Landlords Should Not Play Games With Tenants' Security Deposits

A new landlord-tenant decision has been recommended for publication. Boelter v. Tschantz involves a tenant suing her former landlord for double damages and attorney’s fees after the landlord made 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 in a timely manner. As a result, the tenant paid 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 because 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 the tenant's security deposit to pay her water bill and then fail to pay it in a timely manner. 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 decisions. So while the court's decision here is not new, it reminds all landlords that they take 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. Tschantz itemized the $85 as follows: a $40 service call fee plus 45 minutes of labor at $60 per hour for the actual work. Tschantz stated that this deduction was “less than or equal to what an area plumber would bill.” The problem was that Tschantz didn’t hire a plumber to do the work; instead, he hired his son’s (handyman) company, which billed Tschantz only $15 per hour for the work.

The court emphasized that the applicable law, Sec. 704.07(3), Wis. Stats., states that a tenant must reimburse a landlord only 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 charged only $15 per hour by his (handyman) son to clear the toilet, $12 total per the court's calculation, so that is the amount he was legally entitled to deduct from his tenant's security deposit.

Since there is no other published Wisconsin appellate decision that has addressed this specific issue, at 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 to, the tenant is, as a matter of law, entitled to an award of attorney’s fees. Here, the trial court denied the tenant attorney's fees because the judge felt the fees were too far out of proportion 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 ATCP 134 is violated, even if the attorney’s fees far exceed 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 attorney’s fees through the appeal per Shands v. Castrovinci, 115 Wis.2d 352, 340 N.W.2d 506 (1983)