Residential Landlord Provision That Can Cause Big Trouble
A sometimes overlooked provision can cause big trouble for Wisconsin residential landlords. That provision centers around disputes with the tenant and specifically who will be responsible for paying the legal fees associated with the dispute. Under Wisconsin law, a landlord may not charge a tenant for actual attorney fees or costs incurred by the landlord in any legal action or dispute arising under the rental agreement. Any rental provision mandating that tenants pay actual legal fees renders the entire rental agreement void and unenforceable.
Section 704.44(4m) of the Wisconsin Statutes states, “Notwithstanding s. 704.02, a residential rental agreement is void and unenforceable if it does any of the following:
(4m) Requires payment by the tenant of attorney fees or costs incurred by the landlord in any legal action or dispute arising under the rental agreement. This subsection does not prevent a landlord or tenant from recovering costs or attorney fees under a court order under ch. 799 or 814. (emphasis added). Chapters 799 and 814 only allow for the collection of statutory costs and fees upon the entry of judgment, as opposed to actual costs and fees.”
This same language is mirrored in Wisconsin’s administrative code governing consumer protection. See Wis. Admin. Code ATCP § 134.08 (4). A landlord pursuing an eviction action, for example, may be awarded court costs and a statutory attorney fee in a judgment by the court. Wis. Stat. §§ 799.25 and 814.04, but the landlord cannot charge the tenant for its actual attorney fees.
Further, the failure to comply with this Wisconsin law exposes the landlord to double damages, fines and the tenants’ attorneys’ fees: “[P]ractices in violation of s.704.28 or 704.44 may constitute unfair methods of competition or unfair trade practices under s. 100.20.” Wis. Stat. § 704.95. Such practices may be sanctioned by fines up to $5,000 per offense, and provide a cause of action for the tenant to recover double damages plus the tenant’s attorney fees and costs. Wis. Stat. §§ 100.20 (5) and 100.26 (3).
In Baierl v. McTaggart, the Wisconsin Supreme Court held that a landlord’s lease provision requiring a tenant to pay the landlord’s attorney fee and costs was an unfair trade practice which rendered the entire lease unenforceable. The court refused to sever the illegal provision and enforce the remainder of the rental agreement. Instead, the court deemed the entire rental agreement unenforceable.
Despite the fact that the tenant vacated the apartment prior to the end of the lease term without paying rent or damages, and the landlord was unable to re-rent the apartment, the court awarded damages to the tenant in the amount of double their security deposit remaining after deduction of rent and other uncontested deductions, as well as ordering the landlord to pay the tenant’s attorney fees. Baierl v. McTaggart, 2001 WI 107, ¶ 4, 245 Wis. 2d 632, 629 N.W.2d 277.
This is just one example of an illegal rental provision that renders the entire rental agreement void and unenforceable and costly to the landlord. Having rental agreements reviewed for compliance with Wisconsin law can save a landlord big trouble in the long run.