would have a lower burden of proof, in that context, in proving that the ordinance was unconstitutional.   

2.     The ordinance contains fatal defects

Plaintiffs’ Argument:

This argument was that the ordinance as written contained terms which were unclear, had no definitions, and failed to set forth clear standards for when a rental certificate would be granted.  As a result the application of the ordinance by the city would be fatally flawed.  Additionally it was argued that the ordinance gives the DNS Commissioner and his inspectors the arbitrary power to grant, deny, or revoke a rental certificate without providing specific standards as to how that discretion should be used.

The plaintiffs provided nine examples within the ordinance where significant terms were not defined or were unclear.  It was argued that the standard as to what will cause the issuance of a rental certificate is a subjective standard contained only in the minds of the Commissioner and his inspectors and such standard will most likely vary from one inspector to the next. 

This argument also focused on the fact that the ordinance allows for the DNS Commissioner to draft rules or regulations which have not been made a part of the ordinance.  This means that the Commissioner could change the rules at any time and without providing owners prior notice of the changes.  The rules and regulations are not required to be made publicly available since they are not contained in the ordinance itself.

Court’s Ruling:

Disclaimer: I was unable to attend the entire ruling of the court on this issue as I needed to get across town to give a seminar at the AASEW Tradeshow.  However, I was present for the first part of the court’s ruling on this issue and I spoke with people in attendence at the hearing later in the day with regard to the remainder of the court’s ruling.

The court felt that the plaintiffs’ 1st argument (vagueness) and its 2nd argument (fatal flaws) were very similar and contained much overlap.  As such, the court applied the same analysis as it did on the vagueness claim and ruled that the plaintiffs did not meet their burden of proof.

The court also addressed the plaintiffs’ argument that the ordinance does not provide landlords with sufficient notice becasue it refers to standards that are not incorporated into the ordinance itself, which allows DNS to add these standards at a later date and/or change them over time etc.   The court ruled that regulations can legally be added to an ordinance at a later date and are not required to be included in the wording of the ordinance itself.  The court pointed out that it is often the case that administrative rules are created to interpret statutes and ordinances at the federal, state and local levels, and therefore this subset of the plaintiffs’ argument is moot.

3.     Failure to provide impartial review

Plaintiffs’ Argument:

Under the ordinance as written if a landlord does not agree with the decision rendered by the city inspector, the landlord can appeal that decision to the Commissioner of DNS — the employer of the inspector that made the initial decision.  The plaintiffs argued that any ordinance that allows a boss to review the decision of his employee (to deny a landlord a rental certificate) cannot be impartial.  The plaintiffs argued that  Wisconsin Statutes Sec. 68.11(2) requires that all municipalities provide an “impartial decision-maker . . . who did not participate in making or reviewing the initial determination” to preside over any review.  While the RRI ordinance does eventaully allow an impartial review by the Standards and Appeals Board at a later point in the procees, the plaintiffs argued that the requirement that the initial decision first be reviewed by the commissioner, will delay a review by an impartial body by almost a month at a minimum.

Court’s Ruling:

The court stated that the ordinance did provide for an impartial review of the building inspector’s decision by the Standards and Appeals Board and that the requirement that the Commissioner be allowed to review the initial decision, before it could be appealed to Standards and Appeal Board, added no appreciable delay.

4.     Interference with a landlord’s constitutional right to contract with a tenant

Plaintiffs’ Argument:

The plaintiffs argued the denial of a rental certificate would interfere with the landlords rental agreement with his/her tenant.  According to the ordinance, if a landlord does not obtain a rental certificate then s/he cannot continue to rent out the unit — thus implying that the tenant must vacate or if the tenant refuses to do so, be evicted.  First, the plaintiffs argued that the city does not have the authority to remove a tenant from a rental unit which is denied a rental certificate.  The city does not own the property and therefore is not legally allowed to bring an eviction action against the tenant.  Second, the plaintiffs argued that while a landlord has the right to bring an eviction action against his/her tenant generally, said eviction must be predicated upon a breach of the rental agreement by the tenant (unless it is a month to month tenancy).  It was argued that, under a scenario where a rental unit that is inhabited by a tenant is denied a rental certificate, and the tenant has done nothing wrong,  a landlord has no legal basis to evict the tenant, and to require a landlord to evict his tenant under such circumstances is an interference with the landlord and tenant’s contractual agreement.

Court’s Ruling:

The city argued, and the court seemed to tacitly agree, that if a rental certificate is not issued for a specific unit, that the landlord has in effect breached the rental agreement because the landlord is in violation of a city ordinance.  Such a violation of a city ordinance, and brach of the lease, renders the rental agreement void and could thus be the basis for an eviction.

NOTE:  I will have to devote another post to my analysis of this aspect of the ruling because I promise you this will be a huge problem in eviction court should this ever get pushed that far.

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Hearing on Landlords Lawsuit vs. City To Be Held This Wednesday, September 22nd

The hearing on both the Landlords’ and the City’s cross motions for Summary Judgment will be held this Wednesday, September 22nd, at 10 am.   The hearing will take place before Judge Timothy Witkowiak at the Milwaukee County Courthouse.

This hearing could be the final hearing on this lawsuit (barring any appeals) which involves three Landlords suing the City and asking the Court to declare the Residential Rental Inspection (RRI) program unconstitutional as currently written.

Both parties have completed their briefing on the issues.  I have reviewed all of the briefs (hundreds of pages, trust me : ) and am looking forward to attending the hearing at which the judge could issue an oral decision.

If you are interested in attending and want to get up to speed here is a link to all of the posts that I have written on this subject.

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