NEW SUBSCRIPTION SERVICE UPDATE

I would like to apologize to those of you who are subscribed to my blog for having to tolerate all of the recent problems related to my old subscription service - especially the multiple email notifications.

Please be assured that I have chaged subscription services and this new service will send you no more than 1 email per day -- and if I don't revise or post a new blog entry that day then you will not receive any email notifications.

How about that - a system that actually works - pretty cool concept.

So I hope that you will give the subscription service another chance and that I haven't scared you away. Unfortunately I am unable to manually subscribe you to the new service. So you will need to go to the link on the left hand side of my blog entitled "Subscription Options" and then type in your email and press the "subscribe button." You will then receive an email that you need to click on the link and you will then be officially subscribed.

Thanks and please accept my apologies.

T

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

LEAD-BASED PAINT DISCLOSURE FORM: YOU MUST USE THIS DOCUMENT!

Just last week I read yet another article about an owner and its management company in California being threatened with a $330,000 fine for failure to give it's tenants a lead-based paint and lead-based paint hazard disclosure notice as required under federal law. Yes, that number is correct - $330,000 - I did not mistakenly add an extra 0 or two. That is $11,000 per violation for the 30 alleged violations.

Just yesterday I was meeting with a new client to review his rental documents and assist him with a problem tenant issue. This client owns several properties in the city of Milwaukee and has owned one of them for over 10 years. After reviewing the rental documents that he was using and not noticing the lead-based paint disclosure form among them, I asked him if he gave his tenants the federally-mandated lead-based paint disclosure. He did not know what I was talking about - he was not aware of the law or the disclosure form.

It is federal law (24 C.F.R. Part 35, subpart A) that an owner, or its agent, of any property that was built before 1978, must disclose to any prospective tenant whether or not it has any knowledge of lead-based paint or lead-based paint hazards in the property and if so provide any written records of same if available. The owner/agent must also give the prospective tenant a copy of the E.P.A.-approved information pamphlet entitled "Protect Your Family from Lead In Your Home."

You must give these two documents to each and every tenant even if you have no knowledge of any lead-based paint issues in your property. Chances are that most, if not all, older housing stock has some layers of lead-based paint somewhere within it. The fines for failing to provide these documents to tenants are huge - as you can tell from the California article I reference above.

If you are interested in seeing a copy of the manual that the feds follow to determine what amount the fine should be for such violations click here. It is truly scary. You can be fined for failing to provide the above documents to tenants even if no one has been injured by ingesting lead-based paint chips or dust. You can be fined even if there are no children living in the unit. The fine is for failing to provide the disclosure form. If children are living in the unit or god forbid any child is injured as a result of ingesting lead-based paint at your rental property the fines just increase.

It is very easy to comply with this law and protect both yourself and your tenants. You can purchase a copy of the Lead-Based Paint Disclosure form at Wisconsin Legal Blank, Inc. The EPA pamphlet may also be purchased at WLB. The pamphlet is also available for free on the internet here. As long as you include all of the pertinent requirements you can even draft your own disclosure form.

Once you have purchased or drafted the disclosure form fill it out. If you are not aware of any lead-based paint or lead-based paint hazards you simply check the applicable box on the form. If you have no documentation of any lead-based paint or lead-based paint hazards (such as building code orders) you also check the applicable box. If you are aware of your property having lead-based paint or lead-based paint hazards (i.e. you or some agency have conducted tests and/or you have been cited by your municipality) then you must disclose this information and also attach any written documentation that you have in your possession regarding this.

Once you have accurately completed the form you should sign and date it. You should then give a copy of the form and the EPA-approved pamphlet to each adult and have them sign and date it. This disclosure form is the first document you should be having your soon-to-be tenant reviewing and signing when you meet with them to review and sign your rental documents. The law says that you should be providing this disclosure form to prospective tenants - so they should be receiving the disclosure before they sign the rental agreement and actually become tenants.

If you are reading this post and have not provided your current tenants with the disclosure form and the pamphlet I would suggest that you take action immediately and get these two documents to them ASAP. Late disclosure is better then no disclosure.

With such large fines levied by the government for such failure to disclose lead-based paint and lead-based paint hazards I am extremely cautious and often advise my clients to provide new disclosure forms and a new EPA-approved pamphlet to tenants every time they sign a renewal or enter into a new rental agreement. It probably is not necessary but I'd rather be safe then sorry.

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.

COURT OF APPEALS SAYS TENANT NOT LIABLE FOR FIRE DAMAGE

The court of appeals recently released its decision in the case of Maryland Arms Limited Partnership v. Connell. This decision has been reccomended for publication. The issue in this lawsuit was whether the landlord or the tenant should be liable for damage to an apartment unit when the damage was not caused by the negligence of either the landlord or tenant. The Court of Appeals held that it is the Landlord that should be held liable in such a situation. As such the case will now stand for the proposition that a tenant cannot be held liable for his/her actions that damage the property unless the damage is caused by the tenant's negligence

The facts were as follows and were not disputed by either the tenant or the landlord:

- A fire occurred in the tenant's apartment and caused $8,000 worth of damages while the tenant was asleep.

- The fire started from a hair dryer owned by the tenant which was plugged into the elctrical outlet.

- The tenant did not know that the hair dryer was deffective when it was left plugged into the electrical outlet.

- The tenant and the landlord both agreed that the tenant was not negligent in causing the fire as she had no indication that anything was wrong with the hair dryer when she left it plugged into the outlet.

The rental agreement that was signed by both the tenant and landlord included the following language:

"Lessee shall be responsible for all intentional and negligent acts or breaches of thie Lease by the Lessee, Lessee's occupants, guests, or invitiees. Lessee shall be liable for all damage to the premises and appliances and equipment belonging thereto, in any way caused by the acts of Lesee, Lessee's occupants, guests and invitiees."

As a result of the above language the trial court (Judge Michael Brennan of Milwaukee County) granted judgment for the landlord and against the tenant.

A majority of the Court of Appeals (the court was divided as one judge dissented) reversed the trial court's ruling and remanded the case back to the trial court directling it to enter judgement against the landlord.

In essence the Court of Appeals voided the lease language that is underlined above becasue it felt that the lease provision was contrary to the Wisconsin Statutes governing Landlord Tenant Law - specifically sec. 704.07, Wis. Stats.

Sec. 704.07 states that a landlord is required to make repairs to the property unless the repairs were made necessary by the negligence of the tenant. Sec. 704.07 also states that a tenant must repair damage if it is the result of the tenant's negligence.

The Court of Appeals did admit that sec. 704.07 does not specifically address the issue of who should be responsible in a situation where the damage was not caused by the negligence of either the landlord or the tenant. The logical outcome should then be to look to the rental agreement and determine what the parties agreed to in such a situation. If that was done then the tenant would be liable for the cost of the fire damage repair.

Instead the Court of Appeals held that the only logical conclusion that one should come to after reading the statute is that it is the landlord's responsibility to pay for the damage because the damage was not caused by the tenant's negligence.

This is just another example of the courts going out of their way to protect the tenant at all expenses. It seems as if the Court decided the outcome that they wanted and then did whatever was possible to piece together an argument to support that outcome rather then following and applying the law as written and then arriving at the outcome. I'm assuming the landlord had insurance and the Court felt that as such the landlord would be better able to handle the repair costs.

Landlords already have statutes and administrative code regulations that tell them what they can and cannot include in their rental agreements. Now we have a case that essentially says that even if a statute or regulation doesn't prevent you from including certain language in your rental agreement, if we (the Court of Appeals) don't like the provision that was included in then we will find a way to make it void and unenforceable.

The only voice of reason appears to be in the dissent which is authored by Judge Ralph Adam Fine -- who by the way was once a member of my law firm Petrie & Stocking S.C. (we only hire the smartest and brightest ; ) -- who concluded that while the landlord would have a duty to repair the fire damage there is nothing in the statute that requires the landlord to be responsible for the cost of the repairs in the end especially when the parties agrees differently in the rental agreement.

It is yet unknown if the landlord will appeal this decision to the Supreme Court of Wisconsin or even if it did whether or not the "supremes" whould agree to hear the case. So it appears as if for now at least we have precedent in this case that is not very favorable to landlords.

What are your thoughts on this decision?

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.

NEW RULES FOR LEAD-SAFE REMODELING GO INTO EFFECT IN 2010

New rules for remodeling of houses built before 1978 go into effect in April of 2010. As of April 22, 2010 any person or business that disturbs more than 6 square feet of interior surface that may contain lead-based paint or more than 20 square feet of exterior surface that may contain lead-based paint will be subject to the EPA's 2008 Lead Renovation, Repair and Painting Rule.

In the past a person or business did not need to comply with the EPA's lead paint rules as long as they were not engaged in "abating" or "eliminating" lead based paint surfaces. That has now changed. In the near future if you are working on pre-1978 homes or child occupied business (like day care centers or schools) you will need to be registered with the EPA and take certified lead-safety training.

Certification will cost $300 and includes attending an 8 hour course. Certification must be renewed every 5 years. The required forms to become certified may be found here.

At least one person in each firm needs to be trained and certified. A firm is defined as including a sole proprietorship. On each job site there must be one certified person present to ensure that the lead-safe work practices are followed. This includes training the workers, setting up the containment system (for the lead-dust collection) and for supervising the clean up.

Following the new federal rules will also include distributing the new lead-safe remodeling pamphlet to owners and occupants and obtaining their signatures verifying that they received the pamphlet. It will also be required that the owners or occupants are notified in writing of the scope of the work, the location of the work and the expected start and end dates for the work. Records will need to be kept for at least 3 years.

Testing of the various surfaces that are to be disturbed is also required via chemical spot testing, x-ray fluoresence, and lab analysis.

The keys to abiding by the new rules will include: (1) isolating the job area, (2) managing the dust, and (3) keeping the area clean.

Is painting considered to be remodeling? This is the question on many landlords' minds. While painting isn't considered to be remodeling or renovation in itself, painting will be subject to the new regulations if the surface that you are painting will need to be disturbed in any way (such as through sanding, scraping or any other dust causing actions).

These new rules will need to be followed by anyone that is disturbing the minimum areas in pre-1978 housing -- it does not just apply to certified contractors -- if you are doing work on your own rental property, these federal laws will apply to you.

If you are interested in learning more about these new lead-safe remodeling rules please attend the Apartment Association of Southeastern Wisconsin's June membership meeting on June 15, 2009 at 7 pm. You can find additional information here.

If you would like to learn additional information on the rules you should read Eileen Franko's article here.

DNS COMMISSIONER TO SPEAK AT JUNE AASEW MEETING

I hope that AASEW members and non-members will all come out in force to attend the AASEW's June membership meeting on June 15, 2009. Our main speaker will be the Department of Neighborhood Services new Commissioner Mr. Art Dahlberg. We are not yet certain what Mr. Dahlberg's speaking topic will be at this time but check back to this Blog for updates. Mr. Dahlberg has been more than willing to meet with the AASEW, its Board of Directors, and landlords in general to assist in fostering a good working relationship between the City and rental property owners.

The AASEW's meeting are always held on the 3^rd Monday of each month - and held at the Best Western Midway Hotel located at 1005 S. Moorland Rd. in Brookfield.

MILWAUKEE CO. TO REQUIRE LLCs TO BE REPRESENTED BY AN ATTORNEY

It has recently come to my attention that Milwaukee County small claims court will in the very near future prohibit any individual other than a lawyer to represent a LLC's in court. This would mean that a landlord that owns his rental property in an LLC would no longer be able to appear in court to pursue his/her eviction case against a tenant. This is a change from how things have operated in the past and also different from what the law says in my opinion.

For those crafty landlords reading this who think that they will be able to circumvent this roadblock by merely filing the lawsuit in their individual names rather than in the name of the LLC that actually owns the property - you may want to read my earlier post entitled WHO MAY BRING AN EVICTION LAWSUIT.

As background, Wisconsin corporations have been required to appear in court through an attorney in large claims court since 1997 (Jadair Inc. v. U.S. Fire Insurance Co., 209 Wis.2d 187, 562 N.W.2d 401 (1997)). To date there is no case or statute that specifically requires an LLC to be represented by an attorney in large claims court although the reasoning for why only an attorney can appear in court on behalf of a corporation can quite easily be applied to an LLC as well.

Small claims court has been much different then large claims court however. In small claims court landlords have been able to appear in court themselves on behalf of their LLC because of §799.06(2), Wis. Stats. In essence the law says that as long as you are a full time employee of the LLC, or a member of the LLC yourself, you to represent the LLC in small claims court. While the statute prohibited most management companies from appearing in court for an LLC (since most management company employees are not full-time members of the LLC that owns the property but rather a full time employee of the management company that has been hired to manage many properties owned by various LLCs) at least the smaller landlord that owned and operated his/her own rental property could appear in court.

Apparently this will no longer be allowed as a friend of mine informed me that just this week he was warned by a Milwaukee County court commissioner that Milwaukee is preparing to require LLCs to appear in small claims court by attorneys only. Obviously this is going to put a financial strain on many smaller landlords that do not have the financial resources to retain a lawyer to represent their LLC every time they need to evict a tenant.

03/23/15 - UPDATE -- As a result of Act 76 (effective 3-1-14) LLC's no longer need to be represented by Attorneys.

NEW LEGISLATION TO MAKE VICTIMS OF ABUSE A NEW PROTECTED CLASS

On May 14, 2009, Wisconsin Senator Spencer Coggs along with 7 other state senators introduced 2009 Senate Bill 204 entitled the "Victim Fair Housing Act."

This bill will prohibit discrimination in housing on the basis of a person's status as a victim of domestic abuse, sexual assault, or stalking. The bill also prohibits the owner of housing from requiring that a rental applicant supply information concerning the person's status as a victim of domestic abuse, sexual assault, or stalking.

If passed (and there appears to be a great many co-sponsors to date) this bill will create an additional protected class in Wisconsin for victims of domestic abuse, sexual assault, and/or stalking with regard to housing. Discrimination in housing includes such actions as rejecting a person who applies to rent your property or causing the eviction of a current tenant solely because they are a member of a protected class. Wisconsin currently prohibits discrimination in housing based on a person's sex, race, color, sexual orientation, disability, religion, national origin, marital status, family status, lawful source of income, age, or ancestry. Some municipalities like the City of Madison and Dane County have even more protected classes then the twelve mentioned above.

While I am not aware of any landlord that would refuse to rent to a victim of abuse in theory it is when that theory is dropped into the "real world" that sticky situations may arise. One concern I have is the fact that the abuser often follows his/her victim. This could pose noise and safety issues for the other tenants that reside in the same building with the abuse victim. What happens if the abuser shows up at the victim's apartment banging on doors and disturbing the quiet enjoyment of the other tenants? Is a landlord allowed to evict the abuse victim/tenant in this situation? Or worse, what if the abuser shows up at the property and engages in criminal acts such as destroying the landlord's property or assaulting other tenants who get in his/her way? Will the landlord be prohibited under this new law from evicting the abuse victim/tenant under this scenario? While I don't think it is fair to evict the abuse victim in these situations I also don't think it is fair that the other tenants and neighbors should have to endure such situations either. What is the landlord who is providing housing to that abuse victim to do? The landlord also owes his/her other tenants the right to quiet use and enjoyment of the property and to be free from criminal activity and harm.

Another concern is the fact that under the City of Milwaukee's nuisance ordinances a landlord can be fined for having repeated calls to the police from the same property within a certain period of time. If the abuser should try to contact the abuse victim/tenant there is a strong probability that the victim will call the police (and they should). But under the nuisance laws, even if the police calls are legitimate, if there are too many of them the owner of that property may be fined. If the landlord doesn't pay the fine it will be added to his/her property tax bill. While I have no supporting data, I think it stands to reason that a victim of abuse may need to contact the police more often than a non-victim of abuse

I don't know what the answer is or should be. I certainly don't think that victims of abuse should be discriminated against in housing but I also hope that the legislators, the police, the city and others that will be drawn into this dialogue will understand that there needs to be some protections or accommodations made to a landlord who may be stuck between the proverbial "rock and a hard place."

Tell me what you think about this new legislation and how it might affect your rental properties.

Here is a link to view the press conference regarding the Victim Fair Housing Act.

AASEW MEETING ON HOW TO BUY FORECLOSED PROPERTIES - MAY 18th

Anyone interested in purchasing foreclosed properties will not want to miss the Apartment Association of Southeastern Wisconsin's upcoming monthly meeting on Monday, May 18, 2009 at 7 pm at the Best Western Midway Hotel located at 1005 S. Moorland Rd. in Brookfield.

Attorney James Mulligan, an expert in the area of foreclosures, will be the key note speaker and will discuss how to purchase foreclosed properties as well as provide us with some common pitfalls to avoid. Also on hand will be Jason Fernhaber and Brian Meidam, rental property investors and current AASEW members. Both Jason and Brian have obtained many of their rental properties through the foreclosure process and will be there to answer any nuts and bolts questions that you may have on the process.

5 DAY NOTICES AND LATE FEES IN MILWAUKEE COUNTY

Around March 1, 2009 or so, Milwaukee County court commissioners began dismissing eviction lawsuits that were based on 5 day notices that included any amounts other than "rent."

The statute regarding 5 day notices, §704.17, Wis. Stats., states that if a tenant "fails to pay any installment of rent when due" the landlord may issue them a 5 day notice to pay rent or vacate the unit.

In the past landlords often listed other amounts that the tenant owed in their 5 day notices such as: late fees, remaining portions of security deposits, unpaid utility fees, or amounts owed for damage to the unit. Those days appear to be gone.

Milwaukee County is now taking a very narrow view of the definition of "rent." As such, if a landlord includes any amounts other than pure rent in his/her 5 day notice they risk having their eviction lawsuit dismissed.

As such, landlords will need to pursue these other amounts that the tenant owes during the 2^nd and 3^rd causes of action for money damages. If the tenant should cure the 5 day notice by paying the rent amounts within the 5 day notice then the landlord will need to keep track of these other amounts owed and deduct them from the tenant's security deposit at the end of the tenancy or rental term (assuming that those amounts are included in the Nonstandard Rental Provisions and thus can properly be deducted from the tenant's security deposit).

To date I am not aware of any landlord appealing a court commissioner's decision to the small claims judge on this issue. While there is a chance that the judge could rule differently I believe that the safest thing to do is for the landlord to eliminate the inclusion of any amounts owed by the tenant other than straight rent from his/her 5 day notice.

It does not appear that Milwaukee County is applying the same reasoning to 14 day notices at this time. That most likely is because the statute pertaining to 14 day notices does not limit itself to just "rent."

This is just another example of the many technical pitfalls that can cause a landlord's eviction action to fail. The need to stay on top of the various L-T laws and the many permutations of that law as determined in Milwaukee County is obvious.

WHO MAY BRING AN EVICTION LAWSUIT

§799.40 of the Wisconsin Statutes states that an eviction action may be commenced by a "person entitled to possession of the property." This law has often been ignored and many eviction lawsuits have been brought in the name of someone other than the owner of the property. Oftentimes a management company is named as the plaintiff rather than the actual owner of the property.

Milwaukee County is paying close attention to this issue lately. At one of my pre-trials with the court commissioner on an eviction action this week I was specifically asked by the commissioner if the plaintiff whom I was representing was the owner of the real estate. The court commissioner then proceeded to go to his computer and search the internet to confirm that my client was indeed the person who's name was on the deed to the property.

I have heard of several eviction actions being dismissed lately because the name of the plaintiff did not match the name of the person on the deed.

While many management companies have written agreements with the owners who's property they manage that allows the management company to bring an eviction lawsuit on behalf of the owner, I am not aware as to whether or not that argument will prevail. It might or it might not but why take the chance.

Be safe and make sure that the named plaintiff in the eviction action is the person or entity that owns the property at issue - it is the law.

NEW PUBLISHED CASE ON EMERGENCY ASSISTANCE STAYS

We will soon have a published Wisconsin Court of Appeals decision on the issue of emergency assistance stays in eviction actions that will assist us as landlords in removing the non-paying tenant.

Sec. 799.40(4) of the Wisconsin Statutes states that a court must stay an eviction action brought against a tenant that has applied for emergency assistance. The stay remains in effect until it is determined if the tenant is eligible for the assistance, and if they are, until that assistance is received. For any of you that have been in this situation you are well aware that this stay can work a substantial hardship on the landlord who is now required to allow a tenant to remain in his/her property for free. Even if the tenant is eventually awarded the emergency assistance it typically does not cover the full amount of the past due rent owed and as such the landlord declines the money and asks for his/her writ. The tenant then uses the assistance money for the security deposit on their next apartment.

This stay can delay an eviction for months. Such a situation is frustrating at best and an improper "taking" of a landlord's property at worse. In the case of McQuestion v. Crawford (Appeal No. 2008AP1096) from District I (Milwaukee) of the Wisconsin Court of Appeals, it was held that "implicit in the statute's mandate that a stay is required until the tenant receives the emergency assistance is a requirement that the tenant seek and find suitable permanent housing within a reasonable period of time."

What is a "reasonable" amount of time will still need to be determined on a case by case basis by a judge but at least there will now be some required inquiry into the efforts made by the tenant to locate new housing and consideration made for the amount of time that this takes. Wisconsin landlords now have case law to support our arguments that the length of the stay is no longer reasonable.

PASSING OF WORTHLESS CHECKS WILL NOT BE PROSECTED IN CITY OF MILWAUKEE

Issuing a worthless check is a crime in Wisconsin. Accordingly, when a tenant pays his/her rent or security deposit with a worthless check I typically advise my landlord clients to do two things: (1) serve the tenant with the proper notice terminating tenancy for failure to pay rent so that an eviction action can be commenced against the tenant, and (2) report the crime to the local police so that a potential criminal action could be initiated against the tenant. Unfortunately, this second piece of advice is no longer valid -- at least for clients who own or manage rental property in the City of Milwaukee.

The Milwaukee Police Department have in place a written policy statement containing 20 exceptions to its normal prosecution of "worthless check" complaints, and one of those policy exceptions directly affects landlords and/or their agents: Policy Exception 17 states that "checks issued pursuant to any contractual agreement, including the payment of rent or security deposits for rental property," will not be pursued. The Milwaukee Police Department does not provide an explanation or rationale for this policy exception. And upon reading the entire list of policy exceptions, I am hard pressed to come up with any situation involving the issuance of a worthless check which wouldn't fall under one of the twenty exceptions. Apparently, the Milwaukee Police Department is not interested in pursuing individuals who pass worthless checks in general and, specifically, the MPD will not pursue tenants who pass them to their landlords.

This means that it is more important than ever that City of Milwaukee landlords and/or property managers do thorough and legal background checks on all prospective tenants in order to increase their odds of obtaining trustworthy and responsible tenants. Secondly, landlords may want to consider adding language to their standard rental agreements stating that any and all rental payments and security deposit payments must be made via certified funds (i.e., certified check/cashier's check or money order). Third, City of Milwaukee landlords now have another reason not to allow tenants who have fallen behind with their rent payments to continue to reside in the their properties.

In order to protect yourself and your properties, landlords or their managers should consider commencing an eviction against a tenant as soon as the tenant is late in paying even one month's rent. If landlords continue to allow tenants to get further behind in rent payments and continue to accept promises of future payments from such tenants, landlords will increase the chances that the promised past due rent payments will be made via worthless checks -- and now landlords will receive absolutely no assistance from the Milwaukee Police Department when trying to recover these funds from their tenants.

TENANT PROTECTION ACT PASSED

A new law has recently been passed that will affect rental property owners that may be in the unfortunate position of having their properties foreclosed upon as well as those individuals that may be purchasing a property that has been foreclosed. Sen. Lena Taylor's bill referred to as the "Tenant Protection Act" (SB 78) was incorporated into the budget repair bill that was recently passed.

The new law requires that the property owner notify any prospective tenant in writing that (a) a foreclosure action has been commenced, and (b) if a judgment for foreclosure has already been entered, the date when the redemption period expires. Further any rental agreement that is entered into while a foreclosure action is pending must include a separate written statement, signed by the tenant, stating that the owner has provided the above notice to the new tenant. The rental agreement will be voidable at the option of the tenant if it does not include the written statement.

With regard to current tenants, the new law requires that the plaintiff in the foreclosure action (typically a financial institution) give the tenants several notices advising them as to the status of the foreclosure action. Failure to provide the notices will allow the tenant to be awarded $250 in damages plus reasonable attorney's fees.

Also under the new law, if a tenancy is terminated as a result of a foreclosure judgment the tenant may retain possession of the unit for up to 2 months after the end of the month in which the sale of the property is confirmed (but the tenant must pay rent during this period at the same rate that was applicable prior to the confirmation). Also the tenant may withhold rent in an amount equal to the security deposit during the last month of possession. Furthermore, no eviction judgment for the removal of the tenant whose tenancy was terminated as a result of a foreclosure judgment, may be executed before the end of the second month after the foreclosure sale was confirmed.

Finally, if an eviction action was commenced against a tenant and their removal from the rental property was due to a mortgage foreclosure then no information regarding that eviction can be included on CCAP.

The newly enacted law can be viewed here (it starts on page 108)

A NEW COLLECTIONS TOOL FOR LANDLORDS IS AVAILABLE

The Apartment Association of Southeastern Wisconsin has recently entered into a contract with Rent Recovery Service so that AASEW members can receive a discount on this new collection tool for landlords.

You can access Rent Recovery Services from the AASEW website. After providing Rent Recovery Service with the necessary information about your ex-tenant, RRS will send a letter to the debtor advising them of the debt. If the ex-tenant has not made payment arrangements to pay you back you will be allowed to report the money that the tenant owes you to the 3 credit bureaus.

This is definitely worth looking into -- contact Bill Gray at 212-561-5492 or bill@rentrecoveryservice.com for more information and to sign up.

TIME TO REVIEW YOUR RENTAL DOCUMENTS

With the new year already upon us, I encourage all property owners and managers to spend some time reviewing their current rental documents so that any needed changes can be made before accepting new applicants. Below are some questions and ideas that may assist you in your review.

Is the rent amount that you are charging your current tenants in line with the what other similar properties are being rented for in the same neighborhood? If your monthly rental price is "under market" then you should consider increasing your rent. Have your costs of doing business increased over the past year? If so, then you have yet another reason to increase your rent amount as long as the rental market in which your rental property is located can accomodate such an increase.

Does your residential lease contain an automatic renewal clause whereby at the end of the lease term it automatically renews for another lease term or even reverts to a month-to-month tenancy? If the answer is yes, then insure that an automatic renewal or reversion is what you actually want. Many landlords are now opting to have their lease agreements cease at the end of the term. By doing so, the owner or manager now has the inclination and reason to review his/her tenant's behavior and payment history over the past year and determine whether or not they want that tenant to remain in their property for the next year. It should also be noted that owners using automatic renewal provisions in their leases must also provide written notice of that renewal to the tenant in order for the provision to be enforceable.

In light of your interactions (both good and bad) with your tenants this past year is there a need to add any additional restrictions to your Rules and Regulations? If you have encountered any problem behaviors from your tenants this past year then consider amending your Rules & Regulations to include a new provision addressing the unwanted behavior.

Has your written screening criteria changed during the preceding year? If so, then you will need to update your screening criteria, specifically noting the changes made, and do this is writing. Be sure and save your old screening criteria and also record the date when you stopped using it. Remember, having written screening criteria and applying it consistently is the #1 best defense to any discrimination/Fair Housing complaints.

Have you incurred any additional costs or fees this past year (other than "normal wear and tear" to your property) that you would like to pass on to your tenants? If so, consider adding these costs to your Nonstandard Rental Provisions. By adding the new charges or fees to your NSRP, reviewing those charge with your tenants, and obtaining your tenantss signatures on the NSRP, you will be able to legally deduct these charges from your tenant's security deposit if needed.

Are you utilizing the Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards form Did you provide a copy of this important document along with a copy of the E.P.A.'s free pamphlet entitled "Protect Your Family From Lead In Your Home" to all of your new tenants this past year? If you are not providing these two documents to all tenants that reside in any of your pre-1978 properties then you are in violation of federal laws and subject to large fines, regardless of whether anyone incurs lead poisoning or not.

LLC'S MUST FILE ANNUAL REPORT WITH DFI

Effective January 1, 2004, all domestic Limited Liability Companies are required to file an Annual Report with the Department of Financial Institutions (DFI).

The report is due during the anniversary quarter of the LLC's effective date of organization on record with DFI. The report will be sent to the registered agent of each LLC to the registered office of record. The Annual Report is fairly simple to complete and there is only one page of information that must be filled out. The requested information includes the name and contact information of the Registered Agent, the office address, the name and contact information of any managers of the LLC, if applicable, and a brief description of the nature of the company's business.

You may submit the report online through the DFI website or via the mail. If you file online you will receive a free copy of the filed report via email. Also, if you file online, your next year's report will be pre-filled with the information that you submitted the previous year.

"Here's the rub" - there is a filing fee of $25 for each report. Which means you will have to pay the state $25 per year for each of your domestic LLC's. Visa and MasterCard credit cards will be accepted but debit cards will not. If paying by check your check should be made payable to "Department of Financial Institutions" and should be mailed to:

Department of Financial Institutions

P.O. Box 93739

Milwaukee, WI 53293-0739

It should be noted that if any domestic LLC fails to file this mandatory report in a timely manner that the DFI may administratively dissolve the LLC.