rentals in a storm

Wisconsin’s 10 Deadly Landlord Sins to Avoid in Lease Agreements

For both new and expe­ri­enced rental prop­er­ty own­ers, nav­i­gat­ing the com­plex­i­ties of real estate lease agree­ments can be chal­leng­ing, and even sea­soned pro­fes­sion­als can make mis­takes. Some of these mis­takes can be painful­ly expen­sive as was recent­ly demon­strat­ed in a Wis­con­sin real estate court rul­ing.

In Koble Invest­ments v. Mar­quardt, it’s mind numb­ing from the rental prop­er­ty own­er’s per­spec­tive how a court could rule so harsh­ly and against what many may con­sid­er com­mon sense and fair­ness.

Regard­less, this is the cur­rent state of affairs and if you want to suc­cess­ful­ly offer rental prop­er­ty, you best put aside fair­ness and equi­ty, and play defense or pay the price as Koble Invest­ments clear­ly did.

In Koble Invest­ments v. Mar­quardt, Mar­quardt argued, and was suc­cess­ful, in not only hav­ing the entire lease agree­ment void­ed, albeit also received DOUBLE the rent paid to Koble Invest­ments as dam­ages in the suit. There are times where dam­ages are appro­pri­ate and most will agree the out­come was just, how­ev­er, in the case at hand, the plain­tiff, Mar­quardt suf­fered NO ACTUAL dam­ages and their legal the­o­ry was the land­lord sim­ply had lan­guage in the lease agree­ment that is not per­mit­ted.

That was it, noth­ing else besides imper­mis­si­ble lease agree­ment lan­guage, and it result­ed in the rental prop­er­ty own­er hav­ing to refund dou­ble the amount of rent. So the ten­ant in this case not only was able to live and use the prop­er­ty for free, they received (again) dou­ble the rental amount paid as dam­ages.

Because the rental agree­ment was void­ed, the ten­ant received their rental pay­ments in return, and then as a pecu­niary loss, the same amount was award­ed to the renter. To add salt to the wound, the rental prop­er­ty own­er had to also pay for the renter’s (plain­tiff’s) court costs and attor­ney fees (at least at the appeals lev­el).

What was the pro­hib­it­ed lan­guage used? As described below, it was num­ber 10 of the “dead­ly sins” of lease lan­guage. It was the ABSENCE of notice and lan­guage in the lease agree­ment, name­ly “Notice of Domes­tic Abuse Pro­tec­tions” required by Wis. Statute § 704.14.

The take­away is that even if the ten­ant does­n’t suf­fer a loss or actu­al dam­ages for a lease vio­la­tion, under Wis­con­sin law, it does­n’t mat­ter, the ten­ant can get paid, and paid well, if the land­lord fails to com­ply with the require­ments.

As a rental prop­er­ty own­er, you may think your lease is fine if you bought a “stan­dard lease” from a big box store, such as Office Depot and akin, albeit you may be very very wrong. Also, if you draft­ed your own lease (cut and paste off the inter­net is not your friend), which many rental own­ers do, or had one draft­ed years ago by an attor­ney, pri­or to recent statute changes you’re on sol­id ground, albeit again, you may be very painful­ly and finan­cial­ly wrong.

Henchey v. Wausau Landmark Corp

Take anoth­er rel­a­tive­ly recent case (at the time of this writ­ing) in which the rental prop­er­ty own­er found out how wrong they were. In Henchey v. Wausau Land­mark Corp (Appeal No. 21AP1684) decid­ed on May 2, 2023. It’s VERY impor­tant to note, Henchey is not a pub­lished opin­ion, and is not prece­dent, albeit rental own­ers should view it as high­ly per­sua­sive and ensure com­pli­ance in their rental agree­ments.

The Court of Appeals in this dis­pute held the lease which con­tains com­mon lease lan­guage pro­hibit­ing ten­ants from engag­ing in ille­gal activ­i­ty on the premis­es or per­mit­ting the premis­es to be used for an unlaw­ful pur­pose as well as pro­hibit­ing ten­ants from mak­ing exces­sive noise or engag­ing in activ­i­ties that would undu­ly dis­turb oth­er ten­ants or neigh­bors, allowed the land­lord to evict a ten­ant based on the com­mis­sion of a crime. MANY rental agree­ments con­tain sim­i­lar lan­guage.

That lan­guage in the lease vio­lat­ed the “9th Dead­ly Sin” in § 704.44(9). The unlaw­ful pur­pose pro­vi­sion of the rental agree­ment would per­mit the land­lord to ter­mi­nate a ten­an­cy if a ten­ant made use of the premis­es for an unlaw­ful pur­pose or per­mit­ted anoth­er to make use of the premis­es for an unlaw­ful pur­pose even if a per­son who law­ful­ly resided with the ten­ant was a vic­tim of that crime. Thus, the court found the lease vio­lat­ed § 704.44(9).

The Appeals Court opin­ion states the rem­e­dy is that the land­lord has to refund all of the rent received dur­ing the course of the ten­an­cy with­out off­set for the val­ue of liv­ing in the apart­ment rent-free.

What should rental property owners have or not have in their lease?

Here are the 10 Dead­ly Sins for a Wis­con­sin res­i­den­tial lease agree­ment:

§ 704.44 pro­hibits the fol­low­ing pro­vi­sions

You can not include lan­guage in your Wis­con­sin res­i­den­tial lease agree­ment that includes:

1. Allows a land­lord to do any of the fol­low­ing because the ten­ant has con­tact­ed an enti­ty for law enforce­ment ser­vices, health ser­vices, or safe­ty ser­vices:

a. Increase the rental amount

b. Decrease ser­vices pro­vid­ed to ten­ant

c. Bring an action for pos­ses­sion of the premis­es (i.e. evic­tion law­suit)

d. Refuse to renew a rental agree­ment

e. Threat­en to take any action described above.

This pro­hi­bi­tion is pret­ty self-explana­to­ry and real­ly should be com­mon sense as a prop­er­ty own­er. “self-help” and retal­i­a­tion (or what may be viewed as retal­ia­to­ry action) is not per­mit­ted. You can­not have a rental agree­ment pro­vi­sion that allows a land­lord to retal­i­ate against a res­i­den­tial ten­ant just because the ten­ant has con­tact­ed law enforce­ment or a reg­u­la­to­ry agency, to com­plain about some­thing that the prop­er­ty own­er did (when the own­er should not have) or some­thing the land­lord did not do (when the own­er should have).

2. Autho­rizes the prop­er­ty own­er to evict the ten­ant using a means oth­er than by the judi­cial evic­tion process as required by Wis­con­sin Statutes.

The prop­er­ty own­er can­not put any lan­guage in the rental agree­ment that states that if the ten­ant refus­es to vacate the prop­er­ty at the end of a lease, or after com­mit­ting a breach of the lease agree­ment, that the land­lord is able to then con­duct a ‘self-help’ evic­tion. This includes, albeit not lim­it­ed to hav­ing a lease agree­ment with lan­guage such as:

The prop­er­ty own­er (or man­ag­er) can change the locks, caus­ing the ten­ant to be locked out.

The prop­er­ty own­er can remove the door to the rental.

The own­er can turn off the heat or elec­tric­i­ty to the rental.

The land­lord can remove the ten­an­t’s per­son­al prop­er­ty and put them on the curb or in a stor­age facil­i­ty.

In oth­er words, includ­ing an actu­al ‘self-help’ evic­tion, the prop­er­ty own­er may not have lease lan­guage that would allow the land­lord to “con­struc­tive­ly evict” the ten­ant nei­ther.

It should be not­ed, gen­er­al­ly, the only option avail­able for a rental prop­er­ty own­er if a ten­ant refus­es to leave the prop­er­ty, is to file an evic­tion action against them in the appro­pri­ate court, obtain a judg­ment of evic­tion, and if nec­es­sary involve the Sher­if­f’s Depart­ment to phys­i­cal­ly remove the ten­ant.  That is the only way a prop­er­ty own­er should evict to ensure it is done legal­ly.

3. Accel­er­a­tion of rent pay­ments if the ten­ant defaults or breach­es the rental agree­ment or oth­er­wise waives the land­lord’s oblig­a­tion to mit­i­gate dam­ages as required under Wis. § 704.29

Accel­er­a­tion of Rents claus­es are per­mit­ted in com­mer­cial lease agree­ments, albeit the same are pro­hib­it­ed in res­i­den­tial leas­es. If a ten­ant breach­es their rental agree­ment the prop­er­ty own­er can­not require the ten­ant imme­di­ate­ly pay all future rent through the end of the lease term.

Fur­ther­more, under Wis. § 704.29 the prop­er­ty own­er has a duty to mit­i­gate the own­er’s and ten­an­t’s dam­ages by attempt­ing to re-rent the unit. If suc­cess­ful in re-rent­ing the rental, the for­mer ten­ant will no longer be respon­si­ble for the future rent once the new ten­ant moves in and begins pay­ing (although, if unable to rent at the same amount, it’s pos­si­ble the for­mer ten­ant may still have some lia­bil­i­ty).

If the own­er is unable to find a new renter then the pre­vi­ous breach­ing ten­ant will be respon­si­ble for all of the rent through the end of the lease agree­ment. Regard­less, since the own­er is not able to deter­mine if that will be the case at the time the first ten­ant vio­lates the lease agree­ment, the own­er can­not include lan­guage in the lease that the ten­ant must pay all future rent imme­di­ate­ly upon a breach.

It is not only ille­gal for a land­lord to avoid their duty to mit­i­gate the breach­ing ten­an­t’s dam­ages (i.e. make effort to re-rent the unit) by putting such lan­guage in the rental agree­ment, the own­er has a requirement/duty to attempt to rent the prop­er­ty.

4. Require­ments the ten­ant must 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 is often placed in res­i­den­tial lease agree­ments. Be very care­ful regard­ing stan­dard lease agree­ments from Office Depot con­tain this pro­hib­it­ed lan­guage. This is also the same pro­hib­it­ed lan­guage in a Wis­con­sin Supreme Court case of  Baierl v. McTag­gart. In this case, again, the ten­ant was award­ed the entire amount paid in rent.

As a rental own­er, unlike res­i­den­tial leas­es, you are per­mit­ted to have rea­son­able legal expense terms in your com­mer­cial lease.

5. The land­lord is autho­rized to con­fess judg­ment against the ten­ant in any action aris­ing under the rental lease.

Unlike some oth­er states, Wis­con­sin res­i­den­tial rental agree­ments are not per­mit­ted to include lan­guage autho­riz­ing the land­lord to auto­mat­i­cal­ly take a judg­ment against the renter and the ten­ant has no right to defend against such action by the own­er.

6. Trans­fers the own­er’s lia­bil­i­ty for dam­age or per­son­al injuries as a result of the own­er’s neg­li­gence.

If the own­er or an agent of the own­er (ie man­ag­er) caus­es dam­age or injury to a renter, then the land­lord will be respon­si­ble for it, and the own­er can­not require the renter to assume the risk and lia­bil­i­ty of the own­er. An own­er can­not remove their lia­bil­i­ty in a rental agree­ment from the renter waiv­ing the own­er’s responsibility.This is espe­cial­ly impor­tant regard­ing need­ed repairs or updates the own­er should per­form on the prop­er­ty. Any lan­guage in the lease that attempts to trans­fer such lia­bil­i­ty will be con­sid­ered void (along with the rest of the lease agree­ment).

7. Attempts to trans­fer lia­bil­i­ty on the renter for any of the fol­low­ing:

(a) Per­son­al injury aris­ing from caus­es clear­ly beyond the ten­an­t’s con­trol.

(b) Prop­er­ty dam­age caused by nat­ur­al dis­as­ters or by per­sons oth­er than the ten­an­t’s the ten­an­t’s guests or invi­tees.

Lease agree­ments can­not have lan­guage trans­fer­ring lia­bil­i­ty to a renter for per­son­al injuries that were caused by some­thing beyond a ten­an­t’s con­trol. While the renter remains respon­si­ble for their own con­duct, they are not respon­si­ble for faulty repair work per­formed by oth­ers or the weath­er. That said, if the renter has a respon­si­bil­i­ty to clear the side­walk, and they fail to do so in a time­ly man­ner, renter may have lia­bil­i­ty. How­ev­er, the ten­ant is not respon­si­ble for things out­side their con­trol, or beyond the rea­son­able lease require­ments.

8. Waives the legal require­ments that the own­er deliv­er and main­tain the prop­er­ty in a hab­it­able con­di­tion.

A rental prop­er­ty own­er has a respon­si­bil­i­ty and legal duty to pro­vide a renter with an rental prop­er­ty that is hab­it­able and rea­son­ably safe. An own­er addi­tion­al­ly has the respon­si­bil­i­ty and legal duty to repair and main­tain the rental prop­er­ty to insure that it remains safe and liv­able dur­ing the lease agree­ment. A land­lord can­not require the renter to waive this respon­si­bil­i­ty and legal duty even if the ten­ant is will­ing to allow and or waive the hab­it­able con­di­tion require­ments.

9. Per­mit­ting the own­er to ter­mi­nate the ten­an­cy and lease agree­ment based sole­ly on the com­mis­sion of a crime in or on the rental prop­er­ty, EVEN if the ten­ant, or some­one who law­ful­ly resides with the ten­ant, is a vic­tim of that crime.

It’s impor­tant to note the dif­fer­ence between allow­ing a renter to com­mit crimes, and not allow­ing the renter to be the vic­tim of a crime. While an own­er is allowed to pro­hib­it crimes on the prop­er­ty by the renter (or their guests and invi­tees), the prop­er­ty own­er is not allowed to evict and/or ter­mi­nate a rental agree­ment sim­ply because any crime occurred on the prop­er­ty.

10. Per­mit­ting the own­er to ter­mi­nate the ten­an­cy and lease agree­ment for a crime com­mit­ted in rela­tion to the rental prop­er­ty and the lease agree­ment does not include the notice of domes­tic vio­lence pro­tec­tions as required under Wis. § 704.14

Many, if not all lease agree­ments con­tain lan­guage along the lines of “Ten­ant shall not engage in or allow oth­ers to engage in any crim­i­nal activ­i­ty on the property.“It is good prac­tice by the rental own­er to have such lan­guage, albeit it’s not com­plete under Wis. § 704.29 unless addi­tion­al lan­guage is includ­ed. Under Wis. § 704.14 if you have a crime com­mit­ted clause in your rental agree­ment, you must have, and it must be exact (no sum­ma­ry to replace the actu­al required lan­guage).

NOTICE OF DOMESTIC ABUSE PROTECTIONS
(1)As pro­vid­ed in sec­tion 106.50 (5m) (dm) of the Wis­con­sin statutes, a ten­ant has a defense to an evic­tion action if the ten­ant can prove that the land­lord knew, or should have known, the ten­ant is a vic­tim of domes­tic abuse, sex­u­al assault, or stalk­ing and that the evic­tion action is based on con­duct relat­ed to domes­tic abuse, sex­u­al assault, or stalk­ing com­mit­ted by either of the fol­low­ing:
(a) A per­son who was not the tenant’s invit­ed guest.
(b) A per­son who was the tenant’s invit­ed guest, but the ten­ant has done either of the fol­low­ing:
1. Sought an injunc­tion bar­ring the per­son from the premis­es.
2. Pro­vid­ed a writ­ten state­ment to the land­lord stat­ing that the per­son will no longer be an invit­ed guest of the ten­ant and the ten­ant has not sub­se­quent­ly invit­ed the per­son to be the tenant’s guest.
(2)A ten­ant who is a vic­tim of domes­tic abuse, sex­u­al assault, or stalk­ing may have the right to ter­mi­nate the rental agree­ment in cer­tain lim­it­ed sit­u­a­tions, as pro­vid­ed in sec­tion 704.16 of the Wis­con­sin statutes. If the ten­ant has safe­ty con­cerns, the ten­ant should con­tact a local vic­tim ser­vice provider or law enforce­ment agency.
(3)A ten­ant is advised that this notice is only a sum­ma­ry of the tenant’s rights and the spe­cif­ic lan­guage of the statutes gov­erns in all instances.

A rental own­er that has failed to include the domes­tic abuse pro­tec­tions lan­guage will face their rental agree­ment as void­ed if the lease also includes lan­guage allow­ing the own­er to ter­mi­nate the lease and evict if the ten­ant or their guest have engaged in crim­i­nal activ­i­ty.

Make dou­ble sure that your rental agree­ment con­tains the manda­to­ry notice of domes­tic abuse pro­tec­tions as required in Wis. § 704.14

Fail­ure to com­ply with any of the above Wis­con­sin “dead­ly sins of a lease agree­ment” may result in finan­cial ruin, or at least more pain than most rental own­ers wish to bear.