On May 20, President Obama signed a new law into effect. It wasn't emblazoned in the national media, it wasn't trumpted from the sky, but it hits each and every one of us: It is S.896, "Protecting Tenants at Foreclosure Act." Basically, this law is designed to protect tenants whose landlords are being foreclosed on.
This law is actually very simple: if a tenant lives in a house that is foreclosed on, the tenant may remain in the house after foreclosure for 90 days or the remainder of the lease, whichever is longer.
This law was passed due to publicity of the evil banks perfoming no-notice evictions in California and Nevada. A number of tenants are being removed by the local sheriffs with no notice, and are unable to remove their possessions before the proprty is being padlocked. They were paying rent on time, but the landlord was not paying the mortgage.
Even if the new buyer wants to occupy the house, the new buyer has to allow the tenant to stay. Let's pretend that a house in Chenal is in foreclosure and I want to buy it and move in. Let's pretend that there is a tenant. The tenant gets to stay through the remainder of the lease.
But my reason for posting is what this will do to us as landlords. Personally, I don't have any sympathy for a landlord who intentionally stops paying a mortgage but continues to collect rent. My business plan is to expand and provide good quality rentals. I plan to keep buying new properties, and foreclosures often have a good bang for the buck.
On the other hand, the few times I've bought a house with existing tenants, the experience was not good. The leases were often worthless, and the tenant who "always" paid on time turned out to be perpetually late and refused to pay late fees. Or a drama queen. Or trashed the house.
When I buy a foreclosure, I assume that repair work will be necessary. After all, the previous owner couldn't pay the mortgage... what are the odds on plumbing, HVAC, electrical, etc., being pristine? These are often the kind of repairs that are done best with the property empty.
But with this new law, I MUST keep the tenant for the terms of the original lease. If the property requires extensive repairs, I have to get the tenant's cooperation... what if they become a hindrance to my handyman?
And what is the tenant is not paying the rent? To me, this is the biggest drawback: we have to "trust" that the bank is telling the truth about the tenant's payment record, while the bank is trying to unload the property as quickly as possible. To me this is a significant motivation for the bank to lie. It would be VERY easy for a bank to say "oh, the tenant ALWAYS pays on time" in order to get me to buy the property... then afterwards I have to pay for the eviction.
Bottom line is I see this law making foreclosure buying less attractive to investors like us. And when an asset gets less attractive, the prices keep going down...
Links:
http://tenantstogether.org/article.php?id=723
http://tenantstogether.org/downloads/S.896.pdf
Monday, May 25, 2009
Tuesday, April 7, 2009
SB2 has passed
This will be a short post: today, SB 2 passed. This bill removes the unfair tax from self-storage units. This hopefully will send a message to our representatives: taxing rentals... whether a mini-storage, an apartment or commercial property... is a bad idea and it is something we will oppose.
This is a great victory for those people who lobbied their representatives, who pushed, who emailed, who called... sometimes more than once... and made their voices heard.
With the economy is bad shape, the various governments... city, county, state and federal... are looking for every form of tax revenue they can lay their hands on. Since our state legislature will be meeting on an annual basis, we must be on the watch again next year for another attempt to tax us.
This is a great victory for those people who lobbied their representatives, who pushed, who emailed, who called... sometimes more than once... and made their voices heard.
With the economy is bad shape, the various governments... city, county, state and federal... are looking for every form of tax revenue they can lay their hands on. Since our state legislature will be meeting on an annual basis, we must be on the watch again next year for another attempt to tax us.
Friday, April 3, 2009
Legislative session winding down
The bills that passed so far:
The most important to landlords: HB1213 (Act 311.) This bill contained the technical changes to make the Landlord-Tenant Act of 2007 work. All that is left is for the Supreme Court to allow District Courts to hear eviction cases… and the District Court judges and the Circuit Court judges want this to happen.
HB1316 (Act 274.) This allows the municipalities to charge the same gross receipts taxes on B&Bs, campgrounds, vacation houses etc as they currently charge hotels. We watched the bill carefully to ensure it does not affect leases of 30 days or longer.
HB1479 (Act 390.) This makes copper theft a class D felony, and establishes restrictions on scrap metal dealers.
SB34 (Act 464.) This allows prosecuting attorneys to evict tenants for various criminal offenses such as drug sales, illegal alcohol sales and prostitution.
SB393 (Act 556.) This allows code enforcement to use regular mail to send violation notices to landlords.
SB408 (Act 482.) This act provides some language changes to the Landlord Tenant Act of 2007, in many cases similar to what we passed in HB1213. Also, this bill had a “self-destruct” clause that makes it inactive if another bill changes the same text.
SB454 (Act 559.) This bill changes the security deposit laws. In brief, landlords now have 60 days to return a deposit, and may use regular mail instead of certified mail.
We have a bill still pending that is of strong interest to us:
SB2 – this bill repeals the unfair tax on mini-storages. It is being held hostage in the House by procedural methods. WE WANT A FAIR, STRAIGHT, UP-OR-DOWN vote on this bill. We STRONGLY encourage everybody to contact your representative and encourage them to VOTE FOR SB2!
Last, the 2009 session is winding down. We have been tracking a number of bills that have failed to make it out of committee:
HB1885 – this bill would require landlords to use bold type, colors or different fonts to highlight the “hold harmless” language in a lease. It has passed the House, but has been stuck in committee in the Senate. As of today, the House has requested the bill be returned.
HB1889 – this bill requires any change to a month-to-month lease to be agreed to in writing by the tenant. The Association is strongly against this bill. As of today, it is still in committee.
HB1890 – castle doctrine. This bill was withdrawn by the sponsor.
HB2141 – this bill was a stub bill filed the last day that new bills were allowed. Subsequently the bill was amended to do the following:
- Repeal the criminal eviction laws in their entirety.
- Require a 30 day wait before evictions due to material breach of the lease.
- Require a 14 day wait before evictions due to non-payment of rent.
- Add warranty of habitability clauses that would make the landlords automatically guilty of being “slumlords” even if the tenants maliciously damaged the property.
- Give tenants the right to issue a cure or quit to the landlord due to repairs, even if the tenant caused the damage.
- Make landlords responsible for providing heat and water, even if the tenants refuse to pay for utilities.
In short, this bill would destroy landlording in Arkansas as an investment (except maybe for renting high-dollar houses in West Little Rock.) We have seen these laws passed in other states, and they invariably fail... when it becomes too expensive to be a landlord, only slumlords remain.
We have spoken with Chris, and he assures us the bill is not going to run before the session ends. (However he will be watching it VERY closely.)
HB2218 – this bill would require banks foreclosing on a rental to allow the tenants to have 1st right to purchase, and would require any landlord purchasing the property to allow the tenants to stay in for 90 days after closing.
SB9 – this bill provides a tax credit for restoring historic buildings. It has passed the Senate, but is in committee in the House and is not scheduled to be discussed.
Wednesday, March 25, 2009
We NEED to support SB2!!!
Good evening!
SB2 is the bill to remove the unfair sales tax on self-storage facilities. It has passed the Senate, but is having a harder time in the House. It’s close… very close… and we need to hit the phones and emails ASAP to ensure it passes.
Even though this sales tax does not affect the majority of landlords, a sales tax on self-storage is just a step away from a sales tax on residential rentals. In the economic conditions today, the government will be trying to scrape together as much revenue as possible… and they see us as “rich landlords” who can “pay our fair share.” By killing this UNFAIR TAX now, we send a message to the legislators that landlords AND OUR TENANTS do NOT want more taxes.
Please call and email your representative ASAP, ask them to vote FOR SB.. It is possible this bill will come up on the floor tomorrow, so time is critical!
SB2 is the bill to remove the unfair sales tax on self-storage facilities. It has passed the Senate, but is having a harder time in the House. It’s close… very close… and we need to hit the phones and emails ASAP to ensure it passes.
Even though this sales tax does not affect the majority of landlords, a sales tax on self-storage is just a step away from a sales tax on residential rentals. In the economic conditions today, the government will be trying to scrape together as much revenue as possible… and they see us as “rich landlords” who can “pay our fair share.” By killing this UNFAIR TAX now, we send a message to the legislators that landlords AND OUR TENANTS do NOT want more taxes.
Please call and email your representative ASAP, ask them to vote FOR SB.. It is possible this bill will come up on the floor tomorrow, so time is critical!
Monday, March 23, 2009
Updates
A few legistlative updates:
HB1479 (Copper theft) has passed both houses, has been signed by the Governor and is now Act 390.
SB34 (Nuisance eviction) has passed both houses, has been signed by the Governor and is now Act 464.
SB408 (Sue Madison's changes to Title 18) has passed both houses, has been signed by the Governor and is now Act 482.
SB454 (Security deposits) has passed both houses, and is on the Goevrnor's desk.
HB1479 (Copper theft) has passed both houses, has been signed by the Governor and is now Act 390.
SB34 (Nuisance eviction) has passed both houses, has been signed by the Governor and is now Act 464.
SB408 (Sue Madison's changes to Title 18) has passed both houses, has been signed by the Governor and is now Act 482.
SB454 (Security deposits) has passed both houses, and is on the Goevrnor's desk.
Friday, March 13, 2009
Legislative updates
This week has seen a few changes… here are the quick updates:
HB1497 (copper theft) – in the House, not on the calendar.
HB1885 (bold-face on the hold harmless language) – still in committee in the House.
HB1889 (MTM tenant has to agree in writing to lease changes) – still in committee in the House.
HB1890 (castle doctrine) – still in committee in the House.
SB2 (remove tax on mini-storage) – in the House, not on the calendar.
SB34 (nuisance eviction) – this has passed in the House and Senate. Nothing yet from the governor’s office.
SB393 (code enforcement mailing tickets) – passed in Senate, now in committee in the House.
SB454 (change security deposit accounting to 60 days) – passed in Senate, now in committee in the House.
HB1497 (copper theft) – in the House, not on the calendar.
HB1885 (bold-face on the hold harmless language) – still in committee in the House.
HB1889 (MTM tenant has to agree in writing to lease changes) – still in committee in the House.
HB1890 (castle doctrine) – still in committee in the House.
SB2 (remove tax on mini-storage) – in the House, not on the calendar.
SB34 (nuisance eviction) – this has passed in the House and Senate. Nothing yet from the governor’s office.
SB393 (code enforcement mailing tickets) – passed in Senate, now in committee in the House.
SB454 (change security deposit accounting to 60 days) – passed in Senate, now in committee in the House.
Sunday, March 8, 2009
HB1889 - Please call the Committee members to VOTE IT DOWN
While we've had a good run of legistlative support this year, a bill has come out that we cannot accept. HB 1889 must be killed, plain and simple.
It comes across apprearing to be a bill aimed only at the slumlords: the title is a very dry "AN ACT TO PROHIBIT MORE THAN THIRTY (30) DAYS’ NOTICE TO RENEW A RESIDENTIAL LEASE; TO REQUIRE NEW OR DIFFERENT TERMS UPON RENEWAL OF A RESIDENTIAL LEASE TO BE IN WRITING; AND FOR OTHER PURPOSES." It's very dry.
Now, if you're still awake, I want to draw your attention to the section of the title "TO REQUIRE NEW OR DIFFERENT TERMS UPON RENEWAL OF A RESIDENTIAL LEASE TO BE IN WRITING". This makes sense to all of us, right? after all, we want everything in writing. Writing everything removes the "he said, she said" source of errors. Writing reduces errors in interpretation. Writing protects both the landlord and the tenant, right?
It's a shame this is NOT what the bill does.
This bill adds a new section to Title 18, Chapter 16 as follows: "18-16-113. Renewal of residential leases. (a) A residential lease shall: (1) Be renewed upon the same terms as the previous residential lease unless the lessee agrees in writing to new or additional terms by signing a new residential lease or an addendum to the previous residential lease;".
Let me highlight the text: "unless the lessee agrees in writing". What if the tenant refuses to accept the new terms? NOWHERE in this new section does the landlord have a remedy if the tenant refuses the new terms. It has been a long-established precedent that if the tenant does not accept the new terms, then the tenant must move. This bill is not fair to us.
Let me give an example: in Little Rock, a Pit Bull ordinance was passed last year requiring microchipping, registering, sterilization, etc., of pit bulls. North Little Rock has gone further and simply banned them outright. In case of a violation, who do you think gets the fines? If a child is mauled by a pit bull, who gets sued? The landlords of course... since we "allowed" the pit bull on our property.
Now, assume that I want to change my lease to not allow pit bulls. I send a notice to the tenant, but if HB 1889 becomes law, THE TENANT GETS TO LAUGH IN MY FACE as he refuses to sign. Where is MY protection?
And while I am picking on pit bulls, this issue applies to ANY change in terms. Do you need to not allow the tenant to park on the grass? Too bad. Do you need to pass an registration/inspection fee to the tenant? Too bad. Do you need to raise the rent? Too bad.
WE NEED TO STOP THIS BILL.
The bill was introduced by Representative Cowling last Thursday. I have attempted to email and call him in order to find out what he means to accomplish with this bill, but my efforts have met with no success. Without talking to him, I can only assume he means for this bill to be anti-landlord. I believe that Chris will attempt to contact him at the Capitol tomorrow.
I encourage all of you to email and call him to ask him to sit down with us and talk about the bill. Perhaps he will discuss the problems in this bill with us, and we can find a solution. But if not, this bull -er- bill will be going to the Finance Committee on Tuesday morning. I encourage all landlords to contact the committee members and voice your opposition! Email them AND call them... tell them to vote this bill down!
I certainly will be calling and emailing.
Bill Sponsor:
Rep. Larry Cowling 870-542-7453 cowlingl@arkleg.state.ar.us
Committee members:
Rep. Steve Harrelson, Chair 870-772-0300 steve@steveharrelson.com
Rep. Joan Cash, Vice Chair 870-886-6663 cashk@arkleg.state.ar.us
Rep. Dawn Creekmore creekmore@arkansas.net
Rep. Lindsley Smith 479-443-9706 smithl@arkleg.state.ar.us
Rep. Tommy Lee Baker 870-563-8277 tbaker7343@sbcglobal.net
Rep. David "Bubba" Powers 870-777-9822 powersd@arkleg.state.ar.us
Rep. Johnnie Roebuck jonnie-r@sbcglobal.net
Rep. Barry Hyde 501-371-0255 bhyde@hydco.com
Rep. Duncan Baird bairdd@arkleg.state.ar.us
Rep. Debra Hobbs 479-636-3982 hobbsd@arkleg.state.ar.us
Rep. Andrea Lea leaa@arkleg.state.ar.us
Rep. Butch Wilkins bl-wilkins46@hotmail.com
Rep. Terry Rice 479-637-3100 ricefurn@centurytel.net
Rep. Darrin Williams 501-312-8500 williamsl@arkleg.state.ar.us
Rep. Steve Cole 870-584-4471
Rep. Ann Clemmer 501-569-3331 avclemmer@sbcglobal.net
Rep. Davy Carter 501-605-1346 davy.carter@gmail.com
Rep. Jim Nickels 501-833-2424
Rep. Tiffany Rogers 870-673-4201 rogerst@arkleg.state.ar.us
Rep. Mary Slinkard 479-787-6120
It comes across apprearing to be a bill aimed only at the slumlords: the title is a very dry "AN ACT TO PROHIBIT MORE THAN THIRTY (30) DAYS’ NOTICE TO RENEW A RESIDENTIAL LEASE; TO REQUIRE NEW OR DIFFERENT TERMS UPON RENEWAL OF A RESIDENTIAL LEASE TO BE IN WRITING; AND FOR OTHER PURPOSES." It's very dry.
Now, if you're still awake, I want to draw your attention to the section of the title "TO REQUIRE NEW OR DIFFERENT TERMS UPON RENEWAL OF A RESIDENTIAL LEASE TO BE IN WRITING". This makes sense to all of us, right? after all, we want everything in writing. Writing everything removes the "he said, she said" source of errors. Writing reduces errors in interpretation. Writing protects both the landlord and the tenant, right?
It's a shame this is NOT what the bill does.
This bill adds a new section to Title 18, Chapter 16 as follows: "18-16-113. Renewal of residential leases. (a) A residential lease shall: (1) Be renewed upon the same terms as the previous residential lease unless the lessee agrees in writing to new or additional terms by signing a new residential lease or an addendum to the previous residential lease;".
Let me highlight the text: "unless the lessee agrees in writing". What if the tenant refuses to accept the new terms? NOWHERE in this new section does the landlord have a remedy if the tenant refuses the new terms. It has been a long-established precedent that if the tenant does not accept the new terms, then the tenant must move. This bill is not fair to us.
Let me give an example: in Little Rock, a Pit Bull ordinance was passed last year requiring microchipping, registering, sterilization, etc., of pit bulls. North Little Rock has gone further and simply banned them outright. In case of a violation, who do you think gets the fines? If a child is mauled by a pit bull, who gets sued? The landlords of course... since we "allowed" the pit bull on our property.
Now, assume that I want to change my lease to not allow pit bulls. I send a notice to the tenant, but if HB 1889 becomes law, THE TENANT GETS TO LAUGH IN MY FACE as he refuses to sign. Where is MY protection?
And while I am picking on pit bulls, this issue applies to ANY change in terms. Do you need to not allow the tenant to park on the grass? Too bad. Do you need to pass an registration/inspection fee to the tenant? Too bad. Do you need to raise the rent? Too bad.
WE NEED TO STOP THIS BILL.
The bill was introduced by Representative Cowling last Thursday. I have attempted to email and call him in order to find out what he means to accomplish with this bill, but my efforts have met with no success. Without talking to him, I can only assume he means for this bill to be anti-landlord. I believe that Chris will attempt to contact him at the Capitol tomorrow.
I encourage all of you to email and call him to ask him to sit down with us and talk about the bill. Perhaps he will discuss the problems in this bill with us, and we can find a solution. But if not, this bull -er- bill will be going to the Finance Committee on Tuesday morning. I encourage all landlords to contact the committee members and voice your opposition! Email them AND call them... tell them to vote this bill down!
I certainly will be calling and emailing.
Bill Sponsor:
Rep. Larry Cowling 870-542-7453 cowlingl@arkleg.state.ar.us
Committee members:
Rep. Steve Harrelson, Chair 870-772-0300 steve@steveharrelson.com
Rep. Joan Cash, Vice Chair 870-886-6663 cashk@arkleg.state.ar.us
Rep. Dawn Creekmore creekmore@arkansas.net
Rep. Lindsley Smith 479-443-9706 smithl@arkleg.state.ar.us
Rep. Tommy Lee Baker 870-563-8277 tbaker7343@sbcglobal.net
Rep. David "Bubba" Powers 870-777-9822 powersd@arkleg.state.ar.us
Rep. Johnnie Roebuck jonnie-r@sbcglobal.net
Rep. Barry Hyde 501-371-0255 bhyde@hydco.com
Rep. Duncan Baird bairdd@arkleg.state.ar.us
Rep. Debra Hobbs 479-636-3982 hobbsd@arkleg.state.ar.us
Rep. Andrea Lea leaa@arkleg.state.ar.us
Rep. Butch Wilkins bl-wilkins46@hotmail.com
Rep. Terry Rice 479-637-3100 ricefurn@centurytel.net
Rep. Darrin Williams 501-312-8500 williamsl@arkleg.state.ar.us
Rep. Steve Cole 870-584-4471
Rep. Ann Clemmer 501-569-3331 avclemmer@sbcglobal.net
Rep. Davy Carter 501-605-1346 davy.carter@gmail.com
Rep. Jim Nickels 501-833-2424
Rep. Tiffany Rogers 870-673-4201 rogerst@arkleg.state.ar.us
Rep. Mary Slinkard 479-787-6120
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