ATTENTION LANDLORDS: Wisconsin Court of Appeals case of Koble v. Marquardt Is Now Law

This is a long blog post, and I apologize in advance, but I sincerely hope that you take the time to read it all the way until the end as it is very important that Wisconsin landlords know what they will be facing. This may be one of the biggest, if not the biggest, issues facing landlords in the last 30 years that I have been a practicing attorney, representing many of you.

Koble Investments v. Marquardt (“Koble”) is a District III Wisconsin Court of Appeals case from Marathon County which has now been published and therefore is now the law in the State of Wisconsin. When a Court of Appeals case is published it becomes precedent for all courts that are lower than the Court of Appeals, which means all the state circuit courts in every county in Wisconsin.

The holding in Koble is that if a landlord has a void rental agreement (i.e., the rental agreement contains one of the “10 Deadly Sins” as set forth in Wis. Stat. § 704.44  the remedy for the rental agreement being void and unenforceable is the complete disgorgement of all rent previously paid by the tenant to the landlord. Stated another way, if a landlord has a provision in its rental agreement, which includes any rental documents as they are incorporated into the rental agreement, that violate any of the “10 Deadly Sins,” the landlord must return all rent that it received from the tenant during the tenant’s entire tenancy. Essentially, because of something that may not even have been intentional by the landlord, the tenant will get to live in the landlord’s rental property for free for the tenant’s entire tenancy, even if the tenant was not damaged because of the prohibited language in the rental agreement.

While the landlord in the Koble has petitioned the Supreme Court of Wisconsin to accept and hear this case, the Wisconsin Supreme Court only accepts a limited number of cases each year and is not obligated to take the Koble case.

Additionally, the landlord in Koble failed to raise the argument that under Wisconsin law if a landlord’s lease is determined to be void, it automatically defaults to a month-to-month tenancy per Wis. Stat. § 704.01(2), and thus still requires the tenant to pay rent. How did the landlord fail to raise such an obvious argument? I do not know the answer for certain, but my assumption is that the attorney that represented the landlord was unfortunately not familiar with Wisconsin Landlord-Tenant law.

In May of 2023, in an unpublished District III Wisconsin Court of Appeals case also out of Marathon County entitled Henchey and Blakely v. Wausau Landmark Corp. (“Henchey”) the landlord also failed to raise the argument that a void lease defaults to a month-to-month tenancy and that rent still must be paid. In Henchey, the Wisconsin Court of Appeals from District III also said the sole remedy for having an illegal provision in a lease was the return all rent paid by the tenant during the entire tenancy, thus allowing the tenant to live for free. In Henchey, the tenant was not even a current tenant of the landlord at the time of the lawsuit. The tenant had moved out of the rental property two (2) years earlier before choosing to sue the landlord for the return of its rent. Again, just like in Koble, the tenant was not damaged because of the prohibited provision included in the lease. In Henchey, the Court of Appeals analogized the inclusion of prohibited language in the lease to an auto repair shop failing to obtain prior authority from the customer to make the repair and failing to provide an estimate of the cost of the repair to the customer prior to commencing work on the customer’s car.

Additionally, the landlord in Koble also allegedly failed to sufficiently develop its argument against the remedy of returning all rent received during the entire tenancy back to the tenant. The landlord also failed to advise the court that such a holding would decimate a large part of the residential rental industry in Wisconsin.

Since the above arguments were either not raised or allegedly not sufficiently developed by the landlord in Koble, those arguments are essentially waived and cannot be raised by the landlord before the Wisconsin Supreme Court.

Thus, the burden falls on the various landlord groups throughout the state, such as the Rental Property Association of Wisconsin, Inc. (“RPA”) to take action and make these arguments to the Wisconsin Supreme Court by filing an amicus (“friends of the court”) brief requesting that the Wisconsin Supreme Court accept the Koble case. This is necessary so that the Supreme Court of Wisconsin can prevent an unjust outcome because the applicable law in Wisconsin was ignored.

The publication of Koble is detrimental to all Wisconsin landlords because tenants now have an even greater reason to argue that all rental leases that they have ever entered into with a landlord or property management company are void and contrary to Wis. Stat. § 704.44. Tenants have nothing to lose in making such an argument. If they prevail, they receive a windfall and have been able to live for free. And if they lose, their case is just dismissed and there is no penalty to the tenant.

In the Koble case, the landlord failed to include the required domestic violence notice provisions as required per Wis. Stat. § 704.14. Further, the lease also contained language that allowed the landlord to terminate the tenancy of a tenant for a crime committed in relation to the rental property. The inclusion of such language coupled with the failure to include the domestic violence language is a clear violation of the 10th Deadly Sin (Wis. Stat. § 704.44(10)).

But the arguments that tenants have been making since Henchey in May of 2023, have not been as clear. In fact, some of the arguments being made stretch both the imagination and common sense. Arguments are being made that if a landlord’s lease states that a “tenant can be evicted if they engage in criminal activity on the premises” that it violates the 9th Deadly Sin (Wis. Stat. § 704.44(9)).

Wis. Stat. § 704.44(9) says that a lease will be void if it “Allows the landlord to terminate the tenancy of a tenant based solely on the commission of a crime in or on the rental property if the tenant, or someone who lawfully resides with the tenant, is a victim, as defined in 950.02(4), of that crime.”

Where in the following language -- “tenant can be evicted if they engage in criminal activity on the premises” -- does is say that the landlord can evict a tenant if they are a victim of a crime? Nowhere. It does not state that anywhere and thus it is not a violation of the 9th Deadly Sin. But it is being argued that the above language violates the 9th Deadly Sin unless you also include the following phrase: “unless the tenant, or someone who lawfully resides with the tenant, is a victim, as defined in Wis. Stat. § 950.02(4), of that crime.”

So, with the publication of Koble, I anticipate that landlords will see even more tenants trying to attack their leases arguing that they are void. Wisconsin landlords must ensure they are using rental documents that do not violate any of the 10 Deadly Sins. If you are using the rental documents that I draft that are sold at Wisconsin Legal Blank (“WLB”), you must use the most current version of both the Residential Rental Agreement, Rules and Regulations, Nonstandard Rental Provisions, and the other rental forms that I draft. WLB provides you with a list of the most current rental documents. This is necessary to protect yourself. It doesn’t mean that tenants won’t still try to attack them. They will. They most definitely will. They will continue to attack them as long as there is the possibility for them to obtain that windfall and live for free.

The Koble case could completely wipe out small to mid-size landlords in Wisconsin. If many tenants living in a large rental complex come together to sue a larger landlord seeking reimbursement of all rent paid or if all tenants renting from a large landlord with multiple rental properties in the state, join in a class action lawsuit against that larger landlord seeking the return of all their rent, that landlord could go out of business as well.

If landlords are forced to file bankruptcy and/or give up their rentals, who is prepared to take over their roles? Is the government ready to step in and be a landlord? We need only look so far as the Housing Authority of the City of Milwaukee (“HACM”) to see that the government is not the answer. Who then?

A final note, if you happen to be on the wrong end of one of these lawsuits and the tenant is arguing that your rental documents are void and unenforceable and that you must return all of their rent payments and let them live for free, make sure that you contact the Rental Property Association of Wisconsin, Inc. (RPA) or your local landlord association. Let them know of your situation so they can help.

Additionally, if you have been sued, make sure that you retain an attorney that understands and is knowledgeable about Wisconsin landlord-tenant law as there are legitimate and valid arguments and defenses that can and should be raised in your defense. Don’t’ end up like the landlords in Henchey and Koble.

Thanks for reading until the end.

T