Archive for category Caselaw

New & Improved Nonstandard Rental Provisions Form Available at Wisconsin Legal Blank

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As many of you know, I draft the various landlord-tenant law forms that are sold at Wisconsin Legal Blank Co., Inc.  In light of the recent court of appeals decision (Keyes & Gruner v. Waldbillig et. al) that I referenced in an earlier blog post, I have made some additions and revisions to WLB’s Nonstandard Rental Provisions Form.  As such, a new and improved Nonstandard Rental Provisions form is now being sold at Wisconsin Legal Blank.

The date of the new form is May 29, 2013.

I would strongly encourage landlords and management companies to start to using the new form as soon as is legally possible.

The new form includes an added provision that allows alandlord to deduct re-rental costs as allowed under Wis. Stats. sec. 704.29 from a tenant’s security deposit – this was the specific deduction that was at issue in the Keys & Gruner v. Waldbillig et. al. Court of Appeals case referenced in my earlier post.

The new Nonstandard Rental Provision form also includes a provision addressing the withholding of “holdover” damages as set forth in Wis. Stats. sec. 704.27, from a tenant’s security deposit.

Finally, I made some grammatical changes and reworded a few provisions in the old Nonstandard Rental Provisions form to make them more straightforward and clear.

So to best protect yourself, I would encourage you to pick up the new Nonstandard Rental Provision form dated May 29, 2013 from Wisconsin Legal Blank.

DISCLAIMER:  For those of you who may think that I am “pushing” the new Nonstandard Rental Provisions form because I receive a portion of the sale proceeds, that unfortunately is not the case : ).  I am paid up front by WLB for my time to draft the forms and revise them as needed based on changes in the law.  So I have no vested interest in you purchasing the new form other than I don’t want you to be caught in the same situation as the landlord was in the Keyes & Gruner v. Waldbillig  et. al court of appeals case. : )

 

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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The Wisconsin Court of Appeals, in an unpublished decision dated May 9, 2013, held that a landlord wrongfully withheld a portion of his tenants’ security deposit for costs incurred when attempting to re-rent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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Wisconsin Supreme Court Rules Against Landlord in Maryland Arms Case and Chooses To Avoid Answering The Bigger Question

The Wisconsin Supreme Court filed its opinion in this very important case on July 7, 2010.  While the majority opinion ruled against the landlord it did not go so far as to say that a landlord and tenant could not allocate liability for damage (when neither party was negligent in causing the damage) in their rental agreement. 

If you would like to review the specific facts of the case and the arguments made by both sides please revisit my posts of May 29, 2009 and October 15, 2009.

The Court was split, so there is a majority opinion, a concurring opinion, and a dissenting opinion.  So if you are brave enough you can read all three opinions which encompass 37 pages and can be read here.  The Wisconsin Law Journal provides a very good summary of the decision if  you are not feeling ambitious enough to read all 37 pages.

As an attorney who primarily represents landlords, I must admit that I had a mix of emotions after I finished reading the opinion.  I was upset that the majority opinion held that the landlord should be responsible for damage to his rental property that was caused by the tenant leaving her hair dryer plugged in overnight.  I was also frustrated by the fact that the major issue in the case — whether or not a landlord and tenant can allocate liability through the language of the rental agreement — was not addressed by the majority opinion, thus providing little guidance to landlords in the future.  On the other hand I was also grateful that the majority decided to “pass the buck” and not address this issue becasue, quite frankly, if the majority had addressed that issue, I believe they would have said “no” a landlord cannot allocate liability on a tenant for damage that was not casued by the negligence of the tenant.

The majority opinion held that the landlord should be held responsible for the damage because the rental agreement (which was drafted by the landlord) was ambiguous when it came to who would be held liable for damage in a situation where neither the tenant not the landlord were negligent in causing the damage.  The majority rested its decision on a very well established principle of contract law that any ambiguity in a contract  should be construed against the drafter of the contract.  The majority said that since the contract terms did not unambiguously state that the tenant would be liable for the damage under the specific fact situation in this case, then the landlord should be liable for the damage.

The majority declined to address the very important issue that the AASEW and other landlord associations were concerned about in this case — whether a landlord can add a lease provision assigning liability to a tenant for damages (when the damages is not caused by the tenant’s negligence) or whether doing so would be a violation of Wis. Stat. sec. 704.07.  So essentially the “Supremes” chose to dodge the issue, which in effect means that nothing prevetns a landlord from allocating liability to a tenant for such damage in a rental agreement under similar facts.  What this also means is that should a landlord make such an allocation and hold a tenant responsible for similar damage, the tenant can argue that such contract language violates sec. 704.07, and the courts will have no guidance as to how to rule. 

It was a missed opportunity by the Supremes to add to Wisconsin Landlord-Tenant law.  However, based, on the tortured analysis (my view) of the majority opinion, if the court had addressed the allocation of liability issue it would have most likely resulted in a holding that would not allow a landlord and tenant to allocate liability — which would have been even worse.  So in the end maybe it was best that the issue was not addressed.

Justice Ziegler, who agreed with the majority opinion, wrote a concurring opinion to add that  her view of Wisconsin law is that a landlord and tenant are not prohibited from allocating liability by contract as long as it is done clearly (i.e. no ambiguity) and is otherwise enforceable by law.

The dissenting opinion, which begins on page 18 and is authored by Justice Prosser, stated that not only are a landlord and tenant allowed to allocate liability in a rental agreement but that that is exactly what the parties to this lawsuit did and that the majority opinion is ignoring the clear meanign of the language in the rental agreement.  The dissent did not find the lease to be ambiguous at all.  The dissent, quite correctly in my opinion, points out the absurd nature of the majority opinion by saying that “imposing responsibility on the landlord for damage caused by a tenant, when the landlord cannot control risks created by the tenant” (like keeping a hair dryer plugged in overnight) defies economic logic.

The dissent, being very pragmatic, actually takes the time to address what the practical effect the majority decision will have on landlords by stating, “When the landlord is made responsible for abnormal damages that is actually caused by tenants, the landlord must spread the resulting expense among all tenants by charging higher rent.  When a tenant is made liable for damage that is caused by that tenant, the landlord is better able to control rent and the tenant has an economic incentive for prudent stewardship of the premises.” 

Which of the three opinions seem more reasonable and logical to you?

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Landlords Should Not Play Games With Tenants’ Security Deposits

A new landlord-tenant decision has been reccomended for publication.  The case of Boelter v. Tschantz involves a tenant suing her past landlord for double damages and attorney’s fees for making improper deductions from her security deposit.  
 
The essential facts are as follows:

1.   Tschantz (the landlord) withheld money from the tenant’s security deposit.

2.   The key deductions that were made were: (1) $323.84 for the tenant’s water bill and (2) $85 to repair a clogged toilet.

3.   After withholding a portion of the tenant’s security deposit to pay her water bill, the landlord then failed to pay the bill timely.  As such, the tenant opted to pay the utility directly to avoid late fees. 

4.   The landlord then sent a refund check to the tenant — three weeks later — for the amount that he deducted from her security deposit to cover the water bill along with a Post-It note that said “Oh, too bad no double damages for you.” 

5.   The landlord then stopped payment on the check prior to the tenant cashing it.

The Court of Appeals held that the landlord violated ATCP 134 as a result of his “game-playing” with the tenant’s security deposit. 

First violation of ATCP 134:  The court held that it was unreasonable for the landlord to withhold money from his tenant’s security deposit in order to pay her water bill and then not use that money to pay the water bill timely.  The court specifically stated, “A landlord cannot indefinitely retain a deposit — merely as a deposit — after a tenant vacates.”  Read the rest of this entry »

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Oral Arguments On Important Landlord Case To Be Heard on January 6, 2010

The Wisconsin Supreme Court will hear oral arguments on the case of Maryland Arms L.P. v. Connell on Wednesday, January 6, 2010.  This is a very important case for landlords as the decision will affect a landlord’s ability to contract with his/her tenant.

You can learn what the case is about by reviewing my earlier posts from May 28, 2009 and October 15, 2009.

Oral arguments will be streamed at http://wisconsineye.org for those that wish to watch.

The exact time that for the Maryland Arms arguments is unknown.  The case is scheduled to be heard second.  The first case starts at 9:45 am.  More than likely — and assuming everything runs on schedule – the case will be argued before 11 am.

For those of you new to oral arguments, the Wisconsin Supreme Court justices will allow each side to summarize their arguments (which have already been submitted via briefs).  The justices will also interrupt the attorneys in order to have them answer specific questions that the justices may have or to attempt to get the attorneys to concede certain arguments.  Sometimes the grilling by the justices can be harsh.  The justices will not issue a final decision on Wednesday.  A final decision will be issued many months later in writing.

The AASEW, along with three other Wisconsin apartment associations, hired legal counsel to submit an amicus curiae brief setting forth the concerns of the apartment industry as a whole, with regard to the specific facts of this case.  The lawyer for the apartment associations will also be allowed time to present our argument to the justices.

MARYLAND ARMS CASE WILL BE REVIEWED BY WISCONSIN SUPREME COURT

In my May 28, 2009 post I wrote about the then recently published Wisconsin Court of Appeals case of Maryland Arms Limited Partnership v. Connell, 2009 WI App 87, __ Wis.2d __, 769 N.W.2d 145

This was an important case because a divided Court of Appeals held that a tenant could not be held responsible for the damages that resulted after her hair dryer caused a fire which resulted in thousands of dollars of damage to her landlord’s rental property. 

A key fact in the case was that the landlord agreed that the tenant was not negligent in causing the fire becasue she had no prior knowledge of the hair dryer being faulty.  Another key fact in the case was that the tenant’s lease contained a provision that stated that the tenant would be responsible for all damages that were in any way caused by the acts of the tenant.  The Court of Appeals held that such a lease provision was void.

The landlord in this case has petitioned the Supreme Court of Wisconsin to review the the case and the “Supremes” have agreed to hear the case.  Oral arguments are to be held on January 6, 2010 and it is expected that a decision will be issued sometime in 2009-2010 term.

One of the main issues that the Wisconsin Supreme Court will have to decide is whether or not a landlord can contractually make a tenant liable for damage in a situation where the tenant is not negligent in causing the damage.

This will be an interesting case to watch and I will keep you updated as I learn more.

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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.

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