Dec. 21, 2011 – Effective today, a new law will have an impact on the relationship between residential landlords and their tenants by making unenforceable portions of municipal ordinances that restrict and penalize certain acts or omissions by residential landlords.

These changes are most significant for residential landlords and tenants within the City of Madison, which has perhaps the most far-reaching landlord-tenant ordinances in the state. This article describes some of the effects of the new law, 2011 Wis. Act 108.

Requests and use of tenant information

Act 108 prevents the enforcement of any ordinance that prohibits or restricts a landlord’s ability to request or use certain tenant information such as the following items:

• monthly household income,
• occupation,
• rental history,
• credit information,
• publicly accessible court records (including arrest and conviction records), or
• Social Security number or other proof of identity.

These portions of Act 108 address directly the restrictions enacted under Dane County ordinances and City of Madison ordinances that impose restrictions on use of minimum income requirements and access to the Social Security numbers of prospective tenants.

Under Act 108, municipalities may no longer limit how far back in time a tenant’s credit information, conviction record, or previous housing may be considered by the landlord.

Cooling-off period before re-rental

Act 108 prevents the enforcement of existing ordinances, and the enactment of new ordinances, that prevent a landlord from: a) entering into a rental agreement with a prospective tenant where the applicable rental unit is currently leased to another tenant; or (b) showing the rental unit to a prospective tenant during the current tenant’s rental period.

For example, City of Madison ordinances include provisions that create a form of cooling-off period after an apartment unit has been rented during which time the unit cannot be re-rented or shown to prospective tenants. Act 108 would apply directly to these types of time limitations.

Security deposit restrictions

Act 108 prevents enforcement or enactment of ordinances that place requirements on landlords with respect to security deposits, earnest money, or pre- or post-tenancy inspections that go above and beyond requirements contained in Wis. Admin. Code ATCP 134.

This removes some of the serious consequences that landlords often faced in failing to follow ordinances describing in great detail how check-in and check-out forms must be used.

It also likely renders unenforceable requirements in the City of Madison ordinances that evidence of damages deducted from a security deposit be supported by photographic evidence since ATCP 134 contains no such requirement.

Landlords should also no longer be required to pay interest on security deposits. Landlords had often used security deposits of one half (or less) of one month’s rent to avoid the interest requirements that some local ordinances imposed. With Act 108, there should be no regulatory reason for a landlord to limit its security deposit requirements to one half of one month’s rent.

Under some local ordinances, such as the City of Madison’s, nearly any failure to comply with the administrative requirements regarding security deposits results in an inability of the landlord to lawfully retain any portion of the deposit even if the landlord otherwise had meritorious claims to the deposit for damage or unpaid rent.

Under these ordinances, the landlord also faced attorney fee shifting provisions in the tenant’s favor and damages provisions providing for the multiplication of damages.

Act 108 should eliminate many of these risks and change the leverage relationship between the landlord and tenant in some of these disputes where a tenant formerly had leverage because of landlord violations of security deposit or check-in check-out procedures.

The attorney fee and multiple damages provisions for those types of violations should not be available to tenants under ordinances because the underlying restriction contained in the ordinance “does not apply and may not be enforced.”

The key language used in Act 108 is “no city … may enact an ordinance that places requirements on a residential landlord with respect to security deposits … that are additional to the requirement under administrative rules related to residential rental practices.”

This means that any provision that goes beyond the Wisconsin Administrative Code requirements and that creates obligations on landlords that relate directly to security deposits would be unenforceable.

Other local rules

It is important to note that even with Act 108, landlords state wide remain subject to the rules and regulations found in Wis. Stats., ch. 704, Wis. Admin. Code, ch. ATCP 134, as well as local rules not affected by Act 108.

For example, ordinances that restrict the amount of late fees that may be charged by a landlord are not affected. These remaining rules do provide substantial protections for tenants that would not otherwise be available under the common law (including attorney fee-shifting provisions), and residential landlords are well advised to take steps to comply with these provisions.

For example, landlords are still required under ATCP 134 to provide a statement of claims describing their damages in reasonable detail within 21 days after the tenant vacates a rental unit. That requirement is necessary if the landlord seeks to deduct amounts from the security deposit. Any remaining portion of the security deposit must be returned to the tenant within this 21-day period.

Since ATCP 134 is a set of administrative rules promulgated under Wis. Stat. section 100.20(2), in a case where a violation of its terms are demonstrated, a plaintiff may recover twice its damages plus its court costs and reasonable attorney fees.

About the author

Ed Lawton is an attorney with Axley Brynelson LLP, Madison, where he focuses on assisting clients with real estate and business transactions.