Landlords Lose Lawsuit

Posted by Tristan R. Pettit, Esq. in City of Milwaukee, Residential Rental Inspection (RRI) Program / Mandatory Rental I / Comments

On Wednesday, September 22, 2010, Judge Timothy Witkowiak denied three landlords' motion for summary judgment against the City of Milwaukee and granted the City's cross motion for summary judgment against the landlords, with regard to constitutionality of the city's new RRI ordinance.  This ruling effectively ended the lawsuit.

The lawsuit dealt with the City's new Residential Rental Inspection (RRI) program/ordinance that went into effect on January 1, 2010.  The RRI ordinance requires all landlords in two areas of Milwaukee (the UWM-area on the east side and Lindsay Heights on the north side) to register any and all rental units, pay a fee to the city, allow for the Department of Neighborhood Services to conduct an interior inspection of the rental units, pass the inspection and obtain a rental certificate, in order to continue to be able to rent the rental unit to a tenant.  Any rental unit that does not pass the inspection would be denied a rental certificate and as such the lanldord would no longer be allowed to rent out the unit until such time as a rental certificate could be obtained.

If you are unfamiliar with the RRI program and/or the lawsuit you should review my past blog posts on the subject to get up to speed.

The plaintiff landlords had four main arguments.  I will summarize the arguments and then summarize the court's ruling on each.

1.   The Ordinance Is Too Vague

Landlords' Argument: 

The plaintiffs' argued that the ordinance contains terms and phrases that are so vague that they do not properly notify landlords who own rental properties in the two designated areas as to what specific conditions will result in a denial of a residential rental certificate or the revocation of a certificate.  The ordinance gives the DNS Commissioner and his inspectors the subjective power to determine whether the conditions in a rental unit constitute a denial or revocation of the certificate.  This subjective power will result in a non-uniform application of the ordinance.

The plaintiffs cited 7 examples within the ordinance where a landlord does not have sufficient notice as to what specific conditions or number of conditions will trigger a denial or revocation of a rental certificate by the city.

Court's Ruling:

The court ruled that the plaintiff landlords did not meet the burden that was required of them in order to prove that the ordinance was so vague that it was unconstitutional.  The burden that the plaintiffs were required to meet was quite high. 

Under Wisconsin law, a ordinance is presumed to be constituional.  In order to prove an ordinance unconstitutional the attacker must establish its invalidity beyond a reasonable doubt.  Specifically, the plaintiffs had to prove beyond a reasonable doubt that the ordianance posessed no rational basis to any legitimate objective.  In other words, the landlords had to show that the ordinance was unconstitutionally vague in all aspects and incapable of any valid application.

The typical burden of proof in a civil lawsuit is "a reasonable certainty by the greater weight of the credible evidence" which essentially means that if you tip the scale (of justice) slightly in your favor then you have met your burden.  The burden of proof in criminal matters is "beyond a reasonable doubt" which is a much higher and more difficult burden to meet.  In order to meet this higher standard you essentially have to tilt the scale (of justice) all of the way in your favor.

In order to show that an ordinance is unconstitutional on its face the plaintiffs had to meet the higher (criminal-type) burden.  The court ruled that the ordinance as written was not unconstitutionally vague because the plaintiffs failed to demonstrate that the ordinance was impermissibly vague in all situations.  The court added further that just because certain words and phrases in the ordinance were never defined that that alone does not make them vague because if a word or phrse is not defined then one should resort to the common meaning of the word.

The court held that some valid application of the ordinance can be found so as a result there can be no finding that the ordinance was unconstitutionally vague.

The court added that the burden of proof is lower in an "as applied" challenge, or post-enforcement attack, on the validity of the constitutionality of an ordinance and that the court's ruling under such circumstances could be different.  Essentially, this means that if a landlord was injured (i.e. denied a rental certificate and was forced to evict his/her tenant and lose rental income) by the application of the RRI ordinance, that landord would have a lower burden of proof, in that context, in proving that the ordinance was unconstitutional.   

2.     The ordinance contains fatal defects

Plaintiffs' Argument:

This argument was that the ordinance as written contained terms which were unclear, had no definitions, and failed to set forth clear standards for when a rental certificate would be granted.  As a result the application of the ordinance by the city would be fatally flawed.  Additionally it was argued that the ordinance gives the DNS Commissioner and his inspectors the arbitrary power to grant, deny, or revoke a rental certificate without providing specific standards as to how that discretion should be used.

The plaintiffs provided nine examples within the ordinance where significant terms were not defined or were unclear.  It was argued that the standard as to what will cause the issuance of a rental certificate is a subjective standard contained only in the minds of the Commissioner and his inspectors and such standard will most likely vary from one inspector to the next. 

This argument also focused on the fact that the ordinance allows for the DNS Commissioner to draft rules or regulations which have not been made a part of the ordinance.  This means that the Commissioner could change the rules at any time and without providing owners prior notice of the changes.  The rules and regulations are not required to be made publicly available since they are not contained in the ordinance itself.

Court's Ruling:

Disclaimer: I was unable to attend the entire ruling of the court on this issue as I needed to get across town to give a seminar at the AASEW Tradeshow.  However, I was present for the first part of the court's ruling on this issue and I spoke with people in attendence at the hearing later in the day with regard to the remainder of the court's ruling.

The court felt that the plaintiffs' 1st argument (vagueness) and its 2nd argument (fatal flaws) were very similar and contained much overlap.  As such, the court applied the same analysis as it did on the vagueness claim and ruled that the plaintiffs did not meet their burden of proof.

The court also addressed the plaintiffs' argument that the ordinance does not provide landlords with sufficient notice becasue it refers to standards that are not incorporated into the ordinance itself, which allows DNS to add these standards at a later date and/or change them over time etc.   The court ruled that regulations can legally be added to an ordinance at a later date and are not required to be included in the wording of the ordinance itself.  The court pointed out that it is often the case that administrative rules are created to interpret statutes and ordinances at the federal, state and local levels, and therefore this subset of the plaintiffs' argument is moot.

3.     Failure to provide impartial review

Plaintiffs' Argument:

Under the ordinance as written if a landlord does not agree with the decision rendered by the city inspector, the landlord can appeal that decision to the Commissioner of DNS -- the employer of the inspector that made the initial decision.  The plaintiffs argued that any ordinance that allows a boss to review the decision of his employee (to deny a landlord a rental certificate) cannot be impartial.  The plaintiffs argued that  Wisconsin Statutes Sec. 68.11(2) requires that all municipalities provide an "impartial decision-maker . . . who did not participate in making or reviewing the initial determination" to preside over any review.  While the RRI ordinance does eventaully allow an impartial review by the Standards and Appeals Board at a later point in the procees, the plaintiffs argued that the requirement that the initial decision first be reviewed by the commissioner, will delay a review by an impartial body by almost a month at a minimum.

Court's Ruling:

The court stated that the ordinance did provide for an impartial review of the building inspector's decision by the Standards and Appeals Board and that the requirement that the Commissioner be allowed to review the initial decision, before it could be appealed to Standards and Appeal Board, added no appreciable delay.

4.     Interference with a landlord's constitutional right to contract with a tenant

Plaintiffs' Argument:

The plaintiffs argued the denial of a rental certificate would interfere with the landlords rental agreement with his/her tenant.  According to the ordinance, if a landlord does not obtain a rental certificate then s/he cannot continue to rent out the unit -- thus implying that the tenant must vacate or if the tenant refuses to do so, be evicted.  First, the plaintiffs argued that the city does not have the authority to remove a tenant from a rental unit which is denied a rental certificate.  The city does not own the property and therefore is not legally allowed to bring an eviction action against the tenant.  Second, the plaintiffs argued that while a landlord has the right to bring an eviction action against his/her tenant generally, said eviction must be predicated upon a breach of the rental agreement by the tenant (unless it is a month to month tenancy).  It was argued that, under a scenario where a rental unit that is inhabited by a tenant is denied a rental certificate, and the tenant has done nothing wrong,  a landlord has no legal basis to evict the tenant, and to require a landlord to evict his tenant under such circumstances is an interference with the landlord and tenant's contractual agreement.

Court's Ruling:

The city argued, and the court seemed to tacitly agree, that if a rental certificate is not issued for a specific unit, that the landlord has in effect breached the rental agreement because the landlord is in violation of a city ordinance.  Such a violation of a city ordinance, and brach of the lease, renders the rental agreement void and could thus be the basis for an eviction.

NOTE:  I will have to devote another post to my analysis of this aspect of the ruling because I promise you this will be a huge problem in eviction court should this ever get pushed that far.