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!!!!!

You Will Not Want To Miss AASEW's Fourth Annual Landlord Boot Camp on Saturday Feb. 25th

Landlording can be pretty complex, with a seemingly never ending myriad of paperwork, rules, landlord-tenant laws and simple mistakes that can cost you thousands of dollars.

The Apartment Association of Southeastern Wisconsin's Fourth Annual “Landlord Boot Camp” can help you navigate these treacherous waters and teach you how to run your properties with greater profit and less hassles.

I have given similar landlord-tenant law seminars to fellow attorneys, landlords, and property manager organizations throughout the state for other state-wide semianr companies that charge attendees $300-$400. This is your opportunity to learn all of the same information at a huge discount through the Apartment Association.

Who: Taught by Attorney Tristan R. Pettit (who drafts the landlord tenant forms for Wisconsin Legal Blank)

When: Saturday, February 25th, 2012. 8:30 am – 5 pm

Where: Clarion Hotel 5311 S. Howell Avenue, Milwaukee [Map]

Included: 100 plus page manual/outline to help you put what you learn into practice plus helpful forms.

Cost: $159 for AASEW members and $249 for non-members. If you are not a member of AASEW but are a member of another landlord/apartment association the cost to attend will be $199.

Specials: Not a member? Pay just a dollar more and enjoy a 2012 AASEW membership.

Wisconsin landlord-tenant laws are constantly changing. To help keep you up to date we offer prior attendees a $50 discount.

Sign up by going to the AASEW's Landlord Boot Camp landing page where you can sign up online and pay via PayPal.

What you will learn at the Apartment Association's 2012 Landlord Boot Camp

Landlord Boot Camp covers everything that you need to know about residential Landlord Tenant law in Wisconsin, including:

1. How to properly screen prospective tenants.
2. How to draft written screening criteria to assist you in the selection process and protect you from discrimination complaints.
3. How to comply with both federal and state Fair Housing laws including how to handle with “reasonable modifications” and “reasonable accommodations” requests.
4. How to legally reject an applicant.
5. What rental documents you should be using and why.
6. When you should be using a 5-day notice versus a 14-day notice, 28-day notice, or 30-day notice and how to properly serve the notice on your tenant.
7. Everything you wanted to know (and probably even more than you wanted to know) about the Residential Rental Practices (ATCP 134) and how to avoid having to pay double damages to your tenant for breaching ATCP 134.
8. When you are legally allowed to enter your tenant’s apartment.
9. How to properly draft an eviction summons and complaint.
10. What to do to keep the commissioner from dismissing your eviction suit.
11. What you can legally deduct from a security deposit.
12. How to properly draft a security deposit transmittal / 21 day letter.
13. How to handle pet damage.
14. What to do with a tenant’s abandoned property and how this may affect whether or not you file an eviction suit.
15. How to pursue your ex-tenant for damages to your rental property and past due rent (and whether it is even worth it to do so).

. . . and much more. There will also be time for questions and answers.

You get all this for less than you would pay for an hour of an attorney's time.

Last year’s AASEW Landlord Boot Camp was filled to capacity and we even had to turn a few people away. So call early to reserve your spot.

Call the Association at (414) 276-7378, email membership@apartmentassoc.org or go to our Landlord Boot Camp landing page to sign up online and reserve your spot.

Remember that “landlording” is a business — so take the time to educate yourself on how to better manage your business and avoid costly errors!

Landlords May Want To Pursue Tenants for Holdover Damages As Well As Other Damages

After a landlord has had her rental property returned through an eviction action or the tenant vacating of their own accord, a landlord has the option of pursuing the ex-tenant for money damages. I have explained in previous posts, that a typical eviction lawsuit includes three causes of actions against the tenant. First, return of the rental property ("eviction"). Second, a claim for past due rent and other fees allowed under the rental agreement. Third, physical damages to the rental property and holdover damages.

When it comes to the third claim, I often see landlords pursue physical damages to the unit (and cleaning charges) and fail to even consider pursuing holdover damages. This is often because the landlord is not aware that holdover damages exist and/or she is unfamiliar with them. Hopefully this blog post will rectify that situation.

Holdover damages are allowed per sec. 704.27,Wis. Stats., which states that if a tenant remains in possession of the rental unit without the consent of the landlord after expiration of the lease or termination of the tenancy, the landlord may recover damages from the tenant for the tenant's failure to vacate the unit within the time required.

Sec. 704.27 further states that, in absence of proof of greater damages, the landlord may recover a minimum damages amount for the tenant's holdover of twice the rental value apportioned on a daily basis.

A tenant becomes a "holdover" tenant once their tenancy has been terminated and they remain living in the rental premises without the landlord's consent. A tenancy is terminated under any number of scenarios. For example:

1. A tenancy terminates when when a 5 day notice for failure to pay rent has been properly served on the tenant and 5 days have passed and the tenant has failed to cure the breach or vacate the rental unit.

2. A tenancy also is terminated when a 14 day notice to vacate due to breach has been properly served on the tenant and the tenant fails to vacate at the end of the 14 days.

3. A tenenacy terminates when a tenant is under a month to month tenancy and has been properly served with a 28 day notice and the tenant fails to vacate.

4. A tenency terminates if a lease expires, no renewal has occurred, and the tenant remains living in the rental unit.

Under all of the above situations, the tenant has now become a "holdover tenant" which entitles a landlord to "holdover damages."

Holdover damages are much more easy to prove up in court than physical damages. All a landlord needs to do to prove holdover damages is to establish the date that the tenancy terminated and the date that the tenant actually vacated the rental unit. The rest is just simple math -- calculating the daily rent for the period of the holdover.

When pursuing physical damages to a rental unit, a landlord must prove the following:

1. That the unit was not previously damaged prior to the tenant moving in -- this is often done via photographs, video, testimony, or a check-in check-out sheet, or a combination of any of the above).

2. That the damages were caused by the tenant or the tenant's guests or invitees.

3. That the damages are actually "damages" and not merely normal "wear and tear."

Maybe you have experienced this yourself, but I have noticed that tenants are readily willing to admit that they did not pay rent, but they will fight you tooth and nail if you argue that they damaged your rental property or failed to clean it prior to vacating. Once a tenant learns that you intend to pursue them for damages and cleaning costs, out come the multitude of excuses, such as . . . I didnt' break that door, my brother did that when he was drunk, you should sue him . . . that urine soaked carpeting was like that when I moved in 5 years ago, must've been the prior tenant's cat that used the carpeting as a litter box (even though the carpet is still physically wet 5 years later) . . . etc. etc.

Since tenants often take issue when a landlord pursues them for physical damages, the landlord is often forced to go through with an evidentiary hearing in order to obtain her judgment. Add to that, the fact that a tenant has the right, at no additional cost, to request a de novo review of the hearing if they do not like the result, and a landlord can expend a lot of time and money pursuing her damage judgment.

Since most tenants are often "uncollectible" it often does not make practical sense for a landlord to go forward. She will only lose time and money . . . both of which will never be recovered. Whetehr or not to pursue money damages against a tenant at all is a decision that only the landlord can make based on their specific situation.

When a landlord pursues holdover damages against a tenant there seems to be fewer requests on the tenant's part for a damage hearing. Oftentimes, the court commissioner will explain to the tenant what holdover damages are and that they are "statutory" in nature and thus only require that one factual issue be determined -- when the tenant vacated the rental unit.

This is not to say that a tenant won't still request a hearing if a landlord pursues only holdover damages against them. They still might (although the frequency of the request is much less than when a landlord pursues physical damages, in my opinion). And they certinaly may request a hearing if the landlord pursues both holdover damages and physical damages against them. Nonetheless, even if an ex-tenant does request a hearing, the time spent prepping for the hearing to prove holdover damages, and the exhibits necessary to be introduced at such a hearing, are much less involved than for a damage seeking physical damages

So while tenants may not like holdover damages, the law provides for them and a landlord has every right to avail herself of them.

ADDED 8/2/11 at 5:53 pm --- It should be noted that in Milwaukee County I have been told repeatedly that landlords cannot seek both physical damages to the rental unit and holdover damages against a tenant. In Milwaukee County, the courts have indicated that it is their interpretationof sec. 704.27 that a landlord may only recover holdover damages if the landlord cannot prove greater physical damages to the unit. I believe this interpretation of the statute to be incorrect. I believe -- just as the commentor below has stated -- that a landlord is entitled to holdover damages of twice the rental value apportioned on a daily value as a minimum for the tenatn's holdover unless she can prove greater damages for the holdover. Physical damages should be treated separately. The language "in absence of greater damages" set forth in sec. 704.27 is not referring to physical damages at all. Nonetheless, a landlord should be prepared that they may be told to choose to elect either holdover damages or physical damages in Milwaukee County.

The Vincenti v. Stewart, 107 Wis. 2d 651, 321 N.W. 2d 340 (Ct. App. 1982) further addresses this issue. the Court of Appeals refers to the Committee Comments to sec. 704.27, at pages 654-655 of its decision, and explains that the recovery of twice the rental value only establishes a minimum damages amount for a tenent holding over. The Court explains that in some circumstances greater damages can be proven as a result of the tenant's holdover. It is clear in from the Vincenti opinion that the "greater damages" language refers to greater damages due to the tenant's holdover only and NOT greater damages in general (i.e. physical damages to the unit).