Vol. 76, No. 3, March
Illegal Provisions Void Entire Lease
provision in a residential lease cannot simply be severed and the
remainder of the lease enforced, because to so allow undermines the
underlying intent of the regulations.
by Thomas L. Doerr Jr.
The Wisconsin Supreme Court in 2001 in Baierl v. McTaggart
opined that when a residential lease includes a provision that violates
the Wisconsin Administrative Code, the landlord may not enforce the
remaining provisions of the lease. Section ATCP 134.08(3) prohibits, as
an unfair trade practice, the inclusion of any clause requiring tenants
to pay the landlord's attorney fees and costs incurred when enforcing
the lease. Wisconsin courts have long acknowledged an inherent
inequality in the bargaining power between landlords and tenants in
residential leases. Section ATCP 134.08 attempts to alleviate the
tenants' limited bargaining power.
Baierl v. McTaggart: Facts and Procedural
In July 1996 the McTaggarts signed a residential lease with Baierl as
their landlord. Under the lease, the McTaggarts agreed to rent an
apartment owned by Baierl for one year, from Aug. 1, 1996 to July 31,
1997. The lease contained a provision reportedly requiring the tenant to
indemnify the landlord for all costs and attorney fees incurred by the
landlord in enforcing the lease. This provision was in direct violation
of section ATCP 134.08(3).
In November 1996 the McTaggarts informed Baierl that they would be
vacating their apartment in January 1997, several months before the
lease expired, because of employment reasons. In January the McTaggarts
vacated the apartment and instructed Baierl to deduct the January 1997
rent from their security deposit. Before the McTaggarts departed, Baierl
deducted costs for other damage to the apartment and the January rent
from their security deposit. Unable to subsequently rent the apartment,
Baierl withheld the remainder of the deposit and sought to enforce the
lease terms. After unsuccessfully demanding payment, Baierl sued to
collect damages under the lease.
The McTaggarts counterclaimed that Baierl wrongfully retained their
security deposit to satisfy rent for which they had no liability because
the lease was void due to the illegal provisions. They sought double
damages, costs, and attorney fees under Wis. Stat. section 100.20(5).
The trial court concluded that because the lease included the provision
requiring the McTaggarts to pay attorney fees and costs, the entire
lease was void. As a consequence of the lease invalidation, the court
awarded damages to the McTaggarts in the amount of the security deposit
remaining after the deduction of the January 1997 rent. The court then
doubled the damages and awarded the McTaggarts reasonable attorney
Baierl appealed. In a divided decision, the court of appeals reversed
the trial court. The majority explained that under common law, a
contract containing an illegal provision may be enforceable if severance
of the illegal provision would not defeat the contract's primary
purpose. The court concluded that the purpose of the lease could still
be satisfied absent the illegal provision. The court examined the
equities of the case and determined that because the McTaggarts breached
the lease, equity favored the landlord.
Ultimately, the case reached the Wisconsin Supreme Court. In a July
11, 2001, decision the court agreed that the inclusion of the attorney
fee provision was a violation of Wisconsin law, and the sole question
before it was whether the remaining items of the lease may be enforced.
The court addressed two positions: 1) whether the "rule of severability"
permits a contract to survive if an illegal clause can be severed from
the contract without defeating the contract's primary purpose; and 2)
whether a violation of an administrative regulation results in the
unenforceability of the entire contract. The court concluded that both
parties' positions failed to consider the principle that ultimately was
controlling: the intent underlying the statute or regulation that was
The Ultimate Decision
The Wisconsin Supreme Court stated that ultimately it is the intent
underlying the regulation that dictates whether a clause is severable
and whether the inclusion of the clause renders the entire contract
unenforceable. The court reviewed the text, the history, and the object
of section ATCP 134.08 to determine the regulation's underlying intent.
The court concluded that enforcement of a lease containing a prohibited
provision would not only fail to advance the goals of the Wisconsin
Department of Agriculture, Trade and Consumer Protection (the DATCP) but
would completely undermine them. The court stated that section ATCP
134.08 was enacted because the DATCP sought to eliminate the
intimidation of residential tenants by landlords, and the inclusion of
such an unenforceable clause poses a great threat.
The court noted that if it were to allow the clause to be severed and
permit the remainder of the lease to be enforced, neither of the
aforementioned goals would be advanced. The court believed that if it
permitted the landlord to enforce the lease, despite the fact that it
included an illegal provision, landlords would continue to include such
provisions in their leases with the knowledge that courts merely would
sever the clause and enforce the remainder of the lease. Thus, the goal
of eliminating tenant intimidation would be completely frustrated.
Allowing the clause to be severed and the remainder of the lease to be
enforced by the landlord also would undermine the effectiveness of
private enforcement of tenant rights.
In sum, a landlord who includes a provision specifically prohibited
by the Wisconsin Administrative Code in a residential lease will be
prohibited from enforcing the remaining terms of that lease. Having
examined the underlying intent of section ATCP 134.08(3), the Wisconsin
Supreme Court has determined that allowing the enforcement of such a
lease would fail to advance the overall intent of the regulation and
would completely undermine the objectives of the DATCP and its attempt
to bring equality to residential landlords and tenants. All residential
leases should be reviewed to ensure that they comply with Wisconsin law
and do not result in a void lease.
Thomas L. Doerr Jr., Marquette 2000, practices
with Beck, Chaet & Bamberger S.C., Milwaukee. He can be reached at