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Legislative Updates: Wisconsin

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by William (Nick) Foshag
Gray & Associates, L.L.P.
USFN Member (Wisconsin)

Countering Abuses in the Process relating to Blighted Properties — Over the last two years Milwaukee’s major newspaper has been running an ongoing “watchdog” series dramatically entitled, Landlord Games. The series of articles, along with a recent bestselling book (Evicted) by University of Wisconsin alumnus Dr. Matthew Desmond, has turned a spotlight on landlord-tenant and related foreclosure issues, particularly in the inner city of Milwaukee. In response to this attention, the Wisconsin legislature has enacted several measures aimed at preventing bad actors from abusing the system.

In January 2016 a statutory change was made for Milwaukee County that targeted a handful of third-party purchasers at sheriff’s sales who intentionally delayed (or simply never recorded) a sheriff’s deed. If the deeds were not recorded, the City’s land records were not updated and, consequently, the City’s delinquent tax bills and building code violations were still being directed to the previous owners who had lost the property in foreclosure. In some instances, the property taxes were never paid, and after three to four years the City may ultimately take the property through the tax foreclosure process.

Prior to the tax foreclosure, the current owner might continue to collect rent and, in many cases, allow the property to deteriorate further — resulting in building code violations and City inspection fines, which (like the tax bills) were still being directed to the former owner. To stem this abuse, the 2016 change provided that immediately following a completed foreclosure, the sheriff’s deed would be transmitted directly from the clerk of courts to the register of deeds office for recording.

In December 2017, the legislature expanded the requirements for Milwaukee County to all 72 counties in Wisconsin. To encourage interested third-party buyers, the change also required that the notice of the sheriff’s sale include the street address of the subject property and the amount of the underlying foreclosure judgment.

In March 2018, two even more ambitious measures were passed (and expected to be signed into law by the end of the following month): 2017 Assembly Bill 690 allows a county to enact its own ordinance requiring the sheriff to conduct; or to engage a third party to conduct, mortgage foreclosure sheriff’s sales using an Internet-based auction, and 2017 Assembly Bill 691 imposes minimum qualifications for third-party bidders at a sheriff’s sale.

Following similar measures around the country, the Wisconsin legislature’s intent in allowing sheriff’s sales to be conducted online is to make the process more accessible to the public and more transparent for interested bidders who might otherwise be intimidated by the process as conducted at the courthouse. Sales in Milwaukee, for example, are conducted in a windowless room in the basement of the courthouse and are attended primarily by a regular crowd of seasoned bidders. Further changes will be that any priority liens on the property must be identified in the notice of sale and by the person conducting the online auction. Moreover, any deposit on a successful online bid will be allowed to be paid by credit or debit card, or another electronic payment method.

The intent of imposing minimum qualifications for third-party bidders at sheriff’s sales is to prevent the type of abuses seen particularly in Milwaukee County, where a handful of frequent purchasers were buying low-cost foreclosure properties to be used as rental units — and intentionally allowing property taxes and building code violations to go unpaid. Once this change is implemented, no third-party (or their related business) may bid if more than 120 days delinquent on any property taxes, or if they have any unsatisfied court judgments related to a violation of a state or local building code. With the specific exception made for Fannie Mae and Freddie Mac, no bid at a sheriff’s sale may later be assigned to any person who would not meet these qualifications.

Lastly, before a court may confirm the outcome of the sale, the third-party bidder must file an affidavit with the court affirming that these qualifications are met. If the affidavit is found to contain a false representation, made knowingly, the court can order a $1,000 penalty and prohibit the person from bidding at a future sheriff’s sale in that county for up to one year.

Passage of these provisions targeting manipulations of the sheriff’s sale process continues the efforts in Wisconsin over the past several years to streamline the foreclosure process and to address problems of blighted properties. In particular, 2015 Act 376 addressed vacant and abandoned properties in foreclosure and significantly reduced post-judgment redemption periods for loans executed before April 27, 2016.

Copyright © 2018 USFN. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."


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