Court of Appeals Decision Reminds Landlords To Review Their Nonstandard Rental Provisions Before Making Deductions from A Tenant’s Security Deposit

The Wisconsin Court of Appeals, in an unpublished decision dated May 9, 2013, held that a landlord wrongfully withheld a portion of his tenants’ security deposit for costs incurred when attempting to re-rent the rental unit.

As I have mentioned in a prior post, Wisconsin law essentially allows a landlord to deduct only three things from a tenant’s security deposit: (1) damage, waste, or neglect, (2) rent, (3) utilities.  Any other items that a landlord would like to deduct from a tenant’s security deposit must be included in a separate written document entitled “Nonstandard Rental Provisions” (NSRP), in order to be legally deducted.  So if what you want to deduct something from your tenant’s security deposit and it is not one of the 3 items listed above and not set forth in your NSRP, it will most likley be considered an illegal deduction.

In Keyes and Gruner v. Waldbillig et. al (2012AP1180), two tenants broke their lease with their landlord by moving out prior to the last day of the lease term.  The landlord wrote the tenants a letter explaining to them that there would be charges against the their security deposit to cover the cost of advertising and marketing the apartment and that his property management company charged him $100 per showing to show the unit to potential new tenants.

The landlord’s managment company showed the tenants’ vacated unit 6 times for a total of $600 in costs to the landlord prior to finding a new tenant for the unit.  The landlord sent the tenants their security deposit itemization letter explaining that he witheld $600 of their security deposit to cover the costs to re-rent the unit.

Under Wisconsin law, specifically Wis. Stats. 704.29, if a tenant breaks their lease or is evicted, a landlord is required to make reasonable efforts to mitigate the tenant’s damages by trying to re-rent the unit.  The same statute also says that a tenant who has broken his/her lease or is evicted can be held responsible for all lost rent and all reasonable expenses of listing and advertising the vacant unit which were incurred by the landlord while trying to re-rent the unit.

But this landlord failed to have a NSRP that allowed him to deduct for the re-rental costs.  As an aside, if the landlord had just opted to withhold the lost rent incurred while trying to re-rent the unit from the tenants’ security deposit instead of the re-rental costs, he also most likley would have prevailed even without having the NSRP regarding re-rental costs since rent owed is an allowable security deposit deduction.  Instead, the landlord deducted $600 in showing fees from the tenants’ security deposit even though he did not have a NSRP in place that allowed him to do so.

Had the landlord had such a NSRP in place, it is my opinion that his deductions from the tenants’ security deposit would have been proper (assuming that the court would agree that $100 per showing is reasonable) and he would not have lost the case and been required to pay double damages and the tenants’ attorney’s fees.

The moral of the case is that just because the law allows a landlord to hold tenants responsible for the costs to re-rent if they break their lease, does not mean that the landlord can legally withhold those costs from the tenants’ security deposit.  In order to be able to legally do that, the landlord must have a NSRP in place which allows for the deduction of re-rental costs allowed under Wis. Stats. 704.29.

Does your NSRP contain such a clause?  Do you even have a NSRP docuement?  If not you may want to contact Wisconsin Legal Blank, which sells a very good Nonstandard Rental Provisions document which I have drafted, that will protect you.

 

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AASEW Meeting: Is Property Management An Art or A Science? – June 17, 2013 at 7 pm.

Join the Apartment Association of Southeastern Wisconsin on June 17th  as we have masters of the craft present on Best Practices in Property Management along with the legal ramifications of failing to follow the rules.  SE Wisconsin is clearly a pro tenant district so educate yourself to the possible landmines that await you along with what some are doing to avoid them.  It will be an educational night with many real world anecdotes — that I am sure you will be able to relate to – and practical real world advice you can apply to your business to protect your assets and increase your profits!

When: Monday, June 17, 2013 at 7:00 p.m.

Where: The Best Western, 1005 S. Moorland Road, Brookfield 53005

Who:  Attorney Tristan Pettit and Professional Property Manager Stacy Hegg

Cost:  Free for current AASEW members, $25 for guests and expired members.

About our speakers

Attorney Tristan Pettit, drafts many of the standardized landlord tenant forms for Wisconsin Legal Blank.  Tristan is in eviction court nearly every week representing many members of the Association and other landlords.  Tristan presents Landlord Boot Camp for the Association twice a year.  He also presents similar courses for attorneys across the state.

Tristan R. Pettit is a shareholder with the Milwaukee law firm of Petrie & Stocking S.C. which has been in existence for over 115 years assisting individuals, families and businesses throughout the state.  He focuses his practice in the area of general civil and business litigation with an emphasis on landlord-tenant law.

Mr. Pettit handles both commercial and residential evictions and the accompanying damages claims for his clients throughout the state. He has also been involved in litigation dealing with lead-based paint, bedbugs, Fair Housing (discrimination) claims, building code orders, public nuisance lawsuits, and both the prosecution and defense of Wisconsin Administrative Code – ATCP 134 violations.

He assists clients with the drafting and interpretation of commercial leases and residential rental agreements and other rental documents and is the author of the landlord-tenant legal forms sold at Wisconsin Legal Blank Co., Inc., which are used throughout the state.

Mr. Pettit presents seminars on landlord-tenant law and related matters throughout the state and is a past president of the Apartment Association of Southeastern Wisconsin, Inc. and is currently serving on its Board of Directors. He also is the author of a popular Wisconsin landlord-tenant law blog that can be found at www.LandlordTenantLawBlog.com

Stacy Hegg is a professional property manager who has more than 20 years experience in multi-housing management in the Greater Milwaukee Area.

Stacy’s career commenced as a Leasing Consultant at a large market rate community in Glendale while attending Cardinal Stritch College. Upon graduation Stacy became a full time Property Manager on a unique, Section 42 renovation on 24th and Wells. Her extensive and varied experience extends from Section 42 and Section 8 communities to luxury developments. She has managed multi-family portfolios for professional realty companies such as: Ogden, Bielinski, and Bryce Styza Properties. She managed Cedar Square Apartments on the Marquette University Campus for 2 years and currently manages for Wellston Apartments where she oversees a 400 unit portfolio near UW-Milwaukee.

 

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AASEW Meeting: Financing Real Estate In Today’s Market —- May 20, 2013

Please join me at the AASEW‘s next monthly membership meeting where we will discuss Financing Real Estate in Today’s Market.

When: Monday May 20th, 2013 at 7:00 p.m.

Where: The Best Western, 1005 S. Moorland Road, Brookfield 53005

Who: Panel of local lending experts. Details below.

Cost: This meeting is free for current AASEW members, $25 for guests or expired members

Good deals are more abundant today than ever in the past.  But we all know low prices at the same time as low interest will not last forever.  The deal killer for most is funding those great projects you find.  Come to this meeting and get a pulse on the current lending environment from big bank lending to smaller community banks. From hard money lending to the credit union perspective, our panel discussion is sure to have something for you! And speaking of perspective, some of our experts are landlords too!

Knowledge is power! The AASEW is proud to present yet another forum on information you need to succeed in today’s economy.

Monday, May 20th at 7 PM is just Around the corner! See you then!”

 

Our panelists will include:

Rob Seetan – Brewery Credit Union

Rob has lived and worked in Milwaukee for 15 years.  His first job in the mortgage industry with Pinnacle Bancorp (no longer exists) as an Account Executive.  He started loan originating in Milwaukee 2000.  He joined Brewery Credit Union in 2009 and holds the position of originator, underwriter and administrator for Brewery Credit Union founded as Brewery Workers Credit Union in 1934.  Brewery CU maintains about 15% of its portfolio with small investment properties (no commercial lending).  The majority of their investment units are within the City of Milwaukee.  Brewery Credit Union was granted special privileges by US Treasury Dept. through our Community Development Financial Institution (CDFI) designation.
Luke Hagel – Commerce State Bank

Luke has been working in the banking industry for about 9.5 years.  He began my career with Wisconsin Business Development as a credit analyst in 2003.  While at the WBD he learned a lot about SBA lending, specifically relating to the SBA 504 and 7a programs.  Hejoined Commerce State Bank in January of 2008 and has worked as part of the commercial lending team there since that time.  Luke grew his own portfolio which is currently about $50MM in loans comprised mostly of C&I loans (Real estate, LOC’s, equipment, etc.).  Luke assists in nearly all SBA lending done at the bank.  Luke graduated magna cum laude from Ripon College with a B.A. in Business Management in 2003 where he also served as a Student Mentor, Resident Assistant (R.A.) and member of both the college Baseball and Football teams.  Luke also graduated magna cum laude from UW-Milwaukee with a Masters of Business Admin in 2006.  He currently resides in West Bend with his wife and 3 kids.

Chris Wilz – Senior Lender US Bank

Chris is Vice President & Relationship Manager for US Bank, Business Banking division.  He has over 11 years of experience with commercial lending and in the financial services industry.  He earned his bachelor’s degree from the University of Wisconsin – Madison Business School majoring in Finance, Investments & Banking.  Chris works with commercial real estate investors and business owners to provide financing for real estate loans, equipment loans or leases, and lines of credit, in addition to the full breath of banking products and services the bank has to offer.  For three consecutive years, Chris has received an Annual Pinnacle award for being one of the top producers at US Bank.
Scott Lurie – F Street Investments, Jomela Properties

Scott, a local Milwaukee businessman earned his B.A. in Finance from The George Washington University.  After college, Scott spent 2 years in the M&A industry serving as an analyst for Kaulkin Ginsberg Company.  After moving back to the Midwest, Scott worked for his family heading a division of Lurie Glass.  In August of 2004, Scott let his entrepreneurial spirit get the better of him and began investing in real estate.  After purchasing a Homevestors of America franchise, Scott got involved in real estate acquisitions, financing, and property management.  His relationship with Homevestors ended in February 2009.  Scott continues to be involved in real estate and finance.  To date, Scott has bought and sold over 125 houses in addition to building a rental portfolio of 1400 units which are self managed.  In addition to the multiple real estate acquisitions Scott has been involved in, he also specializes in “hard money” financing.  With over $12 Millions in deals financed to date Scott gets it done!  Scott’s interest outside of the office are his family, golf, tennis, and travel.

 

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HUD Issues Notice on Assistance Animals and Reasonable Accomodations For Persons with Disabilities

Today the U.S. Department of Housing and Urban Development (HUD) issued a notice on assistance animals and reasonable accomodations for persons with disabilities.

Not to long ago I wrote a post that dealt with this subject.  HUD’s new notice also adds clarifying information to that post.

Disability-related complaints, including those that involve assistance animals, are the most common discrimination complaint that HUD receives per John Trasvina, HUD Assistant Secretary for Fair Housing and  and Equal Opportunity, so HUD felt a need to publish this Notice to provide further guidance on the topic.

The notice will provides landlords and management companies with an explanation how to properly treat a request by a tenant or their guest for a reasonable accomodation to the landlord’s “no pet” policy.  Below are some highlights from the Notice but I strongly encourage everyone to read the entire Notice.

Highlights:

1.  While the definition of a “service animal” under the ADA has been limited to include only dogs that have been specifically trained (and it specifically excludes emotional support animal) this limited ADA definition DOES NOT limit a landlord’s obligations to make reasonable accomodations for assistance animals under the Fair Housing Act and Section 504 of the Rehabilitation Act ot 1973, (or Wisconsin’s Open Housing Law for that matter)/

2.  A reasonable accomodation analysis must be considered when persons with disabilities use (or seek to use) assistance animals in housing where the landlord forbids residents from having pets or otherwise imposes restrictions or conditions relating to the pet.

3.  Assistance animals provide many disability-related functions including, but not limited to:

a.  guiding individuals who are blind or sight-impaired

b.  alerting individuals who are deaf or hard of hearing

c.  providing protection or rescue assistantance

d.  pulling a wheelchair

e.  fetching items

f.  alerting persons to impending seizures

g.  providing emotional support to persons with disabilities who have a disability-related need for such support.

4.   For purposes of a reasonable accomodations request, there is no requirement that the animal be individually trained or certified.

5.  Landlords are to evaluate a requests for a reasonable accomodation to posses an assistance animal in a rental unit using the general principles applicable to all reasonable accomodations requests.

6.  After receiving such a request a landlord must consider the following:

a.  Does the person have a disability?

b.  Does the person have a disability-related need for an assistance animal?

If the answer to both questions is “yes” then the federal laws (and Wisconsin’s Open Housing laws) requires a landlord to modify or provide an exception to its “no pets” rule or policy so that the tenant can have an assistance animal.

7.   The request for an assistance animal can be denied, even if the answers to the above questions were “yes”, if:

a.  the specific assistance animal poses a direct threat to the health and safety of others that cannot be reduced or eliminated by another reasonable accomodation.

b.  the specific assistance animal would cause substantial physical damage to the porperty of others that cannot be reduced or eliminated by another reasonable accomodation.

8.  Breed, size, and weight limitations may not be applied to an assistance animal.

9.  Landlords may not require applicants and residents to pay a deposit for an assistance animal.

10.  Landlords may require a tenant to cover the cost of repairs for damage caused by an assistance animal to the rental unit or common areas after it has occurred.

11.  Landlords may ask individuals with disabilities who’s disability is not readily apparent or known to the landlord, to submit reliable documentation of a disability and their disability-related need for an assistance animal.  The documentation is considered sufficient if it establishes the person has a disability and that the animal will provide some type of disability-related assistance or emotional support.

12.  A determination as to whether a person has a disability-related need for an assistance animal involves an individualized assessment.  There are no birhgt line rules here.  The analysis is very fact specific.

13.  A delayed response to a request for a reasonable accomodation could be considered a violation if the delay is solely to frustrate the process.

 

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Top 10 Pitfalls That Landlords Should Avoid

Those of you that missed the last AASEW membership meeting on Monday, April 15, 2013, missed a great meeting and a great presentation.  The featured presenter was John “Dr. Rent” Fischer, a Wausau-area landlord and rental property manager, who spoke to a packed house that Monday.  John’s presentation was dynamic, educational and at times pretty darn funny.

With John’s permission, I am providing you with a link to John’s handout from the meeting which was entitled “Top Ten Pitfalls That Landlords Should Avoid.”

Like any good Top 10 list (a la David Letterman), John presented these pitfalls in reverse oreder based on importance.  The pitfalls to avoid included:

10.  Mailing the 5 Day Notice

9.  Digging The Hole Too Deep

8.  Incomplete Applications

7.  Not Asking The Right People (about your rental applicant)

6.  Auto-Renewing A Lease

5.  14 Day Notice (or NOT)

4.  “Do-It-Yourself” Leases or Rental Forms

3.  Misuse of CCAP

2.  Carpet Cleaning

1.  That Lease is HOW LONG?

As John stated during his presentation, there are a lot of things that are beyond our control that make life as a landlord very difficult at times.  As such, we certainly do not want to make life more difficult for ourselves based on a lack of knowledge of landlord-tenant laws . . . unless we are masochists, that is.

The AASEW has another great meeting scheduled for May 20, 2013 at 7 pm at the Best Western Midway in Brookfield about “How To Finance Real Estate Transactions In The Current Economy.”

 

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Another Way That Landlords Can Teach Tenant Roommates the Concept of Joint & Several Liability (and Collect Rent)

I recently received an email from the Gino Zahnd the CEO of a company called Cozy based in the San Franciso area.  Gino’s company assists landlords in collecting rent and referenced my blog post discussing the concept of “joint and several liability” in which I explain how landlords should treat roommates as “one person” in order to impress upon tenants the concept of joint and several liability.  Joint and Several liability is a landlord’s best friend and makes life much easier for us.  If you are not already treating your tenant roommates as one person then I suggest you start doing so in the near future.

It appears as if Cozy offers a rent payment product to landlords that may assist in the rent collection process especially with roommates.   Gino’s blog posts mentions some of the practical issues of getting one rent check from several roommates and their product attempts to assist with that.  While I have not tried Cozy’s product it sounds intersting.  If any of my followeres uses it or tries it out in the future please let me know what you think.

Here is the post from Gino that references my blog.

T

 

https://cozy.co/blog/doing-payments-the-right-way/

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Next AASEW Meeting: Dr. Rent’s Top Ten Landlording Pitfalls To Avoid – April 15th

The AASEW’s next meeting will feature Dr. Rent’s TOP TEN Landlording Pitfalls to Avoid

When: Monday April 15th, 2013 at 7:00 p.m.

Where: The Best Western, 1005 S. Moorland Road, Brookfield 53005

Who: John “Dr. Rent” Fisher

Cost: This meeting is free for current AASEW members, $25 for guests or expired members

Bad things happen to good people.  When a good landlord falls victim to a bad tenant, we all know the results. Dealing with bad tenants is already hard enough, but too often good landlords fall victim to their own mistakes as well.  Dr. Rent will discuss the 10 most common mistakes that he has seen in over two decades as a landlord in Wisconsin. One of the best things that we can all do is learn from our mistakes, but Dr. Rent has found it wiser to learn from others.

About our speaker: John H. Fischer is a Wausau, Wisconsin area landlord.  He started working part-time with Emmerich & Associates, Inc. in 1993 and since then has worked in nearly every aspect of the real estate investment field.  He has been involved with residential, commercial and industrial rental properties as well as vacant land sales and condominium development.

Observing a number of old and new landlords going to court and having a hard time because of their not understanding Wisconsin’s complicated laws and procedures, Mr. Fischer has been making an effort to educate Landlords on the proper way to do things for over a decade, and has taught classes on everything from accounting, to proper management procedures to Landlord-Tenant law. He has provided training sessions through Lorman and Sterling educational services.  He has also presented seminars to a number of local apartment associations as well as the Wisconsin Apartment Association.  He offers a series of courses in real estate investing through the University of Wisconsin Continuing Education program.

Mr. Fischer holds a real estate Broker license and is past president of the Wausau Area Apartment Association and Wisconsin Apartment Association.  He is a member of Wausau’s Housing Code Task Force.  He has degrees in International Business Management (with Honors) as well as Human Resources Management (with Honors) from the University of Wisconsin – Madison School of Business. He is also a graduate of the Bryce Harlow Institute for Business and Government Affairs, Georgetown University, Washington, DC.

 

You will not want to miss this meeting!!

Hope to see everyone there.

T

 

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