One of the most misunderstood areas of Wisconsin landlord-tenant law involves application fees.
I routinely see landlords and property management companies charging application fees that may create significant legal issues under Wisconsin law.
The reason is simple: Wisconsin law does not recognize or allow “application fees” in the way many landlords think it does.
Instead, Wisconsin law primarily allows landlords to charge only limited screening-related costs.
Specifically:
• Landlords may charge an applicant for the cost of a consumer credit report up to $25 or the Landlord’s actual cost, whichever is less; and
• Landlords may charge an applicant for the cost of a background check up to $25 or the Landlord’s actual costs, whichever is less, for out-of-state applicants only.
Despite these restrictions, many are charging additional “application fees” beyond the amounts noted above.
The problem is that under ATCP 134.02(3), Wisconsin defines an “earnest money deposit” extremely broadly.
The rule defines earnest money as:
“the total of any payments or deposits, however denominated or described, given by a prospective tenant to a landlord in return for the option of entering into a rental agreement in the future, or for having a rental agreement considered by a landlord.”
In other words, simply calling something an “application fee” does not necessarily mean that it is legally treated as an application fee. Most application fees, excluding the consumer credit report fee and background check fee, fall under the definition of “earnest money” in Wisconsin.
That becomes important because under ATCP 134.05, earnest money must either be:
• Returned to the applicant if their application is denied; or
• Applied toward the tenant’s rent or security deposit if the applicant is accepted.
This is one area where many landlords unintentionally create problems for themselves.
For example, many online leasing platforms automatically charge standardized “application fees” that may not comply with Wisconsin law. I also routinely see landlords charge flat application fees that substantially exceed their actual screening costs.
Landlords should understand that DATCP has historically scrutinized these practices.
Importantly, just because “everyone does it” does not necessarily mean the practice complies with Wisconsin law.
This is one of those issues many landlords don't think about until they receive a DATCP complaint, a CID (Civil Investigative Demand), which starts DATCP’s investigation into your rental practices, including much more than just your application fees, and can continue for well over a year. I have several clients that have been investigated for more than 2 years.
Unfortunately, by that point, the landlord’s own application documents and accounting records often become evidence against them
