A recent Wisconsin Court of Appeals case complicates residential leases by applying the Wisconsin Consumer Act (WCA) to residential leases and uniquely calculating pecuniary loss under Wis. Stat. section 100.20(5) for a violation of Wis. Admin. Code § ATCP 134.08(10).
The case is
Koble Investments v. Marquardt.1 A petition to review the decision is currently pending before the Wisconsin Supreme Court.
Landlords and tenants alike should be aware of its holding, as it has the potential to significantly alter the residential landlord-tenant relationship.
Case Analysis:
Koble Investments v. Marquardt
In
Koble Investments, a landlord served a notice of eviction and filed an eviction action against a tenant for the nonpayment of rent. The tenant then asserted two counterclaims against the landlord, including a violation of the WCA (specifically Wis. Stat. section 427.104(1)(j)), and a claim that the lease was void and unenforceable pursuant to Wis. Stat. section 704.44(10) and Wis. Admin. Code section ATCP 134.08(10).
The landlord ultimately dismissed its eviction claim, but the counterclaims went forward. The court ruled in favor of the tenant, and ordered the landlord to pay to the tenant twice the amount of rent paid under the entirety of the lease, plus reasonable attorney fees pursuant to Wis. Stat. section 100.20(5).
Wis. Stat. section 704.44 sets out 10 specific provisions of a residential lease, the so-called “10 Deadly Sins,” that if present, render the agreement void and unenforceable. Among those, a lease is void and unenforceable if the agreement allows the landlord to terminate the lease for a crime committed in relation to the property and the lease fails to include the required Notice of Domestic Abuse Protections under Wis. Stat. section 704.14.2
In
Koble Investments, the tenant claimed the entire lease was void and unenforceable because it stated that “[n]either party may … make [or] knowingly permit use of the premises for an unlawful purpose,” and that it failed to include the required Notice of Domestic Abuse Protections.3
The appeals court found that this provision would have allowed the landlord to terminate the lease for a crime committed in relation to the property. The failure to include the Notice of Domestic Abuse Protections was a fatal flaw in the lease, and the appeals court found the lease void and unenforceable.
The landlord argued that the lease did not give the landlord “the automatic authority to terminate the lease if a crime [was] committed on the premises” because the tenant had an opportunity to cure such violation. However, the court rejected this argument, stating “it is unclear how a tenant could ‘cure’ a breach that occurred when a crime was previously committed in the rental property.”
Put differently, a crime simply cannot be undone. Moreover, the court found that a right-to-cure provision within the lease would not save the lease from being void and unenforceable under Wis. Stat. section 704.44(10) and Wis. Admin. Code section ATCP 134.08(10).
The court further clarified that sections 704.44(10) and ATCP 134.08(10) do not require the landlord’s ability to terminate the lease to be automatic to be a violation of the statute.
As a result of the lease being held void and unenforceable, the court then addressed the award of damages for such violation of ATCP 134. Wis. Stat. section 100.20(5) states that “any person suffering pecuniary loss [for a violation of ATCP 134] … shall recover twice the amount of such pecuniary loss, together with costs, including a reasonable attorney fee.”
The court found that the appropriate measure of the pecuniary loss was the value of all rental payments made under the void and unenforceable lease. However, the landlord failed to develop an argument that the pecuniary loss was not caused by the violation of sections 704.44(10) and ATCP 134.08(10) and in fact conceded the argument.4
The Impact of Koble Investments: Applying the WCA to Residential Leases
The
Koble Investments court found that a resident is a “customer,” and a residential lease is a “consumer transaction” for purposes of the WCA.5 In Koble Investments, the landlord had served a 5-day eviction notice on the tenant while a COVID-19 emergency order prohibited landlords from terminating a tenancy for failure to pay rent.
This holding imputes all consumer protections afforded under the WCA to residential leases that are regulated by other specific laws – namely Wis. Stat. chapter 704 and Wis. Admin. Code ch. 134. Such consumer protections involve, among other things, certain prohibited debt-collection practices under Wis. Stat. section 427.104.
A residential tenant may be able to successfully bring a counterclaim against a landlord for such violations if the tenant “achieves some significant benefit in litigation involving the [landlord’s] violation of the WCA.”6
Conclusion: Check Your Leases
Although a petition for review is currently pending before the Wisconsin Supreme Court,
Koble Investments has a chance to significantly alter the residential landlord-tenant relationship as we know it, including potentially rendering numerous existing leases invalid.
And, as it currently stands,
Koble Investments is the law. Under Wisconsin law, landlords are expected to be “reasonably prudent,” meaning they are “expected to review and follow the relevant law.”7
Landlords should become familiar with the consequences imposed by
Koble Investments and pay special attention to the requirements enumerated in Wis. Stat. chapter 704, Wis. Admin. Code ch. ATCP 134, and the Wisconsin Consumer Act.
Endnotes
1
Koble Investments v. Marquardt, 2024 WI App 26, 412 Wis. 2d 1, 7 N.W.3d 915.
2 Wis. Stat. § 704.44(10); Wis. Admin. Code § ATCP 134.08(10).
3
Koble Investments, 2024 WI App 26, at 36.
4Id. at 49, 50.
5Id. at 16-14, 23.
6
Id. at 13 (citing
Community Credit Plan, Inc. v. Johnson, 221 Wis. 2d 766, 774, 586 N.W.2d 77 (Ct App. 1998), aff’d, 228 Wis. 2d 30, 596 N.W.2d 799 (1999)).
7
Id. at 31 (citing
State v. Lasecki, 2020 WI App 36, at 39-42, 392 Wis. 2d 807, 946 N.W.2d 137).