Thursday, May 6, 2010

Better City Websites Will Help ID Slumlords


Post by the Hawthorne Hawkman. "Head on a pole" photo by John Hoff.


Yesterday a terrific meeting was held with many Minneapolis government and community workers around how to combat predatory investors, or slumlords, in light of the foreclosure crisis. A national group, Policy Link, put together a report of various city's strategies called "When Investors Buy Up the Neighborhood: Preventing Investor Ownership from Causing Neighborhood Decline."

There were so many excellent ideas discussed in the meeting and detailed in the report, but for now I will focus on just one. And that is...

...getting the city of Minneapolis' website to have the ability to use an owner's name as a search criteria.

The Johnny Northside blog has identified this as a necessary tool for quite some time. It was first brought up in a post about the Devil (Evannor Haymon) moving in to a property at 3007 3rd St N. We didn't find this out until seven months later because neighbors don't have the same kind of tools to search PUBLIC DATA as city employees do. Then, as neighbors encountered massive slumlord after massive slumlord in NoMi, we wondered just how big of a problem each of them was.

How many properties does Bashir Moghul really own? Or Mahmood Khan? Or any other slumlord? If a new problem property arises on someone's block, how do we know if that landlord/owner has similar problem properties in other neighborhoods? And if we can find a concentration of one owner's problem properties in, let's say, Hawthorne and Folwell, but not so much in Willard-Hay or Jordan, then we know which neighborhoods need to work together to resolve things.

Right now, our residents who experience the effects of slumlords and problem properties are at a disadvantage because we cannot easily search and understand the scope of a problem. In the case of Pamiko, for instance, roughly sixty properties have been identified as belonging to Paul Koenig or one of his LLC's. But we had heard rumors that by the time his misdoings were exposed on this blog, there had already been at least one wave of Pamiko foreclosures. The full scope of Koenig's damage to Minneapolis (primarily the Hawthorne, Jordan, Near North, and Willard-Hay neighborhoods) is still unknown.

It should be noted that we can call city employees and ask for this information. But our good partners at the city are already swamped and overburdened. It wouldn't be easy for them to respond to casual questions of this nature on a regular basis - especially if we're just not sure and we're essentially going fishing for information. Getting a response in this case could take days or even weeks. But searching on the city's website from the comfort of our own home takes seconds.

The need to be able to search the city's website using property owners' names as search criteria has also been formally supported by the Hawthorne Neighborhood Council. This is an option that other cities have on their websites. Locally, the Douglas County, WI website has such an ability. One thing that is tremendously useful there is that website lists properties currently AND previously owned by the owner. The drawback of that website, however, is that the search results do not come up in a separate live link that could be shared with others (like, oh, on a blog).

Even city officials at the Policy Link workshop recognized the need to do better. Henry Reimer, the Director of Inspection Services for the city of Minneapolis, said, "We have an obsolete property information data system." While Minneapolis' website has a good framework, the previous sale date and price are often incomplete or inaccurate as well.

Another person said he wished we could bring back...

(childhood photo of me, my twin bro, and mom. Unsure who took this photo.)

...the stocks as a way to publicly shame slumlords and throw tomatoes at them. "That's what Johnny Northside is for," I quickly responded. "We're the public stocks of the digital age." But there is at least one city that does exactly what we've done on Johnny Northside, ON THEIR OFFICIAL WEBSITE!

Allentown, PA lists a "Landlord Hall of Shame." Right on their website, officially endorsed by the city. God love 'em! Currently featured are Adam and Ira Thor, and the site shows detailed photos of how ugly and slummy the Thors' properties are. Not only that, but they publish pictures of the Thors' OWN HOUSES! The Brothers Thor (which would be a great name for a power rock band, I think) are also called out: “The conditions of these properties are particularly galling when you stack them up against the conditions of the homes where they reside.” Right. On. The Official. City. Website.

But having the owner's name as a searchable criteria won't go far enough. For instance, one slumlord, Phil Kliendl, is known to use different German numbers as LLC's for each individual property. At least with Kliendl, he uses the same mailing address in Burnsville for all the LLC's. Some landlords have as many as eighty properties, with a different LLC for each one, and the mailing address of the LLC is the subject property. We need to require that landlords who do this also list a principal of the LLC and a way to contact them other than a PO Box. The LLC principal should also be plugged into the same search criteria as an owner's name.

There were plenty of other excellent ideas tossed around, and I'm sure those will appear on this blog in the near future. For now, having this issue brought forward on such a prominent level is progress!

19 comments:

Hans said...

Ah HA! Finally an explanation for Funf LLC... the name of the "owner" of the house I purchased.

I wonder if this strategy of different LLCs owning each property also limit the Principal's liability in the even somebody sues them. It seems like this takes advantage of some kind of loophole in the law. How could it makes sense to register a new LLC for each slummy house you own?

Searching by owners name would also make it easier to investigate slummy practices like electricity theft. I can think of a certain somebody that's stolen a nice sum from Xcel energy (and all of their customers too).

I'm all for updating the city's website to meet today's needs.

The Hawthorne Hawkman said...

Hans,

In some ways, creating the LLC's for each individual property is a very smart way to do exactly what you mentioned. If I owned multiple properties I would seriously consider doing the LLC's route for exactly that reason.

Playing devil's advocate here, let's say I owned twenty properties, and despite my best efforts (or those of my management entity), a bad tenant snuck through my screening process. They trashed the place, didn't pay rent, and then after eviction, sued me. And then let's hypothesize that they actually WON the lawsuit and I owed them damages in spite of the fact that they were the bad guys.

The one-LLC-per-property model would insulate me, and effectively keep that financial loss from affecting the other 19 properties (and my tenants who need a place to stay). So this could be a very smart way to run properties. Except it tends to be misused by slumlords, as you've experienced.

Anonymous said...

While I understand the concerns of privacy for property owners. I think the need for such an ability far outweighs the intrusiveness of such a search.

Plus, if a property owner isn't doing anything wrong, he or she should worry.

Anonymous said...

Another search tool I would like to see in Hennepin County is to make their property records division at least partially searchable online. In property records, you can search by grantor/grantee, legal description, plat name, and varous other search criteria. Some counties allow people to look at actual scans of the documents (either for a fee or not) and some just show a document index. Even with a document index, you can see basic information, such as date of last transfer, how many mortgages are on the property, and with whom, and whether there are other outstanding liens.

Also, the property tax record website is not the only repository of owner information. I have said for some time that the rental license application needs to be changed to require greater disclosure of information. Take a look at other business license applications for Minneapolis, and you will see how very little information is required on those rental license apps. Once more detailed information is required on license applications, that information could easily be added to fields already available on the city regulatory service website.

AKL

Patrick said...

Thanks for the info Hawkman. I'm learning a lot here.

Hans said...

I agree with Patrick. This has been an exceptionally informative post for the lay person.

Obviously the slummy property owners already know all of this good stuff... my only question is how can we move this proposition forward so the city will actually change the website?

Any ideas Patrick? Lets brainstorm!

The Hawthorne Hawkman said...

Also, I am not advocating for taking data that is currently private and making it public. Instead, we need to make data that is ALREADY public accessible in more ways.

Don Allen said...

Jeff- I usually don't agree with you, but in the case of creating LLC's for each individual property would be a great thing.

One thing this would do is distinguish what properties the Ackerberg Group really owns and what the non-profit group Catalyst owns.

Another point, has anyone contacted NRRC (Northside Residents Redevelopment Council), I think their the experts in forming LLC's for properties in North Minneapolis.

I am very interested in this process and will help in any way I can.

http://ibnnnews.com

The Hawthorne Hawkman said...

Don,

I am actually chuckling a bit at how I think we agree and disagree almost simultaneously here.

For instance, I think that the Ackerberg Group and Catalyst have been tremendous partners in NoMi, and I bet you're more skeptical. Yet I do agree that their properties should be distinguished as far as which entity owns/manages which properties. (For the record, I have no indication whether this is already the case or not.)

And I do like the LLC idea from the standpoint of insulating oneself from risk. I don't, however, like how it makes it harder to determine which landlords/property owners are responsible for what properties. I'm all for the LLC model as long as principals of the LLC's are easily identifiable.

Anonymous said...

What if we made landlords submit some DNA along with their rental license application. This would ensure LLC or no LLC we could tell who the landlord is because likley there would be a trace of their DNA on the property. This way we could respect their privacy that the LLC creates on the property record.

Anonymous said...

The process of forming an LLC for each individual property would be excessive if one owned numerous houses. Forming a LLC type company is a lot of paperwork and filing, and typically takes an attorney. Although an LLC has tax advantages, the limited liability does not necessarily shield the owners from financial peril as the name implies. For someone like Ackerberg with multiple companies to do it makes sense because they have the resources. But for the average guy who buys multiple investment properties as rentals, I think it makes more sense for all the properties to be under one LLC. I don't see any advantage to the multiple Limited Liability Companies.

Anonymous said...

To setup an LLC takes $170.00 and ten minutes at the http://expressservices.sos.state.mn.us/Filings.aspx

Website. You then just need to start a separate checking account for the LLC and do not mingle your money with that of the LLC. Do ALL of your correspondance as your LLC with your title within the company in the signature. Never conduct business as yourself only that of a representative of the LLC and that is pretty much it. You have to renew annualy but that is also online and takes 5 minutes.

The Hawthorne Hawkman said...

Forming individual LLC's for each property does wind up as a very cumbersome process once someone gets up to twenty or more properties. At that point, it makes more sense to roll them into one LLC and not have 20+ checkbooks, tax filings, bank accounts, insurance policies, etc.

A good property manager, even one using the LLC system to mitigate risk, will consolidate them once they reach an unwieldy point. The ones that have scores of LLC's are typically doing it to fly under the radar of detection, in my opinion.

Hans said...

A separate bank account, tax filing and insurance policy for EACH slummy house? Seems like this would entail a lot of work come tax season.

It also seems like it would be easier to slip under the tax radar.

Would the state be more likely to go after someone who owes money on 40 different LLC owned properties... or go after someone who owes on 40 properties under one name?

Again this makes me wonder what we as citizens can do to encourage the city to make this important public data more accessible.

Anonymous said...

It's really not that big of a deal if the LLC is treated as a disregarded entity, in that the profits/losses simply flow through to the personal income of the owner. If I had a bunch of cheapo properties i'd lump say 5-10 per LLC. BUT If I had say properties paid off that were $100k + in value you bet i'd have an LLC per property so if i'm sued the max they can take is the assets of the one business. Small price to pay for the protection by keeping business separate between properties. If I had a bunch, what i'd likley do is create an LLC per property, then create an LLC that is the property managemetn company and perform the day to day property management for my other LLC's using the managemetn LLC so spending on supplies etc is easier. It's really all in how you structure it as to how cumbersome it is. If you have proper records there is no reason to believe you are more likley to face an audit than having one fat LLC etc.

Anonymous said...

Great Article - but the question of how we effect change has not been answered. Who is in charge of updating these services? Does the city even get the information required to complete a decent data bank? Is this something the City Council must address as a rental license requirement? Do we start a petition or think about hiring an attorney?

The Hawthorne Hawkman said...

Anon 7:16, my answers shouldn't be considered definitive; they're only my approach. Others may find ways that are more effective.

The first approach I have is to contact my city council person (Hofstede) as well as Samuels and Johnson because of their northside wards. I want to make sure council members are aware of the concerns of their constituents, and in an ideal world, that would generate enough momentum to convince them to make appropriate changes.

With this issue, at least, we haven't reached that critical mass. So who else should be contacted? The Regulatory, Energy, and Environment Committee is chaired by Elizabeth Glidden and does handle such things as rental licenses. This issue could overlap into other committee areas though, like Community Development (Chaired by Lisa Goodman), Public Safety (Chaired by Don Samuels), or Zoning and Planning (Chaired by Gary Schiff).

Much of the data on the city's website is also compiled by the county, so your county commissioner could be a good person to contact as well. And if you happen to know which city employee is in charge of which department since the last time the city shuffled the deck, you could call that person directly.

Anonymous said...

People are soo stupid ... they cant see whats in front of their faces .. cant trust family .. family are just regular people ... the people that are your brothers/sisters .. can be fake .. your man is more important than your brother??? come on now .. just know you cant trust nobody .. fake sisters .. they just regular people to me now.

Anonymous said...

Your man is more important than your brother ? Ha he not gettin out any time soon . Cant trust none thats what I see..