Saturday, July 29, 2006

The importance of properly filing

While in court yesterday I saw another example of how important it is to understand the eviction process before jumping in:

When their case was called up before the judge, an elder man was escorted by what I think was his son to the plaintiff's table. He was also accompanied by a young woman, who appeared to be his lawyer. The tenants did not show up.

The judge quickly started: "I have reviewed your paperwork, and think I understand why the tenants did not show up. They didn't have to."

It turns out that the woman is his property manager, and when she filed the eviction forms she signed her name instead of his, which she did not have the authority to do. So now, they'll need to refile all of the forms and wait another month to get their tenants out.

The man and the property manager tried telling the judge that since the clerk looked it over before it was accepted it should be valid. The judge cut them off, stating that it simply wasn't filed properly and that they must refile.


As I stated earlier, there are many pitfalls like this, so it is important to be fully aware of the process. If you are not (like I am), it highly pays to have a lawyer available. Also, you need to remember that if anybody is going to receive sympathy at a landlord-tenant hearing, it certainly will not be the landlord.

Friday, July 28, 2006

My big day in court, round 1

Today I had the court hearing regarding my favorite tenants, the ones with the aggressive dogs who have not paid rent since June.

First, a few brief updates. I tried cashing their June rent check again at their bank for at least the 20th time. This time the bank clerk accidentally revealed more information than she was supposed to, informing me that the bank account had been closed. Looks like I'm not going to get paid this way. Also, the second quarter water bill came in and, like the first, water usage was far above normal levels. This has been a problem ever since they've moved in, I'm not quite sure what it is that they're doing. There is not a leak, but their water is usually running when I go over.

Ok, so now the court hearing:

I showed up at the court house 20 minutes early. There were about 10 people waiting to go in, but neither my lawyer nor tenants were there. About 5 minutes after sitting, the female tenant showed up with her ~3 year old daughter. We nodded at each other, but that was all and she passed me to sit a few benches down. Then my lawyer showed up, and we left for the stairwell to go over over the process. There were a few strategies that I wanted to discuss with him, like how the dog situation fit into today's eviction proceedings. Yes, the eviction was initially over the dogs, but after serving the Notice to Cease they stopped paying rent, which was then included as an additional reason for the eviction. It turns out that it is much quicker and cleaner to evict somebody over non-payment of rent, so that was to be our initial plan of attack. If for some reason they end up paying the rent in full, we will just continue the eviction process over the dogs, although it will take a few additional weeks. At least I wouldn't be out so much money.

My lawyer wanted to talk to the tenant to determine where she stood. This was the first major advantage of having a lawyer represent me. He could communicate on less hostile ground than I, which allowed us know what we were dealing with and plan accordingly. When he went to talk with her, I sat in the courtroom. She explained to him that she would not be able to pay in the time required to avoid eviction. Like too many tenants, she mentioned that she was expecting to receive a lot of money "next month" in a settlement, which besides from being unlikely was an excuse she gave me back in June.

Inside the courtroom, we watched a video describing the rights of both the landlord and the tenant. They then read the order in which the cases would be heard, and called a recess for 10 minutes during which they encouraged everybody to talk over the case to see if an agreement could be reached before trial. The clerk came over to us to ask if we had settled or were actually going to have a trial. We told her how the tenant was not going to pay, and she handed us a blank Judgment of Possession form to fill out. We decided not to push for monetary damages on the JoP, but indeed reserved the right to go to small claims court afterwards. The thought was that we'll wait until they are out of the house and we know how much money they owe, including late fees, attorney fees, repair fees, and unpaid rent. My lawyer then brought it over to the tenant, who also signed it. The clerk informed us that we'd still have to meet before the judge.

Getting a Judgment of Possession was the sole purpose of the day. Three business days after the JoP is filed, we can get a Warrant of Removal and schedule a time for the sheriff to lock the tenant out.

When we were called in front of the judge, she already had the JoP in front of her. The tenant carried her daughter on her way to the table, and of course had very teary eyes trying to gain sympathy. The judge asked the tenant, "Are you sure this is what you want to do?", at which point the attorney from Legal Services asked the judge if she could have a moment with the tenant. The judge agreed, and the tenant and newfound attorney went out into the hall, followed by the judge, followed by my attorney. This was another time where it paid to have my lawyer there. It would have been unacceptable for me to accompany them and monitor the situation, but not for him. He went right out there to make sure things didn't get too out of control. Even so, I was a little anxious waiting. I wanted to make sure that if for some reason the rent issue was set aside, the dog one was brought up.

Eventually they all came back and nothing had changed, the JoP still stood. There is really nothing that can be done for a tenant who has not, and cannot, pay rent. While she has other options, like applying for Section 8 housing and finding a different apartment, she will not be able to stay in my apartment without paying me.

We went back before the judge, who again asked the tenant if this is what she wanted to do. She started shrugging and saying that she really had no other options, at which point the judge cut her off and declared it finalized. The JoP stands, and next Thursday we'll file for the Warrant of Removal.

Overall, I think the day was very successful. I am extremely pleased with the job that my lawyer did. There are so many nuances that I definitely would have messed things up had I went without him.

Now, again, we wait...

Thursday, July 20, 2006

How to minimize the risk of paying extraneous fees at closing

This post on TheLandlordBlog talks about how HUD-1s are never correct, and I completely agree with this. It seems like many mortgage brokers and title agents go out of their way to pull the wool over your eyes, and that the first and last time you'll see these extraneous charges are on the HUD-1. For an inexperienced investor, these pointless charges can go undetected and get paid. If the mortgage brokers are questioned, they will be removed, but you have to know to look.

From my experience, dealing with a mortgage broker requires extra care compared to dealing with a bank. The worst experience I've ever had dealt with one company who slapped on several thousand dollars in fees that I saw for the first time on the HUD-1 (at the closing, because "it wasn't ready until then"). I was refinancing two properties at once, and planning to use the money to purchase another. When I looked over the HUD-1, I noticed that there were several extra thousand dollars in fees to the mortgage broker and to the bank. Things like "Processing fee", "Commitment fee", "Appraisal review fee", "Funding fee", and of course the unexpected 1-point "Loan origination fee". None of these items were listed earlier when the broker was enumerating my closing costs. And although I had never heard of any of these fees before closing, they wouldn't remove any of them. I ended up just dropping the deal and walking out of closing, because the people were just too slimy. Since then I much prefer banks = )

While most cases aren't typically this bad, there still may very well be a few hundred dollar fees that can and should be removed at closing. Here are a few things that you can do to minimize the risk of getting taken advantage of at closing:

  1. Be familiar with the process and know what fees are typically paid at closing.

  2. Ask your loan officer to enumerate all expected closing expenses when first applying for the loan. While unexpected costs can and do occur, it is helpful to remember verbatim what was stated earlier to make sure that he was at least being somewhat honest with you.

  3. Go through every line in the HUD-1 with somebody who is both good at math and understands the process. Ideally this person should have no financial stake in the outcome.

  4. Be prepared to walk away from the deal. If you are not, they'll smell blood and won't budge. You'll end up getting jammed with the costs.

  5. Shop around early in the process, use a bank or trusted/recommended mortgage broker (recommended again by somebody who doesn't have financial interests in the deal).

  6. Use your own title agent

  7. Don't be too excited/excitable, you need to be able to think rationally during closing.

  8. Use a lawyer

Any other suggestions?

Tuesday, July 18, 2006

We have a court date

July 28th. Not too bad, just a month or so after initially filing.

Now, if the judge rules to evict, they have four days to leave. If they don't, then I file with the sheriff and he has four days to get them out. Any of their remaining items in the apartment must be properly stored for a certain period of time.

Hopefully I'll get this unit rented out by Sept 1.

Thursday, July 13, 2006

The hideously slow government

My lawyer submitted the eviction forms in person on June 27th. Usually within a week (maybe 10 days) after submission, I receive notification that a court date has been set. I called them yesterday _and they haven't even looked at them yet_.

Certainly part of the problem is that Corzine shut down the state government last week, so they were not in the office Wednesday July 5th – Friday July 7th. They also had July 4th off. Even so, there were still at least 6 business days since the forms were submitted, and yet they still haven't done it. A court date will then be set between 13 and 30 days from the date it is processed.

This is particularly annoying because this delay is costing me money. The tenant's check for June rent was bad, and now they have locked themselves in the apartment, phone lines have been canceled, and there is nothing more I can do to protect my other tenants or to receive the money they owe me. I was hoping to have them evicted by the end of July, and somehow fix up and rent the unit before the beginning of August, but now it is looking like I'll lose August rent too.

I simply wish that the employees at the courthouse were more responsive. I don't think that they understand how important their job is, and they certainly don't have a good enough incentive to get through their work in a timely manner. If somebody were to get hurt by the dogs during this unnecessary delay, I'd think that they should be held partially responsible. I've been very prudent in doing everything I can to remedy the situation, but my hands are tied and I must wait on these slow government employees.