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Federal Laws Property Managers Must Be Aware Of – Part I

Mary Girsch-Bock — Wed, 01 Feb 2012 00:29:56 +0000

Sometimes it seems as if all property managers spend a majority of their time memorizing various rules and regulations. New employees in particular are always trying to learn basic rules such as “when do we return security deposits, or what account does this deposit go into?” But one of the most important set of rules that property managers must be aware of, and have some working knowledge of are federal laws. While memorization is not needed, property managers MUST be aware of the general regulations that these Acts encompass, and must know when further research is necessary in order to clarify any issues that may come up. I’ve summarized a list of federal laws that property managers should be aware of as well as the possible repercussions if violated.

The Fair Housing Act – While the majority of property managers are well acquainted with the Fair Housing Act, here’s a brief recap. The Fair Housing Act prohibits discrimination in the sale, rental, or financing of housing based on race, color, religion, national origin, sex, familial status, or handicap. Penalties for violating the Fair Housing Act are stiff, and include revocation of any license held, and possible federal prison. Make sure you and your staff treat all applicants equally and this should never become an issue.

The Sherman Antitrust Act – This act is designed to promote competition in the open marketplace. While property managers do need to know competitor’s pricing, managers must avoid the appearance of conspiring to fix prices in order to thwart the competition. Only the courts can determine if price fixing has occurred, and a conviction can result in both civil and criminal penalties including time in a federal penitentiary. That simple verbal agreement between property management companies agreeing to maintain similar rents will send a red flag. Remember, all that is necessary is that it looks like price fixing, and you may find yourself in federal court. Avoid even the appearance of price fixing at all costs.

Americans With Disabilities Act (ADA) – The rules of the ADA are complex and multi-tiered. Briefly, the ADA states that no person may be discriminated against on the basis of disability. The ADA mainly affects commercial property managers, but the Act also covers property management offices, which must be made available to all handicapped individuals. Take some time to familiarize yourself with the basics and be sure to keep your office in compliance.

More in Part II.

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Think Lodging Credit is Easy? Think Again

KTS-Law — Fri, 02 Dec 2011 21:05:36 +0000

There has been a recent influx in lawsuits by employees in the property management business. After much consultation and defense of employers in this industry, it has become clear that many employers fail to correctly pay taxes on lodging credit. One of the major problems employers have is grasping the understanding that lodging credit is still “compensation” for tax purposes.

Lodging credit is viewed as a benefit for employers, not only for minimum wage obligations, but also for large tax savings. However, like all California employers, the property management industry must comply with all state and federal laws, including all employer tax obligations and requirements.

Determining what constitutes gross income is the key to understanding an employer’s tax obligation. For tax purposes, gross income includes basically anything of value that a taxpayer receives. For employees, this obviously includes their monetary wages, but it also includes anything else they are given as compensation for their employment, including any “qualified lodging” provided by the employer.

In its simplest form, and for tax purposes only, “qualified lodging” includes any lodging provided by the employer that is:
1. Provided on the business premises;
2. For convenience of employer; and
3. A condition of the employee’s employment

Whether an employee’s compensation includes part lodging credit and part monetary compensation, or whether due to the employee’s limited hours and work schedule he or she receives only lodging credit as his or her sole compensation, an employer must always pay California Unemployment Insurance and State Disability Insurance. However, “qualified lodging” is not subject to Social Security and Medicare taxes.

Lodging credit is great for the employer, as long as understood in its entirety. If you are an employer in the property management industry, or some other similarly situated industry, and you currently do not pay these required tax obligations on your employees’ lodging credit, implement this policy immediately, as it has the potential to save you the expense of future tax penalties and the headache of a Franchise Tax Board audit and/or IRS audit.

You should consult with an attorney for any additional information regarding the requirements of using lodging credit as well as other tax related issues.

Written by: Michaelene H. Kapson, Esq. and Karl P. Schlecht, Esq.

Kimball, Tirey & St. John LLP provides employment law advice to its clients and only represents employers. For more information about this article, please contact partner Karl Schlecht at 800-564-6611.

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Energy Benchmarking Program to Include Multifamily Housing in Seattle

Bryan Ives — Thu, 01 Dec 2011 22:56:09 +0000

The owners of around 8,000 buildings in Seattle, Washington were recently notified that they are now required to take part in the city’s Building Energy Benchmarking and Reporting program. The first phase of the program currently in progress, includes non-residential buildings over 50,000 square feet. The following phase will require both non-residential buildings over 10,000 square feet and multifamily buildings with five or more units to benchmark and report their energy performance no later than April 1, 2012.

In 2010, the benchmarking requirements mandated by the state began with state buildings and in 2011 included buildings over 50,000 square feet. State law initially required the benchmarking of buildings over 10,000 square feet for the year 2012, but city of Seattle expanded the requirements to multifamily properties over five units. Part of the benchmarking requirements is full disclosure of resulting data to lenders, prospective buyers, and tenants. Also, an annual report of the results must be submitted to the city of Seattle.

To help with the benchmarking process, the city partnered with local utilities to provide energy consumption data easily available to building owners. Building owners can access their energy performance online by using the Energy Star Portfolio Manager. The online resource can be used to see how their energy performance compares to similar buildings.

Educational support will soon be provided by the city for building owners who plan on doing the benchmarking themselves rather than hiring an outside party to conduct the analysis. Workshops, webinars and a step-by-step “How To” guide will also be available from the city to help owners with benchmarking while providing valuable energy saving information.

Source: http://www.multihousingnews.com/news/seattle-expands-energy-benchmarking-program-to-include-multifamily-properties/1004044902.html

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Fair Housing Act Lawsuit Settled in Rolla, Missouri

Bryan Ives — Wed, 23 Nov 2011 18:54:34 +0000

Roger Harris, Hediger Enterprises Inc., Carrol Management Group, Forum Manor Associates L.P. and Forum Manor LLC agree to pay $295,00 in monetary damages and civil penalties resulting from a Fair Housing Act lawsuit alleging sexual harassment, race and sex discrimination, retaliation and intimidation.

The lawsuit alleges that Mr. Harris, the former manager of Forum Manor Apartments, a federally-subsidized apartment complex in Rolla, Missouri, engaged in sexual harassment, race and sex discrimination and retaliation, intimidation or coercion against current and prospective tenants. The Department of Justice filed the action in federal court after an investigation by the U.S. Department of Housing and Urban Development (HUD) concluded that Mr. Harris had engaged in a pattern of discrimination in violation of the U.S. Fair Housing Act.

Once the consent decree is approved by the court, the defendants will be required to pay $260,000 in monetary damages to thirteen victims and $35,000 to the United States government as a civil penalty. The decree also requires that all corporate defendants implement non-discrimination policies for its properties and take part in a fair housing training program as a preventive measure against a recurrence of similar conduct.

As to Mr. Harris, the decree will not only prohibit him from managing federally-subsidized properties, but will also limit his ability to manage other rental properties in the future. The Justice Department pointedly observed that it wanted to send a clear message that it regards such discriminatory housing practices as a top priority and that it will aggressively pursue those who violate the Fair Housing Act.

Source: http://www.justice.gov/opa/pr/2011/November/11-crt-1520.html

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D.C. Property Managers Steal 1 Million Dollars

Bryan Ives — Fri, 11 Nov 2011 23:09:34 +0000

The FBI arrested the owners of a D.C property management company accused of defrauding an estimated million dollars from homeowners. The two suspects, Bryan Talbott and Chester Ranson were arrested Tuesday and will be facing a number of felony fraud charges including mortgage fraud, identity theft, bank fraud, and tax fraud. Apparently this is not the first time the two have run into trouble. In 2009 they continued to run their business after a cease and desist order issued by the District Department of Consumer and Regulatory Affairs. ABC7 reported back in May that Esquire Federal City Management, which also conducts business as Esquire, LLC and Private Properties, allegedly stole money from clients’ accounts. Many of the allegations come from people who live overseas and hired Esquire to manage their property in the D.C. area while out of town. Talbott and Ransom are currently being held in a federal facility out of state.

Source: http://www.wjla.com/articles/2011/11/property-managers-arrested-by-fbi-charged-with-fraud-68967.html

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Recyling Bins Now Required for Apartment Complexes in California

Aimee Miller — Tue, 13 Sep 2011 22:44:01 +0000

In California, Governor Jerry Brown recently signed the Renter’s Right to Recycle Act, requiring landlords to offer recycling bins and services for cans, plastic and paper in complexes with five or more apartment units. This effort was led by Assemblyman Bob Blumenfield (Democrat, Woodland Hills), Bob said “…Green living is the future and nothing is more basic than being able to recycle where you live.” This bill was also supported by the California Apartment Association (CAA) which represents thousands of landlords.

An interesting statistic mentioned in the article was that the recycling rate in apartment buildings is just 15%, compared with 70% of Californians who live in single family homes. Before this bill, less than 40% of the renters living in apartments had the option to recycle on the property. If they wanted to recycle, these renters would have to carry their waste across town to a recycling center…..and you can bet not many people will do that!

Source: http://latimesblogs.latimes.com/home_blog/2011/09/apartment-recycling-law-signed-by-governor.html

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Judgment Debtor Exams and the “Secret Lien”

KTS-Law — Tue, 23 Aug 2011 23:14:53 +0000

If you were successful in obtaining a judgment against a former tenant or other third party, chances are you will not be paid voluntarily. Sometimes obtaining the judgment may prove much easier than collecting it. This article will discuss judgment debtor examinations and the “secret lien” which are little known tools that can lead to success in the collection effort.

Creditors routinely collect judgments by bank levy, wage garnishment, and payment plan. In the vast majority of cases, though, a creditor does not know where the defendant currently banks or works. A post-judgment debtor examination in court is an excellent way to find out this information and is the post-judgment equivalent of a deposition.

To initiate the process, a creditor wishing to examine a defendant may reserve a court date by submitting a Judicial Council Form entitled Application and Order for Appearance and Examination to the Clerk of the Court. Once filed, the creditor must personally serve the judgment debtor with the order to appear at least ten days prior to the court date.

Most often, the proper court for the examination proceeding is the court in which the judgment was entered. However, if the debtor resides in a different county and more than 150 miles from the courthouse where the judgment was entered, the examination must take place in a courtroom nearer the defendant. To file for an order to appear in a court other than where the judgment was entered, the creditor must file a special application and affidavit with the court along with an additional filing fee. Prior to submitting this application, the creditor must file an abstract of judgment in the court where the examination is sought.

Upon service of the order, the judgment debtor is required by law to attend. In the event that the judgment debtor fails to appear, a bench warrant may be issued by the court for the debtor’s arrest. Typically, the court sets bail in the amount of the outstanding judgment.

When appearing in court for the examination proceeding, the defendant will be sworn by the Clerk of the Court and under oath. The debtor must reveal and identify all assets at the examination hearing. The creditor may properly present questions pertaining to place of business, banking, inheritances, automobiles, personal property, and real estate, for example.

Courts allow very extensive and intrusive lines of inquiry. As one court opined, the purpose of the examination is to “leave no stone unturned in the search for assets which might be used to satisfy the judgment.” Thus, seemingly remote questions are relevant if they could lead to the existence and location of an asset. The widest scope of inquiry concerning the property and business affairs of the debtor is permissible. Interestingly, even the privilege not to testify against a spouse or registered domestic partner is unavailable to the defendant. The creditor may examine the judgment debtor’s spouse concerning any property in which the debtor has a legal or equitable interest.

One aspect of the judgment debtor examination proceeding that is often overlooked is the “secret lien” that is created upon serving the debtor with the order to appear. Once the debtor is served, a one year lien is automatically placed on all of the debtor’s non-exempt property whether or not it is in the debtor’s possession and control. In fact, the creditor need not actually examine the debtor for the lien to be effective because the service of the order to appear creates the lien.

The lien is a statutory creature that is not published or recorded. The debtor may not even know of its existence. This “secret lien” can be especially beneficial in post-judgment priority litigation or, in some circumstances, a bankruptcy proceeding.

As you might expect, most defendants loathe the courtroom experience. Unless you’re a judge, lawyer, bailiff, or court clerk, the courtroom is a foreign land to be avoided. Because the exam is open to the public, it can be an embarrassing and harrowing circumstance for the defendant. Based upon pure psychology, the service of an order to appear in court can be an outstanding negotiating tool. It literally brings your defendant to the table.

In order to maximize the mechanism, a turnover order can be obtained in conjunction with the examination proceeding. Under a turnover order, the judge can require the appearing defendant to deliver any money or property in his or her possession to the creditor or to the sheriff on the spot. For this reason, it is recommended that the attorney for the creditor apply for a writ of execution prior to the examination date. With the issued writ, the sheriff can properly confiscate monies from the defendant at the judge’s request.

The secret lien, negotiating leverage, and the ability to obtain a turnover order make the judgment debtor examination an especially effective collection tool. Is your collection partner using judgment debtor examinations and the “secret lien”?

Written by: D. Patrick O’Laughlin, Esq.

KTS’s Creditors’ Rights and Collection Practice Group utilizes all available collection tools to ensure our clients have the best opportunity in collecting all monies past due. For more information about collections, please contact us at 800-575-1770 and review our website at www.kts-law.com.

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Case Investigation: Maximizing Commercial Collection

KTS-Law — Fri, 29 Jul 2011 18:44:57 +0000

Commercial collection may be straightforward when a defaulting debtor owns significant real property, has lucrative relationships with identified third parties, or maintains significant money in readily identifiable bank accounts. Commercial collection may be more challenging if a debtor’s assets aren’t as obvious, either because the defaulting debtor has few or no assets, or its assets aren’t as readily apparent.

California has a statutory scheme that provides mechanisms for judgment creditors to recover money involuntarily from judgment debtors. However, a creditor cannot collect if the judgment debtor’s assets cannot be located.

Identifying a defaulting debtor’s assets can be helpful even if a creditor does not have a judgment. Almost all defaulting debtors claim financial distress. A creditor with good information about a debtor’s assets and financial condition will have a better idea of how hard a debtor can be pushed for payment before the debtor is forced into bankruptcy.

Locating debtors and assets is referred to in the collection industry as “skiptracing.” Skiptracing is particularly important in commercial landlord/tenant debt collection because, after an eviction, the tenant has relocated and must be found. One must have the necessary tools to locate a debtor and its assets. Effective skiptracing requires technology, creativity, and persistence.

Public records can be used to locate debtors and their assets. Property ownership records, bankruptcy records, fictitious business names, and business licensing records can be valuable resources.

Most successful collection firms have business relationships with companies who compile and sell information such as employment, location, credit and other information helpful in locating debtors and assets.

Some collection firms specializing in debt collection have invested in software to help with collection. Software may track information about the debt, the debtor, and past collection activity and schedule reminders for future action. Custom software may interface with sources of public record and business credit information to compile potential leads on debtors and their assets. Specialized software may even “scrub” data and prioritize telephone numbers, addresses, and bank information based upon the veracity of the data. While custom software packages can cost hundreds of thousands of dollars, collection firms who make the investment offer their clients a higher rate of return.

While technology is a key component of effective skiptracing, the ability to locate debtors and assets also requires a collector’s personal attention and good judgment.

Law firms that specialize in collection have additional tools available to locate debtors and assets. Additional investigational tools available to collection lawyers include subpoenas, judgment debtor examinations, and interrogatories to judgment debtors. These tools are available only to law firms; they are not available to other third-party debt collection companies.

Commercial collection success requires good tools, accurate determination of which leads to follow and the best method of pursuit, and effective implementation of the chosen course of action.

Our Creditors’ Rights Practice Group effectively utilizes all available collection tools to ensure our clients the best opportunity to collect all amounts due. For more information about collections, please contact us at 800-575-1770.

Written By: D. Patrick O’Laughlin, Esq.

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Protestors Put Homeless in Foreclosed Homes

Nora Betz — Thu, 28 Jul 2011 21:27:31 +0000

Catherine Lennon’s husband died of cancer and Bank of America began foreclosure proceedings on their house in Rochester, N.Y. soon after. A group called Take Back the Land helped her stay in her house for 7 years. Then Fannie Mae took over the loan and began to evict the residents last March. At that point, Catherine had 11 of her extended family living in the home which she was squatting in.

“Take Back the Land blockaded the home for two weeks, preventing the family from being forced out. It ended with a police team physically evicting them and arresting seven people, including a 70-year-old neighbor still in her pajamas.”

Take Back the Land is a group founded by Max Rameau who is a controversial activist who wants to change the way the public views housing issues. Rameau says, “We are challenging corporations’ right to own thousands of homes that they keep vacant while human beings are left homeless. The fundamental purpose of housing should be to house humans. Right now, housing is a corporate profit center.”

The group claims that the squatters they place in the foreclosed homes are to treat the neighbors with respect, maintain the property, and hook up and pay for utilities. This way the value of homes in the neighborhood will not be driven down.

What do you think?

Source: http://realestate.aol.com/blog/2011/07/22/protesters-liberate-foreclosed-homes/

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Handling Evictions While Rents are Going Higher

Marc Courtenay — Thu, 14 Jul 2011 20:36:22 +0000

Rents in Manhattan, NY were up 7% in the second quarter of 2011 compared to the same quarter the previous year. Rents have also increased between 2 and 5% in the major metropolitan areas of California during that same period of time.

The national unemployment rate increased during June of 2011, and the number of new jobs created was disappointingly low. As unemployment benefits expire and public assistance programs are drained, more residents are finding it difficult to meet their major expenses, beginning with their rent.

On July 9th I interviewed the owner of a property management company in Southern California. She and her partners have been managing residential rental properties for almost 40 years. We discussed vacancies, rental rates and handling evictions. She said that vacancy rates in the summer increase because that’s when most people relocate. However, vacancies are being filled at a much faster rate than last summer, and they’ve been able to raise the rents in most locations. “We’re still having to ‘chase’ rents”, she admitted. “The unemployed are having a harder time finding jobs and resident’s finances are strained”. For the first time in their careers, the property managers are hearing residents who are in arrears say that “President Obama is going to help us”—which indicates to them that more are beginning to believe they need government assistance to keep paying their rent.

Being diligent about enforcing their eviction policies has become an important concern. “We are automatically giving out 3-Day Notices after the 6th of the month, no matter how much they owe.” She explained that a 3-Day Notice was a form of “fair warning” that if the resident doesn’t pay in full within 3 days that the eviction process will begin…no exceptions! They’ve decided to hire a legal service to handle the evictions, which includes the serving of the eviction notices.

When it comes to communicating with the residents, they are always polite and respectful to residents who are delinquent in their rent. She or her associates will often call the residents personally to explain what the 3-day notice means and what the residents must do keep from being evicted. “We don’t let our residents become more than 30 days past due. Residents must pay-in-full and we respectfully tell them there are no exceptions.”

When it comes to dealing with older residents or the disabled, the property managers go out of their way to work with their families, local authorities and social services. There are also private and church-sponsored relief programs available for seniors, the disabled and struggling families. The managers use their support staff to locate all available local assistance programs.

“When residents have fallen behind in their rent I often call them and ask if they are planning to move. I remind them that I’m not going to allow them to be past due more than 30 days without filing an ‘unlawful detainer’. Then I explain to them what that is and how the eviction proceeds.” She had their rental and lease agreements updated to clarify that those evicted would have to pay all legal and court costs. There’s also a clause that states the owner and property manager will not pay more than $600 in resident’s legal/court expenses if the eviction is overturned in court.

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