Security deposit withholding issues are the second most litigated area in landlord tenant law after evictions. If a landlord makes improper deduction from a tenant’s security deposit, pursuant to ATCP 134 and §100.20, Wis. Stats., the tenant may sue the landlord for double damages and attorney’s fees. There are numerous published Court of Appeals decisions in Wisconsin dealing with this exact issue. I would like to offer a few suggestions to landlords which will hopefully keep you from making any improper security deposit deductions.
First, we need to address some basics . . .
A security deposit is defined as “any payment that is given to a landlord as security for the performance of the tenants obligations under the rental agreement.” ATCP 134.01(11).
ATCP 134.06(2), states that “within 21 days after a tenant surrenders the rental property, the landlord shall deliver or mail to the tenant the full amount of any security deposit held by the landlord, less any amounts properly withheld by the landlord.”
If you would like to know what a landlord may legally deduct from a tenant’s security deposit you will want to read my Jan. 17th post.
ATCP 134.06(4), states “If any portion of a security deposit is withheld by the landlord, the landlord shall, within the time period and manner prescribed in sub.(2) – 21 days — deliver or mail to the tenant a written statement accounting for all amounts withheld. The statement shall describe each item of physical damages or other claim made against the security deposit, and the amount withheld as reasonable compensation for each item or claim.”
I will refer to this written statement interchangeably as either the “security deposit transmittal letter” or the “21-day letter.”
According to ATCP 134 all prepaid rent in excess of one month is legally considered to be a security deposit. So if you require a new tenant to pay first and last months rent plus a security deposit, legally the security deposit will also include the last month’s rent
Essentially a landlord must either return a tenant’s security deposit or send the tenant an itemization of how the tenant’s security deposit was applied within 21 days after the tenant surrenders the premises. This is mandatory. No matter what the situation – even if you are legally entitled to keep all of the tenant’s security deposit – you must still send the tenant a letter explaining to them why you can legally keep it and how it was applied. There is no situation in which you should not be sending the 21-day letter to a vacating residential tenant in Wisconsin. Even if common sense tells you it is not necessary (i.e. the tenant told me to use his/her security deposit to pay for the last month’s rent) you should still send out the letter. If you are wrong the ramification may be expensive. Be safe – send the letter each and every time. Read the rest of this entry »