It was a very productive weekend for Dr. Rent. Saturday morning was spent finalizing the information I need to get my 1099’s out by the end of the month. There are still 5 W-9’s forms that I am waiting for, but I trust they will come in this week. Plowing started Saturday afternoon around 3 PM and I was able to finish that up by 9 PM. Most of Sunday was spent working on the fiscal year end for my company, HelpRent, Co. and I am happy to say that I did get that done. It will go to my tax accountant later this week. That doesn’t mean my year end work is done, far from it, I still have 4 entities I need to start on.
Most of yesterday was spent working on something called an Amicus Brief. This is when there is a court action and other parties who could be affected by the decision weigh in. It is also called a “Friend of the Court” Brief.
I authored the Brief on behalf of the Wisconsin Apartment Association for a case that is currently in the appellate court system. In this case, a tenant had vacated a residential rental unit long before the lease was set to expire. The landlord made a reasonable attempt to re-rent the property but was unable to do so. The tenant took the landlord to court for the return of the security deposit. The landlord countersued for the rent owed under the contract (the tenant didn’t pay the rent after they vacated). The court ruled in favor of the landlord.
The tenant is now appealing this case. The basis of their appeal is that the lease should be void because it contains a provision that is illegal according to Wisconsin law. The landlord’s defense (as agreed by the circuit court) was that the lease provision in question is not illegal.
ATCP Rule 134.08 lists a number of items that are prohibited from being a part of a residential rental agreement in Wisconsin. Sub-Item (3) specifically makes it illegal to put a provision in the lease that would require a tenant to pay the legal/attorneys fees of a landlord if there is litigation. That is not to say that if a landlord takes a tenant to court and wins, that the court won’t award reasonable attorneys fees (as they will), it is just illegal to have that as a part of the contract.
Although the rule prohibits that clause from being in a rental agreement, nothing in the ATCP Rules or the Statutes for that matter indicate what happens if such a provision is included. In 2001, the Wisconsin Supreme Court needed to answer that question in the case Baierl v. McTaggart. The question was would the lease stand and the illegal provision be void and unenforceable, or would the entire lease be void?
In a 4-3 decision, it was decided that in the specific case of legal fees, ATCP 134.08 (3), that the lease would be void. Although this tends to be seen as a loss for landlords, the logic of the decision does make sense to me. Having this provision tends to “intimidate” tenants from exercising their legal rights under the lease. If you were a tenant with this provision in your lease, and you were wronged by your landlord, would you be willing to take them to court for that $300 that they owe you when you will have to pay their legal fees? You might win your $300, but would lose in the end after paying probably more than that for the landlord’s attorney. Even if this provision was made void, just it being there would have what the Supreme Court called the “chilling effect” of inhibiting a tenant from exercising their rights. Therefore, this clause would void the lease. The court made clear that not every violation of 134.08 would void a lease, but a violation of (3) certainly would.
In the case that my Brief is for, there is a clause in the lease that allows a landlord to recoup costs charged by a collection agency if one is used to collect amounts owed. The tenant is arguing that clause falls under the legal fees provision. The landlord, the trial court, and the Wisconsin Apartment Association disagree. For a collection action to occur, there has to be an amount owed. The “chilling effect” eluded to in the Supreme Court decision doesn’t exist here. Nothing in that provision would limit a tenant’s willingness to file a suit against the landlord. Nothing in that provision would require a tenant to have to pay landlord’s attorney’s fees in a legal action.
Lease provisions that require a tenant to reimburse landlords for fees they incur because of a tenant breach are quite common. Examples include requiring tenants to reimburse bank fees caused by payments returned for non-sufficient funds as well as reimbursing fees or fines charged by the municipality caused by a tenant breach (for example, not shoveling the sidewalk when it is a tenant responsibility). As stated in my Brief, “To not allow landlords to recoup such charges would be an “Unfair Trade Practice” as this would limit the legal rights of a landlord and would discourage tenants from complying with the rental agreement with the knowledge that the landlord could not recoup costs associated with a tenant breach of the agreement.”
Before I forget, on the Dr Rent Radio Show tomorrow (Wednesday) on 93.3 FM, WNRB-LP at 5 PM, the topic of the day will be the proposed legislation I have already blogged about making it a felony for landlords to consider someone’s criminal past when renting to them.