North Minneapolis has seen no shortage of LLC's and odd connections among family members and associates related to slumlord ownership and outright fraud. Whether it's been Koenig's multiple LLC incarnations, Mahmood Khan and his relatives transferring property among themselves, Moghul owning property through a trust account, or the numerous incarnations of Danna D, or even small-time slumlords like Phil Kliendl using a different LLC for each property, we're no stranger to convoluted ownership schemes.
(Or Robert Serr's LLC's and restaurant connections, or Larry Maxwell orchestrating pretty much everything involved in his transactions. Or...well you get the point.)
So one neighborhood group in Chicago used a social mapping technique to draw connections among their local slumlords, and used that data to assist the city attorney in convicting several notorious slumlords. The post has information scrubbed for privacy reasons, but is still an instructive read.
It can be found here. In many ways, Minneapolis bloggers have been using the social mapping techniques already. The article should help improve our tactics.
Tracking these crooks is difficult but only a fraction of the problem. Getting our local government to CARE and ACT is the real obstacle!
ReplyDeleteIf you think that using one LLC per property is somehow shady, you should read up on what an LLC does in the way of asset protection. You seem to cast aspersions on what is a totally legit business practice. I usually bundle 3-4 in one LLC but if I was renting to tenants in North Minneapolis, i'd be using one per property as well.
ReplyDeletelol-not necessarily shady, but a good indicator that it's not an owner occupied property.
ReplyDeleteOh wait you said that.
I've blogged before about how having an LLC for each property (or bundles of them) can be a way to limit liability and could be a legitimate practice. But there's certainly a correlation between that tactic and bad landlords.
ReplyDeleteWhy don't you think that landlords should be liable for their business dealings?
ReplyDeleteThis "business" has an effect on the lives of tenants, neighbors, and homesteaders in the rental properties community.
The effect of limiting liability to 0% removes any personal responsibility that normal human beings have on others. If you can't operate within these perimeters or are a sociopath then you shouldn't own rental property.
My immediate neighbors and I suffered property damage from an adjacent rental property fire in September. What followed for the next 4 weeks was endless phone-calling and meeting attendance on my part to the city, neighborhood groups, and insurance adjusters because I was told rental license holders are not required to have any insurance on their properties if no lien exists on the building. Strangely, nearly everyone I spoke with, from JACC members, to 311, to community police liasons, to my insurance company, etc. believed this either WAS the case or SHOULD be the case. In the end, the property was fixed, but not without threats from the "investment" firm that they legally were not responsible for the damage their tenant inflicted, etc. etc. My neighbor and I suggested to the Jordan neighborhood committee that the city should require fire insurance as part of the rental license process, especially in neighborhoods with small lots, older housing stock, and high density of rentals. The response to this suggestion was something like:
ReplyDelete"Oh, but the landlords wouldn't like that- They'd have to repair the buildings to a safety level acceptable to the insurance company code!" Well, if landlords/investment owners/whatever, can't or aren't willing to make their properties safe for their tenants or neighbors, why should they be in business??
Amen, Anon 11:36
ReplyDeleteWhat you heard from the JACC members was not a rationalization of this situation, but a lament that we don't have enough community support to successfully engage the very strong landlord groups that have a stranglehold over CPED and the City Council.
Get more involved and lets make some changes!
Just so you all know, insurance companies only give ACV policies on inner city rentals, so if their is a loss, they do not pay more tnan 20 to 30 cents on the dollar of loss.
ReplyDeleteThere needs to be accountability, not an overly sympathetic hand reaching out to coddle every landlord in Minneapolis. The US has a "too big to fail" problem within the financial sector; it seems we here have a "too scummy to fail" problem with the rental "industry".
ReplyDeleteI'd be interested in working with others on building a case for an ordinance framed on lot size, average age of buildings, density of rentals, etc. I have a feeling successfully presenting the plan to the City hinges largely on preparing a well-written petition/report employing geospatial data to support a definition of Northside neighborhood (or anywhere else in the city that falls within these criteria) properties as "vulnerable" and therefore require fire/property insurance per rental license. You'd also have to make the case the criteria together create a higher incidence of adjacent property damage versus neighborhoods with larger lots, newer housing stock etc...this last bit may be information insurance companies have at their disposal.
Anon 12:09
ReplyDeleteI would be glad to assist you with this. Contact me and we can get the ball rolling.
Maybe we could make an ordinance that at least every two houses must be owner occupied at all times. Then between there could be one rental, then two more owner occupied homes. This way they would be staggered and less of a risk to other homes. Or perhaps we could force landlords to seek a "sponsorship" of an adjacent owner occupant who keeps an eye on the property for the landlord. This way more supervision could be present to keep the renters in line with our community standards.
ReplyDeleteKudos for those considerations 11:49
ReplyDeleteBut, I am afraid that it would be impractical to alternate rental licenses for most neighborhoods as many non-homesteads are already established and the geography of all neighborhoods is not the same.
On your second suggestion I am afraid all we would end up with is a few "homesteaders" picking up some extra cash for shilling for a slumlord. Since we don't currently have any way to enforce property standards, adding a middleman would just make matters more complicated.
It would be better to cap a percentage of licenses that a neighborhood could develop with existing rental licenses grandfathered in. This would increase the property values of existing rentals and give landlords more incentive to maintain those properties. As bad landlords lost their licenses or sold to homesteaders the community would establish a manageable parity.
What we need are standards that apply to every property owner being enforced.
How about we have the city perform an inspection of all properties equal to what landlords face? This should cause all dwellings to rise in quality and improve the overall value of the neighborhood. It would also give us a basis to hold landlords to the same standard as homeowners.
ReplyDeleteDo landlords *actually* undergo inspections from the City? I thought I read the fire inspection list is something like 7 years behind (a point brought up after the tragic bar/apartment fire on Lake Street that killed several people a year or two ago). I think the idea is homeowners with insurance already undergo an inspection that is far more rigorous than any non-insured rental property. If homeowners don't keep up their yard/house, I think that is an issue that, while important, needs to be kept separate from this issue. Partly to keep a focused target, partly to prevent becoming too heavy-handed too quickly.
DeletePlease, anyone correct me if I'm wrong on any of the above.
1915 Bung and Anons at 3:28 and 11:49...sounds like great brainstorming. I think a percentage-based rental cap coupled with mandatory fire insurance would really weed out the slumlords. Perhaps another resource to consider: the City of Duluth placed a moratorium on multi-tenant housing in single-family homes (although this was recently repealed because the City Hall, after seeing a drastic decrease in the problems associated with such rentals thought that after 9 months, the problem was *fixed*---duh!! Kinda like going in for one chemo treatment and letting the tumor grow, but I digress) anyway, I think they researched the property value and standard of living damage high rental densities inflict upon established single-family home neighborhoods (in this case caused by UMD's dearth of student housing and resulting in five billion car households and "Animal House" living conditions at student residences). Perhaps this kind of study can help flesh out and/or build a case for a Minneapolis ordinance.
ReplyDeleteWhile I feel that it seems fair to treat everyone equally regarding nuisance property conditions, I think that maintaining a "business" where tenants are dependent on health and safety issues carries a higher degree of responsibility.
ReplyDeleteFrankly, I don't care if the homesteader next door get a shock every time he flushes the toilet as long as those conditions don't impact my home.
http://www.ci.minneapolis.mn.us/inspections/rental/inspections_rentlicensefee
http://www.ci.minneapolis.mn.us/inspections/rental/inspections_docs_rentalappordinance
Rental Inspections are required at time of initial licensing and then if warranted.
This is a good reason not to piss off your tenant (No matter what he does)!
Section 8 funding maintains that as long as the same tenant is present then you don't need annual inspections. They are way behind also. A report from a HUD auditor last year cited huge discrepancies with that program.
Reimbursements are ridiculously high.
This is why many landlords are willing to protect bad tenants as long as possible.
I agree that landlords need full insurance. As a homeowner, the minimum coverage I can get on mt home is s188,000 even though my mortgage is only $73K and the value of my structure is $60K. Yet, the slumlords who own the rat traps down the block aren't required to have any insurance.
Why buy insurance when the title is registered to a LLC and you can pawn the liability off on the tax payers if it becomes unprofitable. I mean it's not like you even know any of the neighbors whose property values you are destroying. Better to invest that money in a second slum.
Why are renters lives more important than that of a homeowner. If we should protect folks from electrical shocks by the way of inspections, we should make sure that homesteaders are equally protected from unsafe conditions. After all if even one life is saved by revealing an unsafe condition isn't it worth it? I don't think that we can assume that owner occupant homeowners are any less worthy of close inspection to ensure safety in the home. This is also to protect other property owners next door etc. Lets not choose winners and losers when it comes to safety.
ReplyDeleteI don't think anyone is arguing that one life is more important that the other. One of the reasons slum properties exist is because their owners have ZERO incentive or regulation forcing the upkeep of the properties. Requiring property insurance as part of the rental license with the city will help start the reversal of the neglect that affects everyone in the neighborhood, home owner and renter alike.
ReplyDelete1915 Bung, do you think the owners operating under LLCs will use that status as a rebuttal to an insurance requirement? I'm guessing the number of LLCs a person can have are limitless and therefore unregulated?
ReplyDeleteWhat good is it to force investors to hold property insurance on their rentals when if paid off they can just take the money and abandon the property. I fail to see how insurance = the upkeep of a property. I think the only way to keep properties properly maintained is to inspect all property and force the owners to bring up to a common code. This would also help weed out owner occupants who fail to maintain the properties. They would then find life uncomfortable due to repeated fines and re-inspections and would be forced to sell to an investor or owner occupant who will maintain the property to the community standard.
ReplyDeleteProperty insurance should be a condition of rental licenses. All owners who have a mortgage are required to have insurance.
ReplyDeleteNothing can stop an "investor" from running out on an investment.
However, all business entities do need to have a specific individual listed as a registered agent with the Minnesota Secretary of State. By linking data with the State, the City could limit these individuals from obtaining additional rental licenses regardless of the assumed business name. A little due diligence by the City would save millions of dollars worth of wasted revenue and help stabilize our neighborhoods.
Anon 4:54 your characterization of my comments are simplistic.
Naturally, I do care about the health and welfare of my fellow community members. But, while renters are subject to conditions that they cannot fully research or control before or during their lease; they need to have assurances that certain safety standards will exist.
What I am advocating is more leniency in allowing owner/occupants to move into their investments after purchase to protect and do repairs that fit their lifestyle rather than some utopian view of what all modern homes need.
The current City emphasis on bringing old homes up to modern standards under the guise of safety codes mandates extreme costs for homesteaders without actual value being added to the home.
The older homes that exist in most of Minneapolis were more than adequate to raise multiple generations of families who performed many of their own repairs. In the 60's and 70's many decaying neighborhoods were resurrected through sweat equity.
Now, the mandated updates and limited timetables for occupancy drive up the cost of these homes on par with newer suburban homes which have more market stability and less challenging social environments.
The first result of leaving a home vacant is that some thug will take 5 minutes to kick in the back door and take just enough copper to mandate $3-5K worth of repairs before the home can be occupied.
Costs associated with improvements needed to meet the 90 day occupancy requirements with purchase deposit, mortgage payments, and insurance costs puts and you have thousands of properties that even area nonprofits can't finance rehabilitation with any certainty of recouping a fraction of their costs. This glut of housing drives down property and resale values.
Buyers whose homes can not be brought to code on this timetable or have been vacant more than 90 days (all bank owned properties) are subject to an additional $6,000 vacant building fee. Duplexes and mufti-family rentals are allowed a temporary occupancy permit ($177) to allow "investors" to complete projects - these are not given to single family homesteaders.
The time limitations and code requirements of homesteaders who have interest in doing rehab in our community make it cost prohibitive.
Enter the slumlords.
ReplyDeleteDue to limitations placed on homesteaders, these "business men" can now easily pick up properties under $30K and finance cheap short term repairs that will get them past the inspection process (never mind what they look like). Professional shills are recruited to sign off on volumes of sub-standard repairs. Section 8 creates a ready pool of renters who are subsidized at amounts that make these minimal investments lucrative ($2032 mo. for 2-2 Bedroom duplex).
Misguided efforts to improve global energy efficiency and environmental standards cast a huge burden on our housing stock and load landfills with demoed building materials.
City licensed Plumbers and Electricians, asbestos abatement, lead abatement, wired Co2 and fire detectors, hand rails to code, etc...for owner occupied dwellings are great improvements, But to demo homes on the basis that they cannot attract homesteaders who meat the strict financial qualifications to meet these imposed standards is insanity that diminishes a communities ability to restore itself.
The dysfunctional over-site that prohibits homesteading proliferates short term investors in our community.
Now I know I am going to here from a lot of zealots who want to protect children. Well, as parents those are the types of responsibilities we have to take and the decision to live in an older house is no different than the hazardous chemicals we choose to purchase for our homes and gardens. Do you really believe that these same children are safer in a rental owned by Khan or Koenig?
We can't assume that anyone's life would be jeopardized if CPED allowed homesteaders to purchase and repair vacant homes in our neighborhood with sweat equity on their own timetables.
It looks like Koenig is being evicted.
ReplyDeletehttp://pa.courts.state.mn.us/CaseDetail.aspx?CaseID=1615106430
Anon 9:12, your link doesn't take me to direct information. Could you please post the specific case number? Or you could send a private message about this.
ReplyDeleteCase No. 82-CV-12-783
ReplyDeleteLeonzal Biz Inc vs Paul M Koenig, Michelle L Koenig
Case Type: Eviction (UD)
Date Filed: 02/07/2012
Location: Washington-Stillwater
Paul Koenig's Judgments:
ReplyDeleteCase No. 19HA-CV-09-4324
Dakota-Hastings
US Federal Credit Union
Current Principal: $1,062,336.70
Case No. 19HA-CV-09-4324
Dakota-Hastings
US Federal Credit Union
Current Principal: $82,986.53
Case No. 19HA-CV-10-7029
Dakota-Hastings
Wallboard Inc
Current Principal: $15,383.29
Case No. 27-CV-09-20187
Hennepin
Wallboard Inc.
Current Principal: $4,912.00
Case No. 27-CV-09-20187
Hennepin
Wallboard Inc
Current Principal: $15,383.29
Case No. 82-CV-10-8013
Washington-Stillwater
Wallboard, Inc.
Current Principal: $4,912.00
Pamiko's Judgements:
ReplyDeleteCase No. 62-CV-11-3172
Ramsey Civil
Hiway Federal Credit Union
Current Principal: $1,300.00
Case No. 62-CV-09-8683
Ramsey Civil
FLOOR TECHNOLOGIES INC
Current Principal: $67,568.47
Case No. 27-CV-09-20187
Hennepin
Wallboard Inc
Current Principal: $15,383.29
Case No. 27-CV-09-13108
Hennepin Civil
FLOOR TECHNOLOGIES INC
Current Principal: $67,568.47
Case No. 19HA-CV-10-7029
Dakota-Hastings
Wallboard Inc
Current Principal: $15,383.29
Paul Koenig's eviction hearing is tomorrow:
ReplyDeleteWashington County Courthouse
14949 62nd Street North
Stillwater, MN 55082
Court Room #200 at 9:00am
Judge Tad Jude
Case No. 82-CV-12-783
It's official......Paul Koenig has been evicted:
ReplyDelete2/22 Eviction Hearing - Held (9am)
2/22 Order & Judgement - Eviction
2/22 Notice of Filing