Attorney General States That A Tenant Can Be Required To Pay For Carpet Cleaning Upon Vacating

It is not often that I get to report good news for landlords, so when the opportunity arises I am especially happy to do so. Today is one of those times. Earlier today the Wisconsin Attorney General issued a formal legal opinion that states that it is legal for a residential landlord in Wisconsin to require an outgoing tenant to pay to have the carpet in the unit professionally cleaned and to include such a provision in the rental agreement.

It is well known that in Wisconsin a residential landlord cannot withhold the costs of having the carpet professionally cleaned from a tenant's security deposit. Wisconsin Administrative Code, ATCP 134.06(3)(c) states that landlords are prohibited from withholding from a security deposits for "normal wear and tear." The Note to this administrative code provision states that carpet cleaning is an example of an impermissible basis for withholding a tenant's security deposit.

What had been unclear until now, is whether or not a landlord could make a tenant pay for the cost to have the carpet professionally cleaned upon vacating and to include such a provision in the rental agreement. I have personally experienced both courts that held that a landlord could charge a tenant for professional carpet cleaning and others that would not. Additionally, some judges and court commissioners felt that including a provision in a residential rental agreement requiring a tenant to pay to have the carpeting professionally cleaned upon vacating renders the rental agreement void.

Wisconsin landlords are now on solid ground in knowing that they can require a tenant to pay to have the carpets professionally cleaned upon vacating and that they can include such a provision in their rental agreement.

The key questions and answers from the formal opinion are set forth below:

QUESTION 1: Based on current law, does routine carpet cleaning at the end of a tenancy fall within the landlord's duty to keep the premises "in a reasonable state of repair" as prescribed by Wis. Stats. sec. 704.07(2)?

ANSWER: No, a landlord's duty to keep the premises in a reasonable state of repair does not encompass routine carpet cleaning.

QUESTION 2: Would a provision requiring the tenant to pay for professional carpet cleaning, in the absence of negligence or improper use by the tenant, render a rental agreement void under Wis. Stats. sec. 704.44(8)?

ANSWER: No, because routine carpet cleaning is not a statutorily-imposed obligation of a landlord, assigning this responsibility to a tenant through a contractual provision does not render a rental agreement void.

In its analysis, the Attorney General states that the key issue upon which the answer hinged was whether or not routine carpet cleaning falls under one of the statutorily prescribed obligations of a landlord. If it does, then the law clearly would prevent a landlord from assigning that obligation to a tenant. If not, then a landlord could legally assign the obligation to have the carpets professionally cleaned to a tenant.

Under Wisconsin law a landlord is statutorily required to keep a rental unit in a "reasonable state of repair" and such repairs cannot be assigned to a tenant as a result. Routine carpet cleaning however is not considered to be a "repair" as a repair typically involves fixing something that is broken. A carpet that is dirty and needs to be cleaned is not in need of "repair."

The AG's analysis then points out that the landlord-tenant statutes do not assign cleaning responsibilities to either the landlord or the tenant. As such, the parties are free to assign the responsibilities for cleaning in the rental agreement. Which therefore means that a landlord can require a tenant to pay to have the carpets cleaned if it is in the rental agreement.

Please note however, that while the Attorney General's legal opinion does allow a landlord to charge a tenant for the costs of having the carpets professionally cleaned, it still does NOT allow a landlord to deduct those costs from the tenant's security deposit (even if you put such a clause in your Nonstandard Rental Provisions). So if the tenant doesn't pay for the carpet cleaning as agreed to in the rental agreement a landlord's only recourse will be to sue the ex-tenant for the costs.

Joint Legislative Council Gives Clarification To Wisconsin's New Landlord's Omnibus Law

You will recall from my earlier post that I had some concerns about the new Landlord's Omnibus Law (Act 134). One of my main concerns was that it was unclear from the wording of Act 143 whether or not a violation of chapter 704 would give rise to a claim by a tenant that would entitle the tenant to double damages and attorney's fees if successful.

The portion of Act 143 that concerned me was Section 36, which creates Wis. Stats. sec 704.95, and reads as follows:

704.95 Practices regulated by the department of agriculture, trade and consumer protection. Practices in violation of this chapter may also constitute unfair methods of competition or unfair trade practices under s. 100.20. However, the department of agriculture, trade and consumer protection may not issue an order or promulgate a rule under s. 100.20 that changes any right or duty arising under this chatper.

My concern was that tenants might start filing suits against landlords alleging that they were entitled to double damages and attorny's fees if a landlord violated any portion of chapter 704. Could a landlord be on the hook for double damages and attorney's fees if he drafted a 5 day notice improperly or served the notice incorrectly?

Because of this concern, the Apartment Association of Southeastern Wisconsin (AASEW) attorney wrote to the State of Wisconsin's Joint Legislative Council which authored the earlier memo summarizing the new Act 143. Specifically the AASEW asked staff attorney Margit Kelley to clarify section 36 of her Act Memo dated March 26, 2012.

I have good news to report. Attorney Kelly in her letter to the AASEW's attorney, indicated that any violation of Chapter 704 does not automatically lead to a cause of action for double damages and attorney's fees.

Her verbatim response -- referring to section 36 (now Wis. Stats. section 704.95) - was as follows:

This means that DATCP may promulgate and enforce any administrative rules that are in line with ch. 704, Stats., including the provisions of the Act that affect that chapter, under DATCP's authority to regulate unfair methods of competition or unfair trade practices in s. 1002.0, Stats. Section 100.20(5), Stats., then, in turn allows an individual right of action for a violation of any rules promulgated under s. 100.20, Stats., and allows for recovery of costs, reasonable attorney's fees, and twice the amount of any pecuniary loss.

Translation: DATCP can create rules to add to ATCP 134 that are line with chapter 704, but a violation of ch. 704 alone does not give rise to a cause of action that entitles a tenant to double damages and attorney's fees, unless that section of the statute is also contained in ATCP 134.

So for instance, if a landlord was found to have violated Wis. Stats. section 704.28, entitled withholding from and return of security deposits, a tenant would be entitled to receive an award of double damages and attorney's fees because the language of sec. 704.28 is ALSO contained in ATCP 134 - specifically ATCP 134.06(2).

Along those same lines, if a landlord was found to have violated Wis. Stats., sec. 704.44, entitled residential rental agreement that contains certain provisions is void, a tenant would als be able to recover double damages and attorney's fees as the language of sec. 704.44 is ALSO contained in ATCP 134 - specifically ATCP 134.08.

As long as the courts are made aware of this, it now appears that landlords can breathe a sigh of relief as they will no longer have to worry about being ordered to pay double damages and attorney's fees to a tenant for improperly drafting or serving a 5 day notice, or any other portion of ch. 704 that is not also included in ATCP 134.

Now we just have to worry -- as we have always had to -- about having the court dismiss our evictions because of an improperly drafted or served 5 day notice : )

2011 Wisconsin Act 143 (Landlord Omnibus Law) Also Applies To Commercial Landlord-Tenant Law

While this blog primarily focuses on residential landlord-tenant law, on occasion I also touch on issues applicable to commercial landlord-tenant law. This is one such instance.

Commercial landlord-tenant is more straightforward than residential in my opinion because commercial tenancies are less regulated than residential. Typically what a commercial landlord and tenant agreed to and placed into their lease agreement is what governs. The Wisconsin Administrative Code's ATCP 134 does not apply to commercial leases and most of Chapter 704 of the Wisconsin Statutes does not apply to commercial leases unless (1) the parties had no written lease, or (2) the lease was silent as to certain issues (see sec. 704.03 and 704.05 respectively).

Well, that has all changed now with the passage of 2011 Wisconsin Act 143 which was signed into law last week and will take effect on March 31, 2012.

While almost all of the attention paid to the new law surrounded its effects on residential landlord-tenant law, the law also impacts the commercial arena as well. I too was caught up in the effect Act 143 would have on residential landlords and missed the applicability of this new law to commercial landlords initially --- thanks to Bob Anderson of Legal Aid of Wisconsin for redirecting me : )

As I have mentioned in prior posts, this legislation was fast-tracked for some reason and rushing new laws through the legislative process is never a good thing. In fact it is a recipe for disaster.

It appears that the legislators did not realize that Senate Bill 466 -- the precursor to Act 143 -- was written in such a way as to encompass commercial landlord-tenant law. When it was brought to their attention, a quick amendment was made to exclude one portion of the new law (the section that makes a rental agreement void if it contains certain prohibited language) from the commercial arena, but apparently there was not enough time to deal with the other sections of the new law, which now will apply to both commercial and residential tenancies.

So what do we have?

The following provisions of Act 143 apply to both commercial landlord-tenant law as well as residential:

1. Moratorium on evictions

2. Severability of rental agreement provisions

3. Disposition of abandoned property

4. Requirement that landlords receive an award of holdover damages when appropriate

5. Acceptance of past due rents

6. Withholding from and return of security deposits

7. Making any violation of chapter 704 a possible unfair trade practice

If you are unfamiliar with the above sections of the new law you should read my prior post summarizing the new law.

Number 1-5 above actually benefit commercial landlords. However numbers 6 and 7 are problematic

By adding ATCP 134.06, which focuses on the withholding from and the return of security deposits, to chapter 704, the new law has now made these requirements applicable to commercial landlords as well. Prior to Act 143 being passed, there was no law addressing what a commercial landlord could withhold from a commercial tenant's security deposit, nor was there any law regarding when that security deposit (or an itemization as to how the security deposit was applied) had to be returned to the commercial tenant. Well thanks to Act 143, now there is.

Act 143 allows a commercial landlord to only make deductions for the following items from a commercial tenant's security deposit:

704.28 Withholding from and return of security deposits. (1) Standard withholding provisions. When a landlord returns a security deposit to a tenant after the tenant vacates the premises, the landlord may withhold from the full amount of the security deposit only amounts reasonably necessary to pay for any of the following:

(a) Except as provided in sub. (3), tenant damage, waste, or neglect of the premises.

(b) Unpaid rent for which the tenant is legally responsible, subject to s. 704.29.

(c) Payment that the tenant owes under the rental agreement for utility service provided by the landlord but not included in the rent.

(d) Payment that the tenant owes for direct utility service provided by a government-owned utility, to the extent that the landlord becomes liable for the tenant's nonpayment.

(e) Unpaid monthly municipal permit fees assessed against the tenant by a local unit of government under s. 66.0435 (3), to the extent that the landlord becomes liable for the tenant's nonpayment.

(f) Any other payment for a reason provided in a nonstandard rental provision document described in sub. (2).

So if a commercial landlord would now like to deduct anything other then the items listed in (a) - (e) above, then that landlord needs to start using a separate written document entitled "Nonstandard Rental Provisions" which must list the additional fees/costs that can be deducted from a commercial tenant's security deposit.

Additionally, Act 143 now requires a commercial landlord to either (1) return the tenant's security deposit to them, or (2) send them an itemization explaining how that security deposit was applied, within 21 days of the following:

(4) Timing for return. A landlord shall deliver or mail to a tenant the full amount of any security deposit paid by the tenant, less any amounts that may be withheld under subs. (1) and (2), within 21 days after any of the following:

(a) If the tenant vacates the premises on the termination date of the rental agreement, the date on which the rental agreement terminates.

(b) If the tenant vacates the premises before the termination date of the rental agreement, the date on which the tenant's rental agreement terminates or, if the landlord rerents the premises before the tenant's rental agreement terminates, the date on which the new tenant's tenancy begins.

(c) If the tenant vacates the premises after the termination date of the rental agreement, the date on which the landlord learns that the tenant has vacated the premises.

(d) If the tenant is evicted, the date on which a writ of restitution is executed or the date on which the landlord learns that the tenant has vacated the premises, whichever occurs first.

Commercial landlords never had to worry about that 21 day time frame before -- now they do. Needless to say it is much more difficult and time consuming to do a walkthrough of a giant commercial space and itemize any damages or cleaning charges than it is for a 500 square foot residential rental unit. I'm not exactly sure how commercial landlords will be able to comply with this time frame, but they will need to find a way, or else they may have to to their tenant double damages and attorney's fees. Which leads me to the next concern . . .

Act 143 now makes any violation of chapter 704 a possible violation of unfair trade practices, which pursuant to sec. 100.20, Wis. Stats. allows a tenant to sue a landlord for double damages and attorney's fees. Prior to Act 143 a commercial landlord was not in this predicament because unfair trade practices were set forth in ATCP 134 which only applied to residential tenancies. But now that Act 143 incorporates some provisions of ATCP 134 into chapter 704 -- and chapter 704 applies to commercial landlord-tenant relations -- things are different.

Here is the language of the new law:

704.95 Practices regulated by the department of agriculture, trade and consumer protection. Practices in violation of this chapter may also constitute unfair methods of competition or unfair trade practices under s. 100.20. However, the department of agriculture, trade and consumer protection may not issue an order or promulgate a rule under s. 100.20 that changes any right or duty under this chapter.

I guess the only positive is that the new law says "may constitute" instead of "shall constitute" however to a commercial landlord that never had to worry about anything they did constituting an unfair trade practice and subjecting themselves to being sued for double damages and attorney's fees, I'm sure this will be of little consolation.

So not only will Act 143 require commercial landlords to make some modifications to the language in their leases, but it will require them to completely change how they run their commercial proeprty management businesses starting March 31, 2012 ---- 2 DAYS FROM NOW!!!!!

Landlord's Omnibus Bill Signed Into Law - Read It Now

Governor Walker did sign the Landlord's Omnibus Bill into law.

I appreciate the effort of everyone that called the Governor's office asking him to veto the bill due to its deficiencies.

Here is a link to the new law. Much easier to read than having to go back and forth between the orginal bill, the Substitute bill and the two amendments.

The two main concerns that I have with the law and which caused me to ask that the bill be vetoed. They are section 35M and section 36.

The AASEW has already spoken with Sen. Lassee's office regarding these two major problems and I will keep you informed if and when anything is done about them.

And yes, I will be reviewing all of Wisconsin Legal Blank's forms in the near future and making the necessary revisions - if needed - and will let you know when they will be available : )

Landlord's Omnibus Bill -- with Amendments -- To Be Signed Into Law Today

One of the biggest pieces of pro-Landlord legislation in quite some time was passed by the Wisconsin Senate and adopted by the Assembly recently and will be signed into law by Governor Walker today. Unfortunately some of the pro-Landlord provisions were amended, diluted, or removed.

I am certainly not denouncing this new law. Many aspects of it will be very helpful to landlords. I just wish that more time had been allowed -- the bill was fast-tracked -- to allow for more discussion, thought and input and allowing for more notice. For instance, many of us in the rental industry were given one day advance notice before the public hearing on the bill which prevented many of us from attending.

I will attempt to summarize the new law in this post. As this new law plays out in the "real world" I am sure that I will be devoting additional blog posts to each provision in more detail.

The proposed effective date of this new law is March 31, 2012. So many of us will need to make some additions and/or modifications to our rental documents prior to that date.

Bankground of Legislation

The Landlord's mnibus bill (Senate Bill 466) was put on the "fast track" for reasons unknown to me. It was introduced on February 13, 2012 by Senator Lassee. A Substitute Amendement 1 was offered by Senator Lassee on February 29, 2012. Senator Waangard then offered the first amendment to the Substitute Amendment on March 6th which was passed March 13th. Senator Lassee then offered a second amendment to the Substitute Amendment on March 12th which was passed on March 13th. The bill will be signed into law by Governor Walker today - March 21st. Approximately one month from introduction to passage into law is very fast for the legislative process.

The key provisions of the new law are:

1. Moratorium on Evictions

This provision of the original bill remained untouched by the Substitute Amendment and the two amendments to the Substitute Amendment. The new law prohibits any municipality from imposing a moratorium on eviction actions. If a municipality has a current ordinance that contradicts this new law it cannnot be enforced.

We now must hope that individual counties, courts, and commissioners adhere to this law. While I don't anticipate courts ignoring this new law, I do anticipate court's continuing to use the "stay" provisions of sec. 799.44(3) to give tenants additional time to vacate during the holidays. So while municipalities will no longer be allowed to impose moratoriums, courts can still prevent evictions during holidays, creating the same result.

2. Severability of Rental Agreement Provisions

The original bill stated that any provision could be severed from the agreement. So if a landlord inadvertantly included a provision that was found to be improper or retaliatory in nature it could be removed and the remainder of the agreement could be enforced.

The Substitute Amendment diluted the above considerably by adding that if a rental agreement contains one of the "7 Deadly Sins" set forth in ATCP 134.08, the inclusion of any of those provisions cannot be removed and will render the entire rental agreement void and therefore unenforceable.

Amendment 1 to the Substitute Amendment went a step further and added an 8th illegal provision that if included in a rental agreement will cause the rental agreement to be void. The new illegal provision would include any language that allows a landlord to terminate a tenant's tenancy if a crime is committed in or on the rental property, even if the tenant couldn't reasonably have prevented the crime.

So in the end, the new law only allows the severability of certain rental provisions. If your rental agreement contains one of the 7 prohibited provisions set forth in ATCP 134.08 or the new prohibited provision created by this new law, your rental agreement will still be be void and unenforceable. Essentially, the new law takes the regulation ATCP 134.08 and codifies it into law.

More tragic is what the "8th Deady Sin" has most likely done to some other pro-Landlord legislation that I had hoped would become law -- the "Crime-Free Lease Addendum" bill. If you read my prior post on the Crime-Free Lease Addendum bill you will see that this 8th Deadly Sin language effectively decapitates this proposed bill. This is a major disappointment as I believe that had the Crime-Free Lease Addendum bill been passed it would have been the most significant piece of pro-Landlord legislation in years. Instead the "odds and ends" Landlord Omnibus bill seems to have killed it. Hopefully, I am wrong and it can be resurrected.

3. Dispostion of Tenant's Abandoned Property

Once again, the original version of this bill was awesome. It stated that any personal property left behind by a tenant could be considered abandoned and disposed of immediately in the landlord's discretion.

The Substitute Amendment modified the original bill by adding that any medical prescriptions and/or medical equipment left behind by the tenant must be held by the Landlord for 7 days. The Substitute Amendment also added that written notice must be sent to the tenant (and any secured party) prior to disposing of any titled vehicles or mobile homes deemed abandoned. I could live with both of those modifications.

However, the amendments to the Substitute Amendment added language that will require landlords to jump through a few hoops. The new law requires that a landlord provide written notice to the tenant at the time of entering into the rental agreement, and at each renewal of the rental agreement, informing the tenant that the landlord will not hold any property left by the tenant and that such property will be deemed abandoned and will be disposed of. Failure to provide this written notice to the tenant requires a landlord hold the abandoned property fpr a period of time as set forth in sec. 704.05 (5), Wis. Stats.

Essentially landlords will now be required to add a new language to their rental agreements -- and any renewal agreements -- advising tenants that any property left behind will be considered abandoned and can be disposed of. Looks like there will be a revised Rental Agreement being sold at Wisconsin Legal Blank Co., in the near future : )

4. Information Check-In Form

This is one of the provisions of the original bill that I didn't care for. A landlord will now be required to provide a standardized information check in sheet to each tenant that contains an itemized description of the premises. The Substitute Amendment merely added that this form must be given to the tenant at the time of occupancy rather than at the time of signing of the rental agreement.

As I understand this law, this does not just mean that the landlord can give his new tenant a blank Information Check-In form to fill in -- which many landlords are already doing. Rather it means that the landlord must completely and thoroughly fill out the Information Check-In form to adequately describe the condition of the rental unit and give it to the tenant. So if you are not thorough in your description of the renal unit this document could be used against you by the tenant, after the tenancy has ended. This new provision of the law will clearly cause additional work for landlords and I fear could harm the less detail-oriented landlords out there when pursuing a tenant for damages to the unit or withholding portions of the tenant's security deposit for damages.

5. Holdover Damages Are Mandated

The new law requires that landlords be awarded holdover damages. If a tenant stays in the rental unit beyond his tenancy, the landlord is now legally entitled to -- at a minimum -- double the daily rent for the time period after the tenancy ended (i.e. the notice expired) until the tenant actually vacates the unit.

This is a positive change because current law (sec. 704.27) only states that a landlord "may" be awarded holdover damages -- and some courts would not award landlords these damages. The new law says that a court "shall" award a landlord holdover damages, at a minimum.

6. Withholding From A Tenant's Security Deposit

The new law has merely codified the provision of ATCP 134.06(3), which states that a landlord is allowed to withhold the following from a tenant's security deposit: (a) Tenant damage, waste or neglect of the premises, (b) Unpaid rent for which the tenant is legally responsible, (c) Payment which the tenant owes under the rental agreement for utility service provided by the landlord but not included in the rent, (d) Payment which the tenant owes for direct utility service provided by a government-owned utility, to the extent that the landlord becomes liable for the tenant's nonpayment, (e) Unpaid mobile home parking fees which a local unit of government has assessed against the tenant to the extent that the landlord becomes liable for the tenant's nonpayment, (f) Other reasons authorized in the Nonstandard Rental Provisions.

The new law also adopts the portions of ATCP 134.06 which state that a landlord cannot withhold from a tenant's security deposit for normal "wear and tear" or other losses which the tenant cannot reasonably be held responsible.

7. Timing For Return of Security Deposit

The original bill indicated that in situations where the tenant broke the lease prior to the end of the term that the landlord need not return the security deposit or provide an accounting of how the security deposit was applied until 21 days after the lease term ended or within 21 days of a new tenant taking occupancy. This langauge is a substantial improvement over current law as it allows a landlord to hold the security deposit until he is able to determine if any future rent will owed by the breaching tenant if the landlord cannot locate a new tenant to re-rent the property to. I explain this issue in more detail in my earlier post on the Landlord's Omnibus Bill.

The Substitute Amendment waters this down a bit. The new law will now codifies ATCP 134.06(2)(a) and states that a landlord shall deliver or mail to a tenant the security deposit or itemization of how the security deposit was applied within 21 days after any of the following: (a) if the tenant vacates on the last day of the rental agreement, the date on which the rental agreement terminates, (b) if the tenant vacates before the end of the rental agreement, then the date on which the rental agreement terminates or, if the unit is re-rented before the end of the rental agreement, then the date on which the new tenancy begins, (c) if the tenant vacates after the last day of the rental agreement, the date on which the landlord learns that the tenant vacated, (d) if the tenant was evicted, the date on which the writ was executed or the date that the landlord learns that the tenant vacated.

So the new law kept the good part of the original bill but by codifying ATCP 134.06(2)(a) the landlord must return a tenant's security deposit or send out the itemization of how the security deposit was applied earlier than when the original bill stated in situations where the tenant was evicted.

8. Disclosure of Code Violations

The original bill required that a landlord disclose to any prospective tenant any uncorrected building code or housing code violations prior to the signing of a rental agreement, accepting of a security deposit or accepting of earnest money.

The second Amendment to the Substitute Amendment modified the original bill and as a result the new law requires a landlord to disclose to a new tenant any uncorrected building code or housing code violations if the landlord has actual knowledge of the violation (rather than if the landlord had received notice of the violation from a housing code enforcement agency as under the original bill).

Specifically the new law requires the disclosure to the new tenant if the following four conditions are met: (a) landlord has actual knowledge of the violation, (b) the violation affects the rental unit or a common area, (c) the violation presents a significant threat to the tenant's health or safety, (d) the violation has not been corrected.

9. Request for Repairs

The orginal bill required that a tenant first notify a landlord in writing of any repair or maintenance issue, and then allow adequate time for the landlord to address the issue, before reporting the problem to the building inspector, elected official, or housing code enforement agency. The Substitute Amendment removed this provision in its entirety so the law has not changed -- tenants are allowed to call whomever they want to complain about maintenance issues without any requirement that they first notify the landlord of the problem.

10. Acceptance of Past Due Rent

The new law states that if a landlord has filed an eviction against a tenant and the landlord accepts past due rent from the tenant during the course of the eviction, that the court cannot dismiss the eviction solely based on the landlord's acceptance of past due rent from the tenant.

I really like this provision of the new law becasue currently, many tenants and their attorneys argue that if an eviction is pending and a landlord accepts past due rent from a tenant, that the landlord's acceptance of that rent has effectively "waived" the landlord's right to proceed with the eviction.

11. Tenant Remedies

The Substitute Amendment added that any violation of chapter 704, including the provisions of the new bill, may constitute an unfair trade practice which may allow the tenant to sue a landlord for double damages and attorney's fees.

I don't like this new provision of the law for one simple reason. I believe it will be used by tenants and tenant's attorneys to seek double damages and attorney's fees whenever a landlord allegedly violates any provision of chapter 704, whether the violation is a true unfair trade practice violation or not. Only the provisions of ATCP 134, which will be codified in ch. 704 under this new law, deal with unfair trade practices. Nonetheless, I anticipate that we will see some very creative arguments by tenant's and their attorneys as to why a tenant should be awarded double damages and attorney's fees for violations of chapter 704 that are not unfair trade practice violations.

Now we will have to wait and see how this new law "plays out" in the real world of landlording. Some of the key things everyone will need to address before March 31, 2012, when the law takes effect are:

1. Make sure any rental agreement you enter into with a tenant after March 31, 2012, does not contain any language that would be in violation of the "8th Deadly Sin" which essentially means eliminating or modifying any language similar to that found in the Crime-Free Lease Addendum.

2. Make sure to add language in your rental agreement, and any renewal documents, stating that any property left behind by the tenant will be considered to be abandoned and will be disposed of by the landlord without any further notice to tenant (except for medical prescriptions and medical devices, mobile homes and titled vehicles).

3. Rename your Check-In / Check Out Sheet as "Information Check-In Sheet" and insure that you provide any new tenants with a completed copy of the form thoroughly documenting the condition of the rental unit.

4. Disclose any code violations that you have actual knowledge of that may present a significant threat to the tenant's health or safety before entering into a rental agreement or accepting a security deposit or earnest money.

Good Luck Everyone

ADDITION: 3/21/12 - Make sure you read my 3/21/12 post about why I now think this new law will actually hurt landlords more than help them

ADDED 4/11/12 -- Here is the link to the new law.

ADDED 4/11/12 - Here is a link to an article I recently authored on the new law.

ADDED 4/11/12 - Here is a link to the newly revised Wisconsin Statutes Chapter 704 re: Landlord and Tenant

New Bills Would Limit Tenant's Attorney's Fees When Suing Landlords

There are two new proposed laws that if passed would limit the amount of attorney’s fees that could be awarded to a tenant that has sued his/her landlord for violation of ATCP 134 to 3 times the amount of compensatory damages in Wisconsin. The proposed legislation (Special Session Assembly Bill 12 & Special Session Senate Bill 12) was introduced by the committee on Senate Organization and the Committee on Assembly Organization at the request of Governor Scott Walker, Senator Rich Zipperer (R) and

Representative Robin Voss (R).

Currently if a tenant sues his landlord for a violation of ATCP 134 – which typically is due to the landlord’s alleged improper withholding of the tenant’s security deposit – and prevails, the court must award the tenant double damages, the costs of the lawsuit, and the tenant’s reasonable attorney’s fees. In almost every instance, the tenant’s reasonable attorney’s fees are much larger than the compensatory damages awarded.

In the United States we follow what is referred to as the American Rule which states that a person pays for their own attorney’s fees regardless of the outcome of the lawsuit. This is very different from the English Rule, which is followed in England, which requires the losing party to pay for the prevailing party’s attorney’s fees in addition to their own.

Despite following the American Rule in the United States, there are certain situations in which a state or federal statute will allow for the shifting of one’s attorney’s fees to th other party. These statutes are referred to as fee shifting statutes. Sec. 100.20(5) of the Wisconsin Statutes is an example of a specific type of fee shifting statute, called the private Attorney General statute, which requires that a landlord that has been found to have violated ATCP 134, to pay his tenant two times the tenant’s compensatory damages and the tenant’s reasonable attorney’s fees.

It is argued that the private Attorney General statute, which is codified as sec. 100.20 (5), Wis. Stats., has many purposes, such as: (1) it encourages a tenant that is damaged financially by the acts of their landlord to file a lawsuit to enforce their rights even if the alleged damages are small, (2) it allows a tenant to enforce his own rights as well a well as the public’s rights, (3) it deters improper conduct by landlords, (4) it strengthen the bargaining power of a tenant, and (5) it provides a much needed backup for th State as there are too many violations for the Attorney General’s Office to enforce alone.

These new bills would limit a tenant’s attorney’s fees to 3 times the amount of the compensatory damages awarded in all cases in which only compensatory damages are awarded. If non-monetary relief is awarded in addition to compensatory damages (such as injunctive or declaratory relief, rescission or modification, or specific performance the court must “presume” that reasonable attorney’s fees do not exceed 3 times the amount of the compensatory damages awarded, however that presumption may b overcome after the court analyzes 13 factors which the bills will allow a court to consider when setting the amount of attorney’s fees.

Critics of the two new bills feel that if passed, they will essentially “gut” Wisconsin’s consumer protection laws. Their argument is that no attorney will be able to afford to tak a tenant’s smaller damage case due to the limitations of their fees. As a result, it is argued that tenants will no longer be able to challenge the improper behavior of the landlords and therefore” bad” landlords will be able to do whatever they want and get away with it.

UPDATE - 10-28-11 -- On Thursday, Oct. 27, 2011 the aforementioned bill was passed by the Senate 17-15 (on a party line vote). The bill was softened a bit to allow for atty. fees greater than 3 times damages to be awarded by a judge BUT the presumption would still be that three times damages is sufficient.

The Consequences of A Landlord Violating Wisconsin's Residential Rental Practices (ATCP 134)

The Residential Landlord Tenant relationship is controlled by two main areas of law: (1) Chapter 704 of the Wisconsin Statutes, and (2) the Wisconsin Administrative Code, Chapter ATCP 134 entitled "Residential Rental Practices."

ATCP 134 sets forth 21 regulations that a landlord must follow in a residential landlord tenant context. ATCP 134, under its orginal name "Agriculture 134," was first introduced in May of 1980. "Ag 134" was then renamed ATCP (Agriculture, Trade and Consumer Protection) 134 in 1993. In 1999 there was a complete overhaul of ATCP 134 which resulted in the 21 regulations that we have today.

If you are a landlord and are not familiar with ATCP 134 please take the time to read the chapter -- it is only 5 pages long and is relatively easy to understand -- it must have been drafted by someone other than a lawyer or government employee : )

The main remedy available to a tenant that is damaged by a landlord violating ATCP is what is referred to as the "private attorney general" provision. Essentially, the Wisconsin Statutes allow a party who is injured by a violation of ATCP 134 to "step into the shoes" of the State Attorney General to privately prosecute such violations.

This private attorney general provision, specifically sec. 100.20(5), allows an injured tenant to recover double damages and reimbursement of their actual attorney's fees against a landlord that has violated ATCP 134.

The State has enumerated several public policy reasons for allowing the private attorney general provision in the residential landlord tenant context, such as:

1. It encourages an injured tenant to enforce his/her rights even if the amount of damage is small and the aggrieved tenant does not have the "means" to pay for their own attorney.

2. A tenant who sues for a violation of ATCP, while clearly enforcing his/her rights, will also be enforcing the public's rights.

3. By allowing a tenant the ability to more easily pursue such claims against his/her landlord, it will deter impermissable conduct by landlords and thus strengthen the bargaining power of tenants.

4. It provides a necessary backup to the State, as the State does not have the time or resources to pursue lawsuits against all landlords who violate the regulations of ATCP 134.

Whatever your thoughts are about the above-reasoning, it is imperative that you become knowledgable about the 21 regulations contained in ATCP 134. During the course of consulting with landlords and property managers in my job as an attorney, I am always surprised by the number of landlords that have never heard of ATCP 134.

Landlords Should Periodically Inspect Their Rental Property . . . or Risk $98,465 In Damage

Last night I read an article about a Virginia landlord that had $98,465 in damage to one of his rental units. Apparently his tenant was a compulsive hoarder and every room in the home was full from floor to ceiling with trash, soiled clothing, old newspaper, rotten food, and other deberis and excrement. It cost the landlord over $98,000 to get the unit back into rentable condition. The landlord's insurance company refused to pay for the damages claiming that damage from compulsive hoarding was not covered under the dwelling policy.

After finishing the article I thought to myself that the landlord really was partly to blame for allowing the situation to get so out of control. The landlord should have conducted periodic inspections of the interior of his rental property. If he had done so, most likely, the landlord would have noticed the accumulation of "stuff" months or even years earlier and could have addressed the issue with the tenant before too much damage occurred.

It is good practice for landlords to periodically inspect the interior of their rental units and Wisconsin law allows for these periodic inspections as long as certain requirements are followed.

Background:

The covenant of quiet use and enjoyment is implied in all rental agreements. This covenent simply means that the landlord guarantees that the tenant may take possession of the rental unit and that the tenant has the right to privacy and exclusive use of and possession of the property and that the landlord will not interfere with that.

The Law:

In Wisconsin there are limited exceptions to the covenant of quiet use and enjoyment. One of those exceptions is a landlord's limited right of entry to a tenant's rental unit. Specifically, Wisconsin Administrative Code, ATCP 134.09 (2) and sec. 704.05(2) of the Wisconsin Statutes allows a landlord the ability to enter a tenant's rental unit for the following:

1. To inspect the premises

2. To make repairs

3. To show the property to a prospective tenant or purchasor

ATCP 134.09(2)(c) allows a landlord to enter a tenant's rental under circumstances other than the three listed above, as long as those circumstances are set forth in a Nonstandard Rental Provisions document (which must be a separate document from the Rental Agreement) that is signed and/or initialed by the tenant. So if a landlord always conducts inspections of his/her rental units on the first day of spring and fall, or some other date certain that is known in advance, it might be a good idea to list that information in the NSRP.

Wisconsin also requires other conditions to be met prior to allowing a landlord to enter a tenant's rental unit. Those requirements include:

- The giving of advance notice to the tenant (in most situations)

ATCP 134.09(2) requires at least 12 hours advance notice, however some municipalities -- such as Madison -- have longer notice requirements, so you will need to check the municipal code where your rental is located.

I reccomend that my clients give this notice in writing to the tenant and slip it under the door of the rental unit (or if time permits mail it to them). A landlord should keep a copy of this notice for his/her own files in case a dispute should arise as to whether or not the notice was given. Wisconsin Legal Blank Company, Inc. has a pre-printed form that they sell entitled "12 Hour Notice" that I drafted for this type of situation.

- Entry must be at reasonable times

I hope it goes without saying that 2 a.m. in the morning is not a "reasonable" time to enter your tenat's apartment. While "reasonable times" is not defined in case law, statutes or administrative provisions, it would be safe to say that entry during normal business hours would most likely be acceptable.

- The landlord may not remain in the unit beyond the reasonable amount of time that it takes to inspect the unit, make repairs, or show the unit to a prospective renter or purchasor.

The purpose of entry should be for a specific reason. Get in. Do what you need to do. Get out.

- A Landlord must announce his or her presence to any person who may be present in the unit and identify himself/herself.

I usually reccomend ringing the doorbell and knocking on the door several times before entering and then announcing loudly that it is "the landlord" and that "I'm here to conduct my bi-annual inspection" or "I'm here to repair your refrigerator" or whatever the reason for my entry might be. The last thing a landlord wants to do is open the door to his/her tenant's apartment and find a half-clothed tenant laying on the couch.

The need for providing advance notice and entering at a reasonable time may be disregarded, according to Wisconsin law, if one of the following applies:

1. A tenant who is aware of the planned time that the landlord intends to enter the unit, requests or consents in advance, to the entry by the landlord

An example of this would be when you tell your tenant that you will be entering his/her unit to change the batteries in the smoke detector on Friday at 3 pm and the tenant tells you to go ahead and enter the night before if you can, as they will be having guests over on Friday at 3 pm.

2. A health or safety emergency exists

This exception includes many situations, such as if a tenant falls and is injured in their unit and requires emergency aid, when a tree limb falls through the roof, when an infestation of rodents or bedbugs are discovered, during or after a grease fire, etc. etc.

3. The tenant is absent from the rental unit and the landlord reasonably believes that entry is needed in order to protect the property from damage

This could include situations where a tenant left the water running causing the tub to overflow which is now damaging the bathroom floor and ceiling of the tenant who lived in the unit below.

The Penalties:

Because the above information is contained in ATCP 134, if a landlord violates any of the above provisions, a landlord may be subject to paying the tenant double his/her damages and the tenant's actual attorney's fees. I am also aware of situations where a tenant has claimed that a landlord entered the rental unit without advance notice and stole the tenant's personal property -- this has resulted in the police being called, trespass citations being issued (not properly in my opinion but they were nonetheless issued) and on one occassion a physical altercation between landlord and tenant which resulted in a temporary restraining order being filed and lengthy litigation.

Tenant's often mistakenly believe that a landlord cannot enter their unit unless they are present. A tenant's presence is not required under the Wisconsin Statutes or ATCP 134. A landlord is allowed to enter a tenant's rental unit in the tenant's absence if the above provisions are otherwise followed (and assuming there is no contrary provision in any applicable municipal code).

What should a landlord do if a tenant denies the landlord entry to the apartment? This happens more frequently then one would think and I am amazed when landlords call me and ask me if they should force their way into the unit. Technically, a landlord has the right to enter the unit since a tenant is not allowed to deny entry to a landlord who has complied with the proper notice provisions -- but step back and take a deep breath -- just because you can legally enter does not mean that you should enter. Why risk a possible altercation? Who knows what state of mind (or intoxication) an tenant may be in? Why risk possible injury? Why risk the police becoming involved. Wait a couple of days until tempers have subsided and then explain to the tenant why you need to enter the unit and that legally you have a right to do so. If the tenant still denies you entry, and there is a valid reason for you to enter the unit, then you may want to consider contacting the local police to see if they would be willing to accompany you during the visit. You should also consider alternate remedies, like eviction.

While it is important to remember that a tenant has the right to privacy and sole possession of the rental unit, that does not mean that a landlord should ignore his/her investment. A landlord should conduct regular and periodic inspections of all rental properties. I personally inspect my rentals twice per year. I conduct one inspection in early January when I am making my annual change of the batteries in the smoke detector and carbon monoxide detector. I conduct my second inspection about 6 months thereafter during the month of June.

Had the Virginia landlord referenced in the article I mentioned earlier conducted periodic inspections of his tenant's rental unit, he would have discovered his tenant's hoarding problem and possibly been able to prevent $98,000 in damages that resulted. Don't end up in the same or similar situation -- make sure that you make periodic inspections of your rental properties.

Self-Help Evictions (or Why You Should Not Remove The Roof In An Attempt To Evict Your Tenant)

I apologize for the delay in drafting a new post but this has been a crazy week with two trials in the early part of the week and another one tomorrow (all tenants fighting evictions and none of these trials have been or will be easy). But enough with the excuses . . .

I saw a recent article about a landlord in Lusaka, Zambia (Africa) that actually attempted to evict his tenants by physically removing the roof (which was made of iron sheets) to the home. The article states that the landlord "may not have followed the proper procedures to evict the tenant." No kidding . . . . really, I'm sure it would be illegal to remove the roof to a rental unit in order to evict a tenant in any country (but I am just guessing).

I'm certainly no expert in Zambian landlord-tenant law but I do know that in Wisconsin, if a landlord tried attempted to evict a tenant by removing the roof to the rental property, that the landlord would be opening himself/herself up to liability for engaging in what is commonly referred to as "self-help eviction."

Self-help eviction is a genreal term that refers to any attempt to remove a tenant from a rental property other than through the judicial eviction process and the use of the Sheriff.

In Wisconsin, the only way to legally remove a tenant (that refuses to leave) is through the judicial eviction process. Once the landlord obtains a judgment of eviction and is issued the writ of restitution, should the tenant still fail to vacate the unit, the only legal avenue that the landlord has to reclaim his/her real estate in Milwaukee County is to execute the writ with the Sheriff.

Yes, you heard me correctly! Even if the court has ordered the tenant out of the rental unit, and the tenant intentionally ignore the court's order, the landlord still cannot force the tenant out of his/her property. The landlord must engage the services of the Sheriff to forcibly evict the tenant.

It is illegal in Wisconsin for a landlord to engage in self-help eviction. Examples of self-help eviction would include the following:

1. Changing the locks to the rental unit.

2. Cutting off all utilities to the unit.

3. Removing the outside door to the rental unit.

4. Taking all of the tenant's belongings and putting them out on the curb.

5. Harassing the tenant in order to make them leave.

6. Removing the roof to the rental unit . . .

Wisconsin Administrative Code, ATCP 134.09(7), entitled Prohibited Practices, states that, "No landlord may exclude, forcibly evict or constructively evict a tenant from a dwelling unit, other than by an eviction procedure specified under ch. 799, Wis. Stats."

ATCP 134.08 (1), which lists prohibited rental provisions, also prohibits a landlord from including a clause in his or her rental agreement that authorizes the eviction of a tenant from a unit other than by the judicial eviction proceeding set forth in Ch. 799, Wis. Stats.

Many municipalities, such as Milwaukee and Madision, also have local ordinance that also prohibit self-help evictions.

While Chapter 704 of the Wisconsin Statutes does not specifically prohibit non-judicial forms of eviction, its legislative history states that the procedures for eviction set forth in Ch. 704 and Ch. 799 (Small Claims Procedure) are the exclusive means of conducting an eviction.

I believe (and hope) that most landlords understand that they cannot forcibly remove a tenant from a rental unit on their own. I think that most landlords no that if a tenant will not leave voluntarily that they must file an eviction lawsuit against the tenant. What I think many landlords do not understand however, is that after they have filed the eviction and obtained a judgement of eviction ordering the tenant to vacate the rental property, that if the tenant still refuses to leave, that the only legal avenue the landlord has is to execute the writ of restitution with the Sheriff. This understandably upsets landlords because it results in additional time, delay and money. In Milwaukee County it costs $125 to hire the Sheriff to evict the tenant and requires the posting of approximately $350 with a moving company.

Despite this additional cost and aggravation, this is the law in Wisconsin. I would alert any landlord that is thinking of skipping this part of the eviction process, and resort to self-help, to strongly reconsider.

The penalties for engaging in a self help eviction are sever. A violation of ATCP 134, which precludes self-help eviction, allows the tenant to sue the landlord for double his/her damages and recover his/her attorney's fees.

So if you find yourself on the wrong end of a lawsuit for self-help eviction you could end up paying the tenant's damages times two, the tenant's attorney's fees, all associated court costs, along with your own attorney's fees. Trust me, I have defended several landlords in lawsuits alleging self-help eviction and the outcome can be very expensive. Even if the landlord prevails in the end and a judge or jury decides that there was no self-help eviction, the costs in time and attorney's fees to defend against the lawsuit can be substantial. Don't risk it.

I always encourage my clients to error on the side of caution. If you are unsure whether or not a tenant has vacated the unit then you should file an eviction lawsuit and retain the services of the Sheriff to return the property back to you. If you use the Sheriff's services and the Sheriff removes the tenant, or otherwise determines that the unit has been abandoned, should a tenant later decide to file a lawsuit for illegal eviction s/he will need to sue the Sheriff, not the landlord. Using the Sheriff is a big CYA.

So the moral of this blog post is simple --- if you want your tenant to leave your rental property you should not remove the roof of the rental unit : )

BLOG COMMENT: What If Tenant Does Not Give You Proper Notice To Vacate? . . . and Other Questions.

I recently received a very good question through my blog but because it was posted under my "About The Author" section I don't think enough people would see it so I decided to reprint it as a post.

THE QUESTION:

Good Morning,

I will start by saying thank you for this forum, I find it very helpful and one of a kind. I know you must be very busy but I was hoping you could point me in the right direction regarding a question I have. I am a landlord and I had tenants move without giving a 90 day notice which was one of the provisions I set within their lease. I think this is a breach of contract and if so can I to take them to court? Would it still be filed by small claims, and is there a time limit I must file within? Can I even file for this? Thanks for your time.

THE ANSWER:

Thank you for your kind words and I am happy to hear that my blog is helpful to you.

You did not mention if your rental agreement was a periodic tenancy (month to month or something similar) or a lease for term (1 year lease etc.). I will assume that it is the latter.

If a tenant breaks a lease for term and moves out prior to the ending of the term a landlord has a duty to make reasonable efforts to re-rent the unit. The tenant will remain responsible for paying rent if the landlord is unable to find a tenant to re-rent. The tenant will also be responsible for paying the costs incurred by the landlord to re-rent the unit. The applicable statute dealing with this issue is Sec. 704.29, Wis. Stats.

If you have a term lease that states the tenant must give 90 days notice if they plan to move out at the end of the lease term and the tenant completes the lease term and then moves out but fails to give the landlord notice then you have an entirely different situation then when a tenant breaks a lease and moves out early. In this situation the tenant completed the full term and actually did not breach the lease. Because it was a lease for term and the tenant completed the full term of the lease the landlord cannot hold the tenant responsible for an additional 3 month’s of rent (over and above the lease term) just becasue the tenant failed to give the 90 day notice — the reason being that the tenant did complete the term of the lease. Such a notice provision in lease is legal and are included to assist the landlord so that the landlord will be alerted by the tenant if the tenant intend to leave at the end of the term BUT a landlord should not solely rely on the tenant to provide that notice. It is the landlord's job to determine whether or not a tenant intends to enter into a new lease after the full term of the initial lease is completed.

It is good practice for a landlord to send a reminder to the tenant prior to the 90 days notice period (or whatever notice is set forth in the rental agreement) and either (1) advise the tenant that the lease will not be renewed and providing the tenant with move out instructions, or (2) include a new lease and ask the tenant to sign the documents and return them within X days if they intend to stay for another term. If the tenant does not return the newly signed lease to the landlord within the requisite time period then the landlord may choose to follow up with a telephone call to the tenant if s/he wants to but it is not necessary and the landlord may assume that the tenant will not be renewing the lease and the landlord should began to advertise and make efforts to re-rent.

To try and hold the tenant responsible for an additional 90 days rent beyond the completed rental term because the tenant did not provide the landlord with the 90 day notice that they would be vacating at the end of their lease would be in violation of both ATCP 134.09(3) and Sec. 704.15, Wis. Stats., regarding “automatic renewal clauses.”

To address the second issue that you raised in your comment (assuming it is not moot because of the above answer) small claims has jurisdiction over any civil lawsuits that are seeking $5,000 or less in damages. So if you were attempting to collect 3 months of rent from a tenant (and they have already moved out thus negating the need to file an eviction) then as long as the 3 month's of rent is less then $5,000 you would file that collection action in small claims. See sec. 799.01(d), Wis. Stats. If you were seeking damages greater than $5,000 then you would need to file suit in large claims and pay the higher filing fee.

Addressing the next issue raised in your comment, individual persons are allowed to represent themselves in court whether in large claims or small claims (whether or not that is advisable is a separate question that I will not address). Business entitites (corporations, LLC’s etc.) are not allowed to be represented in large claims lawsuits by a non-attorney — you would need to hire a lawyer to represent your business entity in large claims.

In small claims actions, the law carves out a small exception and will allow a business entity to be represented in court by a full-time employee of the business entity. Sec. 799.06(2), Wis. Stats. Milwaukee – more than any other county – is enforcing this strictly and requires a copy of a W2 from the employee issued by the entity to verify this. Managing members or sole members of an LLC are not considered to be a full-time employee of the LLC unless they are paid income by the LLC.

For additional discussion on this topic please refer to my May 15, 2009 post, July 21, 2009 post, July 30, 2009 post, and Sept. 2, 2009 post.

Your final question, asks if there is a time limit in which you must file a lawsuit against your tenants for failure to give the requisite 90 day notice to you prior to vacating. As I mentioned above, depending on your specific fact situation and the type of rental agreement you are using, you may not even have a claim against your tenant for the 3 month's rent. However, assuming you do have a claim it would be a claim for breach of contract and the statute of limitations for breach of contract claim is 6 years from the date of the breach.

I hope that helps

T

SECURITY DEPOSIT TRANSMITTAL LETTERS: How To Draft A Legal 21-Day Letter

Security deposit withholding issues are the second most litigated area in landlord tenant law after evictions. If a landlord makes improper deduction from a tenant’s security deposit, pursuant to ATCP 134 and §100.20, Wis. Stats., the tenant may sue the landlord for double damages and attorney’s fees. There are numerous published Court of Appeals decisions in Wisconsin dealing with this exact issue. I would like to offer a few suggestions to landlords which will hopefully keep you from making any improper security deposit deductions.

First, we need to address some basics . . .

A security deposit is defined as "any payment that is given to a landlord as security for the performance of the tenants obligations under the rental agreement." ATCP 134.01(11).

ATCP 134.06(2), states that "within 21 days after a tenant surrenders the rental property, the landlord shall deliver or mail to the tenant the full amount of any security deposit held by the landlord, less any amounts properly withheld by the landlord."

If you would like to know what a landlord may legally deduct from a tenant’s security deposit you will want to read my Jan. 17^th post.

ATCP 134.06(4), states "If any portion of a security deposit is withheld by the landlord, the landlord shall, within the time period and manner prescribed in sub.(2) – 21 days -- deliver or mail to the tenant a written statement accounting for all amounts withheld. The statement shall describe each item of physical damages or other claim made against the security deposit, and the amount withheld as reasonable compensation for each item or claim."

I will refer to this written statement interchangeably as either the "security deposit transmittal letter" or the "21-day letter."

According to ATCP 134 all prepaid rent in excess of one month is legally considered to be a security deposit. So if you require a new tenant to pay first and last month's rent plus a security deposit, legally the security deposit will also include the last month’s rent

Essentially a landlord must either return a tenant’s security deposit or send the tenant an itemization of how the tenant’s security deposit was applied within 21 days after the tenant surrenders the premises. This is mandatory. No matter what the situation – even if you are legally entitled to keep all of the tenant’s security deposit – you must still send the tenant a letter explaining to them why you can legally keep it and how it was applied. There is no situation in which you should not be sending the 21-day letter to a vacating residential tenant in Wisconsin. Even if common sense tells you it is not necessary (i.e. the tenant told me to use his/her security deposit to pay for the last month’s rent) you should still send out the letter. If you are wrong the ramification may be expensive. Be safe - send the letter each and every time.

As I mentioned in a previous post about what a landlord can legally deduct from a tenant’s security deposit, ATCP 134.06(3) states that you can only deduct the following from a tenant’s security deposit: (1) damage, waste, neglect, (2) unpaid rent, (3) utility costs, (4) any other items properly identified in a document called Nonstandard Rental Provisions (NSRP).

Note: There are two additional items listed in ATCP 134.06(3) which may be deducted from a tenant’s security deposit but they are not very common so to keep things simple I have not chosen not to mention them in this post.

So if you are not using a NSRP then legally you may only withhold for rent, utilities, and damage or waste or neglect. That is it. Nothing more. If you would like to be able to legally deduct other things from a tenant’s security deposit such as late fees, insufficient funds fees, actual costs charged by a municipality that the landlord had to pay resulting from the tenant’s failure to cut the grass or properly dispose of recyclables etc. -- then you must have those deduction listed in your NSRP and signed or initialed by the tenant.

My suggestions . . .

Now that we have covered the background information, here are my suggestions for how you should draft a 21-day letter to a tenant.

1. Mail the 21-day letter early.

Many landlords get into trouble because they wait until the last day to send out the letter. You only have 21 days from the date that they tenant "surrenders" the unit.

ATCP 134.06(2)(b) defines "surrender" as follows:

a. The last day of the tenancy provided under the rental agreement.

b. If tenant vacates before the last day of the tenancy and gives landlord written notice that they have vacated, then surrender occurs when the landlord receives the written notice.

c. If tenant vacates after the last day of the tenancy, then surrender occurs when the landlord learns that the tenant has vacated.

d. If tenant is evicted, surrender occurs when the writ is executed by the Sheriff or when the landlord learns that the tenant has vacated, whichever occurs first.

If that sounds a bit confusing to you that is because it is confusing! So the key is to not wait until the 21^st day to send out the letter. Send it out as soon as you can. Don’t wait until the 21st day to mail it to the tenant because there is always a chance that there will be a dispute as to what day the tenant "surrendered the property."

A client of mine was once sued for failing to return a tenant’s security deposit within the required time period. The tenant allegedly dropped off the keys in the rental office drop box on a Sunday before the Memorial Day holiday. The office was closed on Monday because of the holiday so my client didn’t learn that the keys were returned until she came into the office and noticed them on Tuesday following the holiday. My client considered the date of surrender to be on Tuesday. My client mailed the tenant’s entire security deposit to them on the 21^st day from that Tuesday.

The tenant sued my client arguing that the 21-day letter and the enclosed return of the security deposit was sent on the 23^rd day rather than the 21^st day after surrender. The tenant argued that the date of surrender was on the Sunday when the keys were dropped off rather than on the Tuesday when my client discovered them. The court commissioner handling the case agreed with the tenant. My client had returned the tenant’s entire security deposit to him but nonetheless was still ordered to pay double damages and a reasonable attorney fee.

While I disagree with the decision of the court commissioner (based on the definition of "surrender" and for equitable reasons - the tenant got the entire deposit back) that is not the point. The point is that my client should never have waited so long to return the security deposit to the tenant. Since my client was returning the entire security deposit to the tenant there was no need to obtain estimates for damage to the unit or have repair work completed. They could have easily mailed it back 2 days earlier, or 5 days earlier, or 2 weeks earlier for that matter. There is no reason to wait the full 21 days.

Yes, I realize that sometimes you may need additional time in order to properly identify all the tenant damage and obtain estimates for those repairs. Sometimes that will be the case. But oftentimes there will be no reason to use the entire 21 days to return the deposit or send the letter, but yet this is what many landlords do. This leads to my second suggestion.

2. Your 21-day letter need only explain how the security deposit was applied and nothing more. You do not need to list all of the damages that the tenant owes you - just enough to cover the security deposit.

ATCP 134 only requires that a landlord account for how the security deposit was applied. It does not say that you must provide the tenant with a complete written list of all damages or money owed – just enough to explain how the security deposit was used.

Here is an example:

Tenant, Joe Smith, vacates the property on the last day of the month of January. While the tenant provided proper notice to terminate his tenancy he failed to pay January’s rent. Mr. Smith left the rental unit in a mess. There was damage, beyond normal wear and tear, to the carpeting, walls, and floors. There were window screens missing. Window blinds were trashed. The place was essentially left a mess and the cost to repair the damage will be very expensive.

Question: Under this scenario, when should the landlord send out the 21-day letter?

Answer: The landlord should send out the 21-day letter the day after the tenant vacated - Feb. 1st.

If rent is $500 and the tenant failed to pay the last month’s rent then you have all of the information that you need to notify the tenant why they are not getting their security deposit back. Remember you are only required to explain how the security deposit was applied. You are not required to notify the tenant within 21 days of all the damages that the tenant owes you because he trashed the place.

In the above example, the tenant failed to pay January’s rent in the amount of $500 which just so happens to be the same amount as the tenant’s security deposit. So even if there are lots of damages to the unit you can still send out the 21-day letter the day after the tenant surrenders the unit because you have enough information to account for the application of the security deposit. Your letter should simply state that the tenant failed to pay the last month’s rent for which he was legally responsible and that you will be applying his security deposit of $500 toward the last months’ rent and no portion of his security deposit is being returned. You have now complied with the ATCP 134 regulations.

Now you can take your time, if needed, to obtain estimates for all the tenant-caused damage to the unit and send the tenant a separate letter on a later date notifying him of the additional money he owes you.

By remembering this simple rule it has been my experience that many 21-day letters can be mailed out well before the 21 day period closes.

3. If you are able, make only "slam dunk deductions" from a tenant’s security deposit.

"Slam dunk deductions" are deductions that the tenant would have a difficult time arguing about. If you have enough "slam dunk deductions" to cover the entire security deposit then the tenant is less likely to sue you for allegedly making an improper deduction from his/her security deposit. Examples of "slam dunk deductions" would be items such as rent and/or utilities. As long as you have a written rental agreement with the rent amount listed and it indicates what utilities the tenant is responsible for paying, these two types of deductions tend to be the safest to make. This is not always the case (especially if there are arguments about if proper notice to vacate was given by the tenant) but for the most part rent and utilities are safe items to deduct.

In my 15 years of representing landlords, I have found that most tenants will be truthful and admit if they did not pay rent and if they failed to pay their utilities. However, tenants are rarely willing to concede that they left the place a mess or that they caused damage. I am not sure why this is - someone should conduct a study of this! As such, deductions for repairs or cleaning charges are NOT "slam dunk deductions." Rather they are deductions that often are disputed by tenants - so try to avoid them if possible. Keep things simple and you will lesson you exposure to a lawsuit.

Let’s take the example mentioned above and change the facts. Assume that the tenant, Joe Smith, did pay the last month’s rent and did not owe any utilities, and therefore the only possible legal security deposit deductions that you could make are the non-slam dunk items related to the property damage. Under this scenario, my "slam dunk deductions" theory is not helpful, so you must proceed to my next suggestion.

4. Itemize all deductions separately and clearly, and enclosing all invoices for the cost of repairs (or estimates if the work has not been completed), photographs, copy of the Check-In/Check Out Sheet, and always error on the side of caution.

If the only legal deductions that can be made from a tenant’s security deposit are for damages to the unit then you very well may need most of the 21 days to obtain your estimates and or make the repairs. If you are unable to have the repairs completed or even obtain estimates within 21 days you still are required to send out the 21 day letter. In that situation I caution you to error on the side of under-estimating the cost of the repairs.

You 21 day letter should be clear and detailed. The purpose of the letter is to explain to the tenant what happened to their deposit. If you are clear in your explanations as to how that deposit was applied there is less of a chance that your tenant will sue you. If the tenant cannot understand the deductions that you made because you did not clearly explain them in the letter or your handwriting is illegible then s/he may think that you are treating them unfairly and that will increase the chances that they will sue you.

Take photos of the damage left behind by the tenant. Hopefully you also have photos that were taken prior to the tenant moving in which will show that the damages caused by the tenant were not preexisting. A Check-In/Check-Out form which you and your tenant completed at the outset of the tenancy, noting any pre-existing damages prior to them moving in, will also be helpful.

If you take the above precautions there will be a better chance than not that a tenant will not sue you for making improper security deposit deductions because s/he will be able to understand the deductions that you made and s/he will also know that you have evidence to support your deductions. Even if the tenant does decide to sue you, you will now be better prepared to defend yourself in court if that is where you end up.

Keep in mind, that if you are unsure whether you can adequately prove that your tenant caused the damage then it is safer to not make the deduction from their security deposit. You will need to engage in some cost-benefit analysis as well as analyze your willingness to take risk. Ask yourself if the $100 deduction that you want to make (and which you cannot adequately support) is worth the chance of having to pay the tenant double damages ($200) plus the hundreds or thousands in attorney’s fees if a court commissioner or judge disagrees with you.

ADDED ON APRIL 21, 2010 --- The law does not require that all damages be prepared prior to you making a deduction from a tenant's security deposit. Unfortunately many courts do not realize this. It should be noted that the Department of Agriculture, Trade and Consumer Protection, the governmental entity that drafted ATCP 134 and the encompassing security deposit regulations, stated in its 1999 Summary of ATCP 134 Revisions, that "if repair costs are not known within 21 days, a written accounting must still be provided. In this case, a 'good faith estimate' may be made."

5. Send the 21-day letter via certified mail.

I always recommend to my clients that they send the 21-day letter (whether it includes the return of security deposit money or not) via certified mail. Why? Because the certified mail receipt is proof of the date that you mailed it. You do not want to be stuck in a "he said - she said" argument with your tenant as to the date you mailed the letter when you are before a court commissioner or judge. The certified mail receipt gives you additional evidence besides "your word" as to when you mailed the letter. Yes, it does cost more to mail a letter certified. And yes, if you have to mail out many 21-day letters this cost can add up. Once again, you will need to evaluate whether or not foregoing the certified mail option is worth the possibility of having a court rule that you did not mail the security deposit transmittal letter timely.

6. If no forwarding address is provided then mail the 21-day letter to the tenant’s last known address.

Send the letter to the tenant’s new address if they provided you with one. But if they didn’t, which seems to be the norm, then ATCP 134. 06(5) says that you should mail it to their last known address. Yes, I do realize that the tenant’s last known address is the address of your rental unit which the tenant just vacated - but as silly as that may seem you should still do it.

ATCP 134 says that you must mail or deliver the security deposit transmittal letter to the tenant - it does not say that the tenant needs to receive the letter. Yet another reason why I suggest certified mail. If the letter is returned to you - do not open it. Keep it in your files for a while to see if the tenant contacts you. If the tenant decides to sue you - having the unopened letter with a date from the U.S. Post Office on it showing when you mailed the letter - should be all the evidence you need to prevail in court.

7. If you have multiple tenants then the refund should be made payable to all of the tenants.

If more than one adult is on the rental agreement, assuming that you are returning their security deposit, you should make the refund payable to all of the adult tenants.

Your check could read:

Made Payable To: Tenant A, Tenant B and Tenant C

It is not your role as a landlord to decide who contributed what portion of the security deposit. The tenants entered into one rental agreement with you (not three individual agreements) for the entire rental unit and they paid one security deposit as a group. You should return the security deposit to all of them and let them determine how to split it up. The only exception to this rule is if the tenants provide you with notice, in writing, signed by all of them, advising you who the return of the security deposit should be made payable to.

_______________________

The above suggestions cover the most common mistakes that I have witnessed regarding security deposit deductions over the years. While I cannot promise you that if you follow my suggestions that you will never be sued by a tenant for making an improper security deposit deduction, I can tell you that you will significantly reduce your exposure to such a lawsuit.

What May A Wisconsin Landlord Legally Deduct From A Tenant’s Security Deposit?

I have received many calls from both landlords and managers over the years asking me if they are legally allowed to deduct X, Y, or Z from a tenant’s security deposit. I fielded such a question just last week – sounds like a good topic for a blog post.

Wisconsin Administrative Code, ATCP 134.06(3) states that a landlord may deduct from a tenant’s security deposit for the following:

1. Damage, waste, or neglect of the unit

2. Unpaid rent

3. Unpaid utilities for which the tenant is responsible

4. Payment for which the tenant owes for direct utility service provided by a government-owned utility (to the extent that the landlord becomes liable for the tenant’s nonpayment)

5. Unpaid mobile home parking fees which a local unit of government has assessed against the tenant (to the extent that the landlord becomes liable for the tenant’s nonpayment), and

6. Other reasons as set forth in a document entitled "Nonstandard Rental Provisions."

For the majority of landlords and managers out there, items #4 and #5 are not often applicable, so I will focus my attention on the remaining items.

Damage, Waste or Neglect: There is no bright line rule or definition of what constitutes damage, waste, or neglect. This is determined on a case-by-case basis and each court commissioner or judge may have a different view on the topic. The best way to prove that a tenant damaged, wasted or neglected your rental property is to (1) use a "Check-In Check-Out" form and (2) take lots of photographs.

If you want to hold a tenant responsible for damage that they caused to your rental unit then you must first demonstrate that the damage was not pre-existing. To do this you should take photos of the entire rental unit prior to a tenant moving in. You should also complete a Check-In form yourself prior to the tenant moving in. Essentially a Check-In form lists the various rooms and areas of the rental unit and provides space for you to note any damage or problems. Once the tenant has moved in you should then provide the tenant with a blank Check-In form and ask them to complete it fully, date it, and sign it and then return it to you promptly.

Upon receipt of the tenant’s completed Check-In form you should compare it to the one that you completed earlier. If there are major differences between the two you should address this immediately with your tenant. Oftentimes the discrepancy will be due to the tenant causing damages during the move-in process.

If the tenant fails to return the Check-In form then a landlord should document this in the tenant’s file. If there is a dispute at a later date, the landlord will now have proof (a contemporaneous document) demonstrating that s/he did provide the tenant with the form and that the tenant, for whatever reason, chose not to complete it.

After your tenant moves out of the unit you should take the time to fully inspect the unit and take photographs of any and all damage, waste, or neglect that you see. Digital cameras (and some of the better phones which include cameras) are great for this purpose. Be sure and use the time/date stamp function if you have it. For those of you that are partial to using a camcorder to record the condition of the rental unit instead of photographs, I would caution you that most commissioners do not have the time or inclination to view a 20 minute tape of you walking around the apartment. Additionally, landlords that I have represented that have opted to videotape the move-out condition of the unit often make inappropriate statements while they are taping which if heard by the judge or commissioner could hamper your case. Furthermore, most courts do not supply the playback equipment needed to view a recording. So unless you want to haul around a VCR and television ("old school") or a digital camcorder and possibly a computer ("new school") - stick to photos.

After the landlord has inspected the unit and taken photos s/he should also complete the Check-Out portion of the Check-In Check-Out form. By doing so, the landlord will now have a "before and after" view of the rental property in one single document to submit as an exhibit in court should it become necessary.

By having photos taken before the tenant moved in, photos taken after the tenant moved out, a Check-In form completed prior to (or immediately after) the tenant moved in, and a Check-Out form completed after the tenant moved out, a landlord should be in pretty good shape to prove any tenant damage, waste, or neglect, if needed.

Do not forget that a landlord is not allowed to deduct for "normal wear and tear." This phrase has never been defined in any Wisconsin statute, administrative rule, or case. Once again, the determination of what is "normal wear and tear" is left to the discretion of the commissioner or judge and may vary from day to day (or even hour to hour - as I have had the misfortune of experiencing)

Unpaid Rent: Deducting unpaid rent from a security deposit would seem pretty straight forward but that is not always the case. Prior to deducting unpaid rent from a tenant’s security deposit a landlord should be sure that s/he can prove what the monthly rent amount is. If you are using a written rental agreement that should do the trick. If you do not have a written rental agreement – a cardinal sin in the rental industry – then you will most likely need to provide proof of your tenant’s rent payment history to demonstrate what the monthly rental amount is.

The issue regarding deductions for rent payments often centers on the determination of when the tenant is no longer responsible for paying rent. This can arise in many different contexts.

One such context would be whether or not the tenant is still responsible for paying rent after they vacate the unit. Another relevant context would be whether or not the tenant is responsible for paying the full rental amount because of the poor condition of the property. Determining whether or not a tenant is responsible for rent in the above contexts (and the myriad of other situations) often depends on a number of factors such as: (1) was the rental agreement a lease for a specific term, (2) did the tenant leave prior to the ending of the term, (2) did the tenant provide the landlord with proper notice of their intent to vacate, (3) was the rental unit uninhabitable, (4) was there sufficient damage to the rental unit such that a tenant could be entitled to "abate" some of the rent, and (5) did the landlord make reasonable efforts re-rent the unit after the tenant vacated.

Unpaid Utilities: This deduction would seem to be fairly straightforward, either the tenant paid their utility bill or they didn’t. But before you make any deduction for utilities from a tenant’s security deposit you should make sure that you have adequate proof to demonstrate that the tenant was responsible for paying the utility. Once again this is where a written rental agreement is a necessity. If you don’t have a rental agreement that clearly states whether or not the utilities are included or not you will often find yourself in a "he said - she said" situation. The person that usually wins that credibility judgment is the party that is the best at lying. Avoid being stuck in such a situation and always use a written rental agreement (even if your tenant is on a month to month tenancy) and always indicate in that rental agreement who is responsible for the utilities.

Another issue that arises with utility fee deductions is whether or not the utility bill became due prior to the 21 day period in which a landlord must either return a tenant’s security deposit or provide the tenant with a written itemization as to how their security deposit was applied. Landlords need to remember that they cannot just hold onto a tenant’s security deposit indefinitely while waiting for the utility bill to arrive. Once your tenant vacates, you will need to contact the applicable utility service and find out what amounts are owed as of that date. Attempt to obtain a written record of this amount if possible. A landlord is not excused form the 21 day requirement under ATCP 134.06(2) just because he or she didn’t yet receive the utility bill for which the tenant is responsible.

Other Reasons as stated in the Nonstandard Rental Provisions: As was mentioned above, if a landlord wishes to be able to legally withhold from a tenant’s security deposit anything other then items 1-5 above, then the landlord must have those additional items set forth in a written NSRP document. There is no such thing as a verbal NSRP. So those landlords that are handling everything verbally - you have limited yourself as to what you may deduct from your tenant’s deposit.

The items in the NSRP should be specifically identified and discussed with the tenant and you must have the tenant either sign or initial the provisions. Examples of items that are often included in a NSRP include: fees for the late payment of rent, the resulting costs to the landlord if a tenant's check is returned for "insufficient funds," any fees charged to the landlord by the local municipality for the tenant's improperly disposing of recyclables, fees for a tenant's failure to permit access to rental unit, the costs to rekey the locks should the tenant fail to return the keys to the unit after vacating, fees for smoking in a non-smoking unit etc. Some landlords charge a flat fee if the tenant fails to clean the stove or refrigerator but other landlords feel that such "liquidated damages" are illegal and if deducted from a tenant's security deposit might open the landlord up for being sued for double damages and atttorney fees. From recent case law it appears that it would be legal to charge a tenant for the actual costs incurred by the landlord for cleaning - at least if the landlord uses an outside company to do the work. The issue of deducting fees for cleaning from a tenat's security deposit is somewhat of a "grey" area so prior to placing such a provision in your NSRP you should consult with your landlord-tenant law attorney.

For those of you that are thinking creatively, I hate to squash your creativity but "no" a landlord may still not deduct for "normal wear and tear" even if there is a specific NSRP saying that such a deduction can be made and it is signed or initialed by the tent.

So that is it - those are the items that a landlord may legally deduct from a tenant's security deposit in Wisconsin.

Two additional notes of caution. First, if you make an improper deduction from a tenant’s security deposit Wisconsin law allow for your tenant to recover double damages and their attorney's fees if they prevail. attorney’s fees. So be careful. Second, security deposits are just that - security. A security deposit should not be treated as an additional source of income - something that a landlord can keep at the end of every tenancy. If you are withholding the entire amount of your tenant’s security deposit after they leave - every time and with every tenant - then it is just a matter of time until you will be sued and have to defend yourself against "double damages" and "attorney’s fees." You do not make money in this industry by keeping your tenant’s security deposits; nor is that the purpose of a security deposit.

To read about a landlord that got burned by not following the above information please go to my January 7, 2010 post.

Landlords Should Not Play Games With Tenants' Security Deposits

A new landlord-tenant decision has been reccomended for publication. The case of Boelter v. Tschantz involves a tenant suing her past landlord for double damages and attorney’s fees for making improper deductions from her security deposit.

The essential facts are as follows:

1. Tschantz (the landlord) withheld money from the tenant's security deposit.

2. The key deductions that were made were: (1) $323.84 for the tenant's water bill and (2) $85 to repair a clogged toilet.

3. After withholding a portion of the tenant's security deposit to pay her water bill, the landlord then failed to pay the bill timely. As such, the tenant opted to pay the utility directly to avoid late fees.

4. The landlord then sent a refund check to the tenant -- three weeks later -- for the amount that he deducted from her security deposit to cover the water bill along with a Post-It note that said “Oh, too bad no double damages for you.”

5. The landlord then stopped payment on the check prior to the tenant cashing it.

The Court of Appeals held that the landlord violated ATCP 134 as a result of his "game-playing" with the tenant's security deposit.

First violation of ATCP 134: The court held that it was unreasonable for the landlord to withhold money from his tenant's security deposit in order to pay her water bill and then not use that money to pay the water bill timely. The court specifically stated, “A landlord cannot indefinitely retain a deposit -- merely as a deposit -- after a tenant vacates."

Second violation of ATCP 134: The landlord then failed to promptly refund his tenant’s security deposit once he learned that she paid the water bill. Tschantz returned the water bill monies to Boelter three weeks later with a taunting note.

Third violation of ATCP 134: Finally, the landlord placed a "stop payment" on the refund check to the tenant. The court stated that, whether intentional or not, this constituted a further improper withholding of the tenant’s security deposit.

The Court of Appeals has admonished this type of "game playing" with a tenant's security deposit in prior decision. So while the court's decision here is not anything new, it does serve as a reminder to all landlords that they are taking a big risk if they choose to play games with a tenant's security deposit. Remember DOUBLE DAMAGES AND ATTORNEY'S FEES - need I say more.

The more noteworthy aspect of this case concerns the court's holding with regard to the repair charge deducted from the tenant's security deposit. Tschantz deducted $85 from his tenant's security deposit to repair a clogged toilet. The $85 was itemized as follows: $40 service call fee plus 45 minutes of labor at a rate of $60 per hour for the actual work. Tschantz stated that this deduction was “less than or equal to what an area plumber would bill.” Problem was that Tschantz didn’t hire a plumber to do the work, instead opting to hire his son’s (handyman) company which only billed Tschantz $15 per hour for the work it performed.

The court emphasized that the applicable law, Sec. 704.07(3), Wis. Stats., states that a tenant is only responsible to reimburse a landlord for the "reasonable cost" of the damage. The court then added that the "reasonable costs" would be the actual costs that the landlord had to pay for the repair work. Since a plumber's fee also includes overhead and profit, the court said that Tschantz was not entitled to reimbursement of that amount. Tschantz was only charged $15 per hour by his (handyman) son to clear the toulet - $12 total per the court's calculation -- so that is the amount that he was entitled to legally deduct from his tenant's security deposit.

Since there is no other published Wisconsin appellate decision that have addressed this specific issue 9at least not to my knowledge) - this is really the key holding of the case. A landlord may not charge a tenant for repairs at the rate that a professional laborer would charge if the landlord does not actually incur those charges.

Finally, the court also explained that when a landlord improperly withholds money from a tenant’s security deposit that the tenant is entitled, as a matter of law, to an award of his/her attorney’s fees. Here, the trial court chose not to award the tenant her attorney's fees because the judge felt that the attorney's fees were too far out of propertion to the claimed damages. The Court of Appeals "slapped the hand" of the trial court judge and reminded him that an attorney’s fee award is mandatory if there is a violation of ATCP 134 even if the attorney’s fees are far greater then the actual damages at issue.

Expensive lesson for Mr. Tschantz.

NOTE: Since Mr. Tschantz lost his appeal in this matter he will also be responsible for paying his tenant's attorneys fees through the appeal per Shands v. Castrovinci, 115 Wis.2d 352, 340 N.W.2d 506 (1983)

Article and Video Regarding Recent Seminar On Advising and Defending Property Owners in Nuisance Actions

On May 7, 2009 I spoke at the State Bar of Wisconsin Annual Convention. I was asked to speak at the Government Lawyer Division's seminar that focused on the topic of neighborhoods and nuisance properties. Specifically I was asked to speak on advising and defending property owners that have nuisance properties.

The State Bar recently published a nice article summarizing my seminar presentation which was published through its online Inside Track newsletter. A link to the article and a short video of my presentation on the topic of written screening criteria is below.

House rules: Landlords knowledgeable of tenancy laws improves condition of rental properties, neighborhoods (from wisbar.org)

Landlord accountability: Advising and defending the property owner

July 1, 2009 -- In this video clip, Milwaukee attorney Tristan Pettit explains the importance of the property owner's consistent use of written criteria when screening potential tenants. Pettit spoke at the Government Lawyers Division program at the State Bar Annual Convention in May. (from wisbar.org)

ATCP 134: THE 7 DEADLY SINS - 7 PROHIBITED RENTAL PROVISIONS

04/16/15 - UPDATE - This blog post has been updated by a new blog post dated 04/16/15 and entitled THE 10 DEADLY SINS: 10 PROVISIONS THAT LANDLORDS ANNOT INCLUD IN THEIR WISCONSIN RESIDENTIAL RENTAL AGREEMENT

Did you know that if you have an illegal provision in your rental agreement that the entire agreement may be unenforceable? Unfortunately this is true. In the case of Baierl v. McTaggart the Wisconsin Supreme Court held that because the landlord's lease contained an illegal provision, the entire lease could be thrown out. This result can occur even if you never tried to enforce the "illegal" provision as was the case with the landlord in the Baierl case.

In my representation of landlords over the past 14 years, the two most frequent situations in which I have found an illegal provision in a rental agreement were because: (1) the landlord decided to draft his/her own rental agreement and didn't know that Wisconsin law prohibited him/her from including certain language, and (2) the landlord used a rental agreement that s/he found on the internet that was not drafted by a person knowledgeable about Wisconsin law.

The Wisconsin Administrative Code, Chapter ATCP 134, specifically ATCP 134.08 sets forth the 7 provisions that cannot be included in a Wisconsin residential rental agreement - often referred to as the 7 deadly sins.

You cannot include a provision in your rental agreement that:

1. Authorizes the eviction of a tenant from the property other than by the judicial eviction process set forth in the Wisconsin Statutes.

Essentially this means that if the tenant refuses to vacate at the end of a lease or after committing a breach, the landlord is not able to engage in self-help eviction. You are not allowed to change the locks so that the tenant is locked out. You are not allowed to remove the door to the apartment. You are not allowed to turn off the heat or electricity to the unit. Nor can you remove the tenant's belongings and put them on the curb or in a storage facility.

If a tenant refuses to leave your property, the only legal way to have them removed is to file an eviction action against them, obtain a judgment of eviction, and if necessary involve the Sheriff's Department to physically remove the tenant. Because this is the only legal way to remove a tenant it is illegal to include some other procedure to evict a tenant in your rental agreement.

2. Provides for the acceleration of rent payments if the tenant defaults or breaches the rental agreement.

Some commercial leases include an "acceleration of rents" clause but such clauses are prohibited in Wisconsin residential leases. So if a tenant breaches their rental agreement the landlord cannot require that the tenant immediately pay all future rent through the end of the term. According to sec. 704.29 of the Wisconsin Statutes, the landlord must attempt to mitigate the tenant's damages by trying to re-rent the unit. If the landlord is able to re-rent the unit then the breaching tenant will no longer be responsible for the rent once the new tenant moves in and begins paying rent. If the landlord is unable to re-rent the unit then the breaching tenant may very well be responsible for all of the rent through the end of the term, however since the landlord is unable to determine if that will be the case at the time of the breach, the landlord cannot include language in the agreement that the tenant must pay all future rent immediately upon a breach.

3. Waives the landlord's duty to mitigate damages.

As I mentioned above, landlord's have a duty to mitigate a tenant's damages by trying to re-rent the unit. As such, it is illegal for the landlord to avoid that duty by putting such language in the rental agreement.

4. Requires the tenant to pay the landlord's attorney's fees or costs that are incurred in any legal action or dispute arising under the rental agreement.

This is the illegal provision that I see the most often when reviewing rental agreements. The lease agreements that are sold at OfficeMax and Office Depot contain this prohibited language. This is also the illegal language that was included in the rental agreement at issue in the Baierl case that I reference above.

In a commercial lease it is acceptable to include language that requires a tenant to pay for the landlord's attorney's fees and costs however it is not allowed in the residential context. A landlord who prevails in court and has a tenant properly evicted will still be responsible for paying his/her own attorney's fees. If you are interested in learning more about the Wisconsin Supreme Court's reasoning you should read the Baierl case here.

5. Relieves the landlord from liability for property damage or personal injuries caused by the landlord's negligent acts or omissions.

To put it simply, if the landlord causes damage or injury to a tenant then the landlord will be responsible for it. A landlord cannot remove his/her liability by having a tenant sign a rental agreement waiving that responsibility. For example, if a landlord is aware that the railing on his rental property's second floor porch is loose and the landlord has not gotten around to repairing it for several weeks, the landlord will be responsible for the tenant's injuries should he fall off the porch, regardless of what the rental agreement says.

6. Imposes liability on a tenant for injuries or damages which are clearly beyond the tenant's control or any damage caused by natural disasters or by persons other then the tenant or the tenant's guests.

This is very similar to the 5^th deadly sin mentioned above but is even broader in scope. The landlord can't hold a tenant responsible for someone else's negligence (other than a guest) if the tenant has no control over that person, nor can the landlord hold the tenant responsible for injuries or damage resulting from an act of God. So if the tenant or the tenant's guest was negligent and that negligence caused damage or injury to the tenant or his property then the landlord will not be responsible - the tenant would. But if a massive snowstorm damages the rental property or an electrician hired by the landlord improperly wires the unit causing injuries and damage, the landlord cannot hold the tenant responsible regardless of what the rental agreement says.

7. Waives any other statutory or legal obligation of the landlord to deliver the unit in a fit or habitable condition or maintain the unit during the tenancy.

A landlord has a responsibility to provide the tenant with an apartment that is liveable and safe. A landlord also has the responsibility to repair and maintain the property to insure that it remains safe and liveable. A landlord cannot avoid this responsibility even if the tenant agrees to allow him/her to do so in the rental agreement.

Wisconsin landlords need to make sure their rental agreements do not contain any of these 7 deadly sins. Failure to remove such illegal provisions may result in your rental agreement being declared unenforceable against the tenant and may even expose you to a lawsuit for double damages and attorney's fees by the tenant.

04/16/15 - UPDATE - This blog post has been updated by a new blog post dated 04/16/15 and entitled THE 10 DEADLY SINS: 10 PROVISIONS THAT LANDLORDS CANNOT INCLUDE IN THEIR WISCONSIN RESIDENTIAL RENTAL AGREEMENT

LATE FEES - PART 1: WHAT AMOUNT CAN YOU CHARGE?

Many of my clients ask me what amount they should charge a tenant who is late in paying rent. Many also wonder if there is a maximum amount beyond which they would not be allowed to charge as a late fee.

The only legal guidance we have as to what amount is acceptable as a late fee is the case of Three & One Co. v. Geilfuss, 178 Wis.2d 400, 504 N.W. 2d 393 (Ct. App. 1993). This 1993 Court of Appeal decision is not even specifically about the issue of late fees but rather addresses the issue of "waste" (when a tenant intentionally damages the rental property) and what amount of damages a landlord may recover against a tenant that commits waste on the landlord's property. Nonetheless the Court in Geilfuss does state in its opinion that the late fee of $50 per month charged by the landlord was properly assessed against the tenant. Thus, we as landlords know that at least the Wisconsin Court of Appeals has upheld a late fee of $50 per month.

There is no other guidance in Wisconsin law as to the amount of late fee that is acceptable. No Wisconsin Statute addresses the issue nor does any administrative rule in Chapter ATCP 134 of the Wisconsin Administrative Code.

As such, a landlord should be able to charge a late fee of any amount as long as it is reasonable. Legally, a landlord should also be allowed to charge a daily late fee as well if they so choose. For those of you who choose to charge a daily late fee you should be aware the Model Lease for Subsidized Programs (which is drafted by HUD) specifically allow a landlord renting subsidized property to charge a late fee of $5 on the 6th day of the month and to charge $1 per day late fee each day thereafter for that month until the rent is paid.

On a practical level however - at least in Milwaukee County - there are some restrictions to the amount of the late fee that a landlord may charge. Milwaukee County has an unwritten rule that it does not allow daily late fees to be charged. I have had both court commissioners and judges in Milwaukee County eviction court toss out daily late fees that I have tried to obtain for my clients. The reason that I was provided is that daily late fees are "not fair."

I have even had a past court commissioner in Milwaukee County (several years ago) tell me that he would not allow my client to collect a monthly late fee of $50 as he thought that was "unconscionable." When I provided the commissioner with a copy of the Geilfuss case mentioned above where the Court of Appeals held that a $50 late fee was appropriate, the commissioner relented.

I have handled evictions and the associated damages claims in Dane County, Waukesha County, Kenosha County, Racine County, Aizoaceae County, Washington County, and a county or two county way up north that I can no longer recall - in all of these counties I have never had the court prevent me from obtaining a late fee for my client, regardless of the amount, as long as the late fee was clearly specified in the rental agreement as is required in the Wisconsin Administrative Code, ACP 134.09(8).

So as the law currently stands you should be able to charge any amount for a late fee that you wish, including daily late fees, if you are so inclined. However if you want to have actual legal support for the amount of the late fee you are charging then you may want to cap your late fees at $50 per month and carry a copy of the Geilfuss decision with you when you go to small claims court at least in Milwaukee County).

Please be aware however that individual municipalities can create ordinances regarding late fees that might be more restrictive than the state law. For example the City of Madison's local ordinances which you can review here prevent a landlord from charging a late fee that is more than 5% of the month rent.

A note of caution for Milwaukee County landlords - do not place the late fee amount in your 5 day notice or you might have your eviction case dismissed. See my prior post on this topic here.

Please share with me your experience with what amount of late fees you charge your tenants and if you have had any problems with the courts doing so.

LATE FEES - PART 2: ATCP 134 REQUIREMENTS

Late fees are a necessary evil for landlords aw we often need some type of "hammer" to hold over the heads of tenants who pay rent late. With this post I want to provide you with some additional information on the requirements that must be met with regard to late fees as specified in ATCP 134 of the Wisconsin Administrative Code.

A Bit of History:

In the past - prior to ATCP 134 and when the administrative rules pertaining to residential rental housing were called Ag 134 -- late fees were not allowed. Because of this creative landlords came up with the idea of offering discounts for the prompt payment of rent. For example, if the tenant pays rent by the 1^st of the month the rent will be discounted to $650, however if rent is not received by the 1^st of the month then the rental amount will remain at the regular rate of $700. By doing this landlords still were able to obtain a form of late fee without calling it a late fee.

I still see this "discount rent" option on a few of my client's rental agreements but it has become rare as there is no need to disguise a late fee anymore since late fees are no longer prohibited.

ATCP 134.09(8) Rules Regarding Late Fees:

While late fees are no longer illegal, there are some rules that have been imposed regarding how and when late fees can be used. In the revised Ag Rules (now referred to as ATCP 134) the rules regarding late fees are as follows:

1. You cannot charge a late fee or late penalty unless it is specifically stated in the rental agreement.

2. You may not charge a late fee for the non-payment of a late fee.

3. Before charging a late fee you must apply all rent prepayments received to offset the amount of rent owed by the tenant.

The first two rules are pretty straightforward. However the third rule is a bit confusing. In essence, the third rule is basically saying that you cannot apply a tenant's rent payment to a past owed late fee so that the tenant would now be considered late in paying the current month's rent thus allowing you to charge an additional late fee.

Here is an example: Joe Tenant fails to pay you rent for the month of June in the amount of $500. After the 6^th of the month you charge Joe a $50 late fee. On or about June 10^th Joe pays his rent of $500 for the month of June but fails to pay the $50 late fee. So while Joe has now paid June's rent in full he still owes you a $50 late fee. When July 1^st comes around Joe promptly pays you his July rent of $500. You are not allowed to take Joe's July rent payment of $500 and apply $50 of that payment to the outstanding $50 late fee for June. This is not allowed because by doing so your actions would now make Joe responsible for paying a late fee for July as well because he would have only paid you $450. You cannot do this.

In the example above you would need to apply the $500 July rent payment to July's rent and then continue to keep the $50 late fee from June "on the books" and either collect it from Joe in the future or at the end of Joe's rental term or tenancy deduct the June $50 late fee from Joe's security deposit (assuming your nonstandard rental provisions allow you to do so).

While it may be tempting to ignore this administrative rule you must remember that by ignoring the rule you will be in violation of ATCP 134 which would allow Joe Tenant, under §100.20(5) Wis Stats., to recover twice the amount of the loss (in this case $100) plus his costs in filing the lawsuit and his attorney's fees (and trust me these will be more than the $100 ; )

The three rules mentioned above are administrative rules and apply statewide. You must also be aware that many municipalities have created additional rules regarding late fees. An example would be the City of Madison which specifies that a late fee cannot exceed more than 5% of the rent amount. So be sure and check the local administrative ordinances where you own your rental property.

If you have not already done so, please read Part 1 of my post on the issue of late fees here.

ATCP 134 RULES ON CREDIT CHECK/REPORT FEES

ATCP 134 contains specific rules regarding when and how a landlord can charge a rental applicant for the cost of their credit report. As background, ATCP 134 is the chapter of the Administrative Code of Wisconsin that sets forth 21 requirements that Landlords must follow or else risk getting sued for double damages and attorney's fees by the applicant or tenant.

The applicable portion of the rules regarding credit checks is located at ATCP 134.05(4). This section says that:

1. A landlord may charge a rental applicant the actual cost of their credit check up to $20.

- So if the actual cost to the landlord to order the report is only $10 then the landlord can only require the applicant to pay $10.

2. In order to charge the applicant the credit report fee the landlord must obtain the report from a consumer reporting agency that compiles and maintains files ona nationwide basis.

- So a landlord can only charge the applicant the fee if s/he is obtaining the credit report from one of the "Big 3" (Experion, Equifax, or Trans Union)

- Thus a landlord cannot charge the tenant for the cost of the report if they are obtained from a local or regional consumer information dateabase, credit brokers, credit resellers etc.

3. The Landlord must notify the applicant of the cost before ordering the report.

4. The landlord must provide a copy of the credit report to the applicant if the applicant is paying for the report.

5. The landlord cannot charge the applicant for the cost of the credit report if the applicant provides the landlord with a copy of his/her credit report (obtained from one of the "Big 3") that is less than 30 days old.

- If you are faced with this situation, I would strongly advise the landlord to still order a nmore recent report at their own expense to insure that the report provided by the tenant has not been modified.

ATCP 134 - RESIDENTIAL RENTAL PRACTICES

If you are a landlord are you familiar with ATCP 134? If not, you definitely need to be. ATCP 134 is a chapter of the Wisconsin Administrative Code that applies to residential rental practices. While these rules were updated in 1998 many well-intentioned landlords are still unfamiliar with their provisions and the rather extreme consequences that may result if you fail to abide by them.

The most overlooked - and the most litigated - rule is ATCP 134.06 (2) which pertains to the return of a tenant's security deposit. This rule states that a landlord shall return a tenant's security deposit to that tenant within 21 days after the tenant surrenders the premises to the landlord. This applies whenever the tenant leaves your unit whether that be at the end of the rental period or as the result of being evicted.

If the tenant has damaged the premises or owes back rent such amounts can be deducted from the tenant's security deposit however the 21-day letter must still be sent to the tenant showing the itemized deductions that were taken form their security deposit. The security deposit and/or 21-day letter must be sent to the tenant's forwarding address or if that was not provided then to the tenants last known address.

The consequences to the landlord who fails to follow the above rules are severe. Together, ATCP 134 and the Wisconsin Statutes, allow a tenant to sue a landlord who fails to return the security deposit or mail the 21-day letter to the tenant within the 21 day time period, for double the amount of the security deposit, together with the costs of the lawsuit and the tenant's reasonable attorney's fees. Yes, that is correct, that same tenant that you were forced to evict for failing to pay their rent or for disturbing their neighbors by playing their music too loud, can now come back and sue his/her landlord. Adding insult to injury, besides receiving a damages judgment against you, the landlord, you will also be stuck having to pay the fees of the lawyer who was hired by your ex-tenant to sue you.

If you are a landlord and are unaware of the above residential practice rule or are unfamiliar with ATCP 134 in general, I urge you to become knowledgable before you become mired in such a situation.