BY JANE GARVEY ON JANUARY 21, 2021
One of the things that really concerns me in today's world is the amount of advice being casually asked for and given on the internet about legal matters. Currently, we are in a period where the number of new regulations, laws, ordinances, mandates, and rules coming at us is overwhelming. Click here to read more.
Legislative experts are struggling to keep up as this information is changing by the day, and the subtle nuances of the legislation takes careful study to understand. Some of these legislative changes come with huge penalties if you get them wrong. This is not a time to take casual advice about the law from internet strangers with unknown credentials and nothing to lose.
These “experts” think they are being helpful, but I personally have witnessed them answering questions with false information, and then defending their answers when challenged. Just because they might be doing it doesn’t make it legal.
- So, what should you do?
- Where can you look for reliable information?
- How can you stay up-to-date?
- How can you make sure you are operating your business within the law?
First, you must realize that your facts and circumstances are unique to you. Your choice of investments and investing goals matters. Not every property will be a match. Some may be too much risk.
Learning the Law and Keeping Up-To-Date:
You may have ordinances at the community, township, county, state and federal level that vary from those in other locales. You may also have a Home Owner’s Association (HOA) with rules to follow. You will need to follow the “laws of the land” promulgated by our “friends” from our neighborhood all the way to Washington, DC. No one person is going to have all of the answers that fit you and your investments without some background and study.
Start at the hyperlocal level:
If you are considering buying in a complex or community with and HOA, ask the association for the current HOA docs and read them. Make sure that your plans for the property are doable. Can you rent the unit? Can you do a short-term rental? Can you combine 2 units for a larger residence? Can the residents have pets? What do the dues cover? How much does the association have in reserves compared to the budget? Read the minutes from recent meetings to see what the issues are that the complex is dealing with. These are all important things to consider if you are thinking about buying units in an HOA. If you decide to buy in an HOA, keep up to date by reading the notices, minutes, and budgets you get from the HOA.
At the municipal level:
Ask questions, read ordinances, talk to the City inspectors and the police departments, read local newspapers, read the City Council minutes for the last few months, talk to local real estate agents, other local investors and residents, and get an idea of what is going on. The officials that enforce the ordinances that pertain to housing should be able to tell you what things will apply to you and where to find them. Check with the alderman’s office for some help in navigating the local bureaucracy. It may seem like lots of work, and it is. These connections and local knowledge will pay off if you decide to invest in the area. To keep up to date once you have purchased property, keep reading the city council minutes, community newspapers, and if available join a local property owner’s group that provides advocacy.
At the County level (and Township level):
There is often another whole set of ordinances pertaining to housing. These can cover property that is not in an area that is physically incorporated as a City, but some of these ordinances apply to all property in the County. Building permits, fair housing laws, property taxes, and rental regulations are all important. Like with the City, investigate. Talk to the people who enforce the building and housing laws, real estate agents, investors and residents. Talk to Judges who handle evictions. Read the minutes of the County Board meetings and read the local news. All of these sources will give you hints of what you need to look up and verify. As the laws are changing regularly, you will need to keep reading County Board meeting minutes and local news. You should also make contact with County Board members and let them know you want to know about any issues that arise that will affect your business. If one is available, join a local property owner’s group that provides advocacy at the County level.
At the State Level:
In Illinois, the state has been very active in regulating housing. The Illinois Rental Property Owners Association has been monitoring proposals and advocating on behalf of rental owners and investors for 26 years. We have found that there are usually about 50 bills a year proposed to change existing (or introduce new) legislation on housing or real estate investing activities. Not all of them pass, but each year there are changes that need to be incorporated. You may find that similar things are happening in the State Legislature where you are looking to invest. It is very important that you learn what the laws are and pay attention to changes.
At the Federal level:
There are laws that need to be learned about and followed. Several of the major ones you need to know about are the Fair Housing Law, the CDC Moratorium on evictions, the laws on service animals, and the Dodd-Frank Act and its impact on seller financing. The National Real Estate Investors Association is a great source for information about the changes happening at the Federal level. National REIA has advocates working on behalf of the industry in Washington.
There is another whole set of regulations that apply to participants in the Housing Choice Voucher programs (some locations mandate that you do not discriminate based on Source of Income – in other words you must consider Voucher holders). The local Housing Authority will be the best source of information on what you need to do to follow these regulations.
Since things that passed several years ago are no longer news but still are laws, you will be well served to find the parts of the code that pertain to housing and read them thoroughly.
Seek advice from legal counsel that specializes in real estate and is local to your area. As I mentioned earlier, even the best experts are struggling to keep up with the changes at the moment. With that in mind, you will need ongoing advice from professionals that are familiar with your investments, strategies, and techniques. Professionals that provide regular updates can be extremely helpful. They should be able to give you advice on how to deal with laws that conflict.
All of this may sound overwhelming. Frankly, it is at the moment. The point is that the casual “expert” responding to your inquiry on the internet is unlikely to have done the homework on your specific investment. Sometimes they are not even from your area, so the laws they are discussing may not even apply. There are no consequences to them for getting it wrong! Do your own due diligence and hire qualified professionals with errors and omissions insurance.
M. Jane Garvey is President of the Chicago Creative Investors Association.