Monday, December 05, 2016

Officials In One Minnesota City Suspect Hubby & Wife 'Landlords' Of Using Contract For Deed Arrangements To Disguise Their Lease Agreements With Tenants For Dilapidated, Blighted Homes In Effort To Dodge Local Laws Governing Rental Property, Landlord/Tenant Relationships

In St. Cloud, Minnesota, the Star Tribune reports:
  • As a district judge, Vicki Landwehr spends her days meting out justice. But as the co-owner of nearly 20 residential properties in the St. Cloud area, it’s Landwehr who’s on the receiving end of public scrutiny — and legal action.

    Several of the properties she and her husband, Don, own have been identified by neighbors and St. Cloud city officials as blights on neighborhoods. Earlier this week, police raided one house and found a meth lab — the latest in a series of troubling incidents that have angered residents and prompted city officials to investigate.

    City officials have met twice with residents to discuss the problems. The most recent meeting, held last week, drew about 100 attendees. The city is so concerned about the issue that it is now taking administrative action against the couple for renting the houses without a license.
    Several properties have been the site of many police calls. In some cases, the houses were occupied by people who had appeared as criminal defendants in Landwehr’s courtroom.

    The city’s investigation, meanwhile, has revealed “high levels of criminal activity” at some of the properties, said St. Cloud City Attorney Matt Staehling.

    St. Cloud Mayor Dave Kleis this week called the problem “a legal issue for the city and a public safety issue. No neighbors should have to deal with the tremendous challenges that these neighborhoods have had to put up with.”

    But it will be difficult for the city to clean up the mess, officials said, because the Landwehrs don’t rent the properties — they sell them on contracts for deed.

    Under the terms of those sales, tenants make payments to the Landwehrs while the judge and her husband retain ownership of the property. The buyer assumes ownership only when the house is fully paid off — but many never are. It’s a business model similar to the rent-to-own method of buying furniture or appliances.

    In some cases, contracts for deed can be used to skirt laws and regulations governing rental property. And that is what the city believes is happening with three of the Landwehr properties, Staehling said. Those properties have changed hands repeatedly, with one holder of the contract for deed transferring it to another while the Landwehrs continue to retain ownership.

    “We’re pursuing these as basically illegal rentals — renting without a license,” Staehling said.

    Early-morning raid

    Staehling called the houses “very distressed properties,” adding that they “have caused a great deal of fear and anxiety in the neighborhoods, and I think for good reason.”

    The police raid this week at 934 Longview Drive — where the meth lab was found — was the second at that address in less than five months. In July, the house, now on its fourth contract-for-deed owner since the Landwehrs bought it in 2003, was the site of a full-fledged SWAT action by St. Cloud police and Sherburne County sheriff’s deputies.
For more, see Judge's St. Cloud properties, including one with meth lab, are called a blight ('High levels of criminal activity' cited at some of the rent-to-own houses).

See also, St. Cloud Times: City cites Landwehrs for contract for deed violations:
  • [C]ity officials have said they think the contract-for-deed arrangements act as a way for the Landwehrs to avoid maintaining the properties as a landlord of a rental property would.

    "Under our normal system of rentals, you would have a rental license, and (the city would) have an opportunity to monitor that," Kleis said, "and when things take place, we have a tool in which to remove that rental license."

    But with contracts for deed, Kleis said, the city loses the ability to hold the deed-holders accountable for problems. Rental ordinances have certain safeguards for tenants and neighbors, including required inspections; contracts-for-deed sales do not.

    In some of the Landwehrs' contract-for-deed properties, it seems the contract holders never actually wind up having the deed transferred to them, according to Staehling. At 934 Longview Drive, the property has changed hands at least three times between when Landwehrs purchased the home in 2003 and Brooks moved in in 2013, according to county records.

    "Contract for deed, in this case, I believe is an attempt to do an end-run on our rental code," Staehling said. "And so we've looked at these contract-for-deed contracts, and there are a number of aspects about them that lead us to conclude that they really are rental properties, operating as rental properties, so we're going to treat them as rental properties."

    Staehling said the contracts for deed act like rentals because occupants rotate in and out by simply transferring the deed to someone else.

    "Every contract can have its own unique terms, but these generally don't have a down payment, generally only have interest payments and no balloon payment," he said. "Just the way it's written, the title's never going to transfer. (The occupants are) not chipping away at the principal."

    Kleis said he called the state's attorney general office for advice.

    "They said, well if it seems like a rental, treat it like a rental, and that's why we're pursuing that angle," he said.

    To give the city more authority in enforcing contracts for deed like rentals, Kleis is looking for the Legislature to create new laws. land contract

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