A Summary of How Security Deposits work in Wisconsin

Week two without a radio show and I already miss it.

 

However, as promised, as long as I am still actively employed in the real estate rental industry inWisconsin, I will continue to answer questions.

 

A question that came up via email from someone who I had answered some questions from a while back concerned their security deposit.  They were on a month-to-month rental agreement, gave the proper notice in May that they would be vacating by the end of June, vacated by the end of June, and here it was July 21st.  Had they won the landlord lottery and are now entitled to double their deposit back?  What if they got the deposit back on the 25th?  Could they still pursue those double damages?

 

InWisconsinin residential rentals, there is a requirement to return the Security Deposit back to the tenant within 21 days of when they “surrender”.  So first, let’s talk about that term “surrender” because that is what triggers that 21 day clock to start ticking.  (This can be found in ATCP 134.06.)

 

In the majority of the cases, the date of “surrender” is the last day of the rental agreement.  If the lease ends on June 30th, that is the date of surrender.  There are three exceptions to the last day rule.  Exception 1 is if the tenant vacates the property PRIOR TO the end date of the agreement.  If the tenant vacates early, and informs the landlord IN WRITING that they HAVE VACATED, then surrender occurs the date the landlord receives that notice.  In the event the tenant vacates AFTER the end date of the agreement, then surrender occurs when the landlord reasonably knew the tenant vacated.  Finally, in the event of an eviction action, surrender occurs when the writ is executed by the sheriff, however if the landlord learns the tenant vacated prior to the execution of the writ, then that date becomes the date of surrender.

 

The lease end date is easy, so let’s use some different examples.

 

Lease end date is July 31st.  On July 25th, tenant physically gives the landlord the keys and tells the landlord that they have vacated.  Surrender remains July 31st, because they told the landlord and didn’t put it in writing.

 

Lease end date is July 31st.  On July 22nd, tenant gives landlord written notice they will be moving out over the weekend and keys will be in the unit on July 25th.  Surrender remains July 31st, because although the notice was in writing, it was done before the move.  The written notice must be done after the fact.

 

Lease end date is July 31st.  On July 25th when the tenant drops off the keys, they include a letter saying they are out.  NOW, the surrender date is July 25th.  (If the tenant mailed the letter on July 25th, law provides for 2 days for the landlord to receive the notice, so surrender date is July 27th unless landlord is willing to acknowledge they received the letter on an earlier date.)

 

Lease end date is July 31st.  Landlord goes to check out the unit on August 1st and there is a moving van in the driveway and they are still loading it.  On the afternoon of August 2nd, the tenants give the keys to the landlord and tell him they were out the evening of August 1st.  Even though they said they were out on the 1st, the 2nd is the date of surrender because that is when the landlord reasonably learned of them being out.

 

Now… to make things interesting, let’s tweak the first example, which was Lease end date is July 31st.  On July 25th, tenant physically gives the landlord the keys and tells the landlord that they have vacated.  But, let us change one detail.  Let’s say that the last month’s rent wasn’t paid.  And because July rent wasn’t paid, the landlord properly delivered a 5-Day notice.  Because a valid 5-Day notice was in play, instead of the July 31st surrender date from the first example, July 25th becomes the surrender date.  Why?  Because of the eviction exception.  If in the process of an eviction, surrender is when the writ is executed unless the landlord learned of the tenant vacating prior to that.  Issuing a 5 Day Notice, ending the tenant’s tenancy (or right to be there) effectively starts an eviction action.

 

So… now we know when the 21-Day clock starts.  Or do we?  Does it start the day of surrender, or the day after?  It starts the day after.  If July 31st is the date of surrender, when counting days, day #1 would be August 1st (and day #21 would be August 21st).  If the tenant did give a letter to the landlord when returning the keys on July 25th, day one would be July 26th, and that simple letter would move the landlord’s deadline up to August 15th.

 

And, are those 21 days the deadline for when the deposit needs to be back in the tenant’s hands?  No.  If the deposit is postmarked by the 21st day, the landlord has complied with the law.

 

What if the tenant didn’t leave a forwarding address?  Then the landlord mails the deposit to the tenant’s last known address.  The landlord does not need to research to try to figure out where the tenant went to.  If the tenant, for whatever reason didn’t give the landlord their new address, all the landlord has to do is mail it to the last known address.  Maybe the deposit will be forwarded and the tenant will get it a week or two later.  As long as the post mark met the deadline, the landlord was in compliance.  Maybe the tenant didn’t leave a forwarding address at all and the deposit was returned as undeliverable to the landlord.  My advice is for the landlord to leave that deposit check in the envelope, leave it unopened, and file it in the tenant’s file.  That way if months later they come back claiming they never got it, the landlord can prove they met their deadline.

 

The landlord has to return the deposit in full.  However, they are allowed by law, and often by the lease contract, to withhold certain items from the deposit.  If any amounts at all are withheld from the deposit, an itemized statement needs to be included that lists specifically each item withheld.  (No statement is needed when the deposit is being returned in full.)

 

There are two instances of when double damages take effect.  First, missing the 21 day deadline completely.  Second, making the 21 day deadline, but taking withholdings out of the deposit that were improper or not allowed by law.  In both cases, not only does the law allow for double damages paid to the tenant, it also allows for court costs and reasonable attorney fees to be paid as well.  (And, I have seen cases where those attorney fees will dwarf the amount of the actual deposit.)  For more information on how this works, you can google Pierce v. Norwick, 202Wis.2d 588 (1996), which is the court case most often used as a precedent on security deposit return issues.

 

In the case of the 21 day deadline being missed, the tenant is entitled to double the entire deposit.  If there were legitimate expenses that should have been withheld, the landlord can counter-sue for those items.

 

In the case that the deadline was met but there was improper withholding, then the tenant is allowed to pursue double damages of only those amounts that were wrongfully withheld.

 

Again, let’s see how this works with an example.  To keep the math easy for me, we will say there is a $500 security deposit and two items were withheld.  One was a $100 unpaid water bill.  The other was a $100 charge for “routine” carpet cleaning.  So, mailed to the tenant was a check for $300 and a statement that itemizes these two charges.

 

What if the landlord missed the 21-Day deadline?  For example, the tenant gave the proper written notice on July 25th, but the landlord got the deposit out on August 20th (missing the deadline by 5 days).  In that case, the tenant (if they pursued it in court), would be entitled to double the entire deposit, or $1,000.  The landlord would have the right to counter-sue for the water bill, but not the carpet cleaning because it is not allowed to come out of a deposit.  The net result in this example would be $900 for the tenant.  (So, the landlord would end up owing the check the tenant received, plus $600 more.)

 

If the landlord did make the 21 day deadline, because the carpet cleaning is not an allowed deduction in Wisconsin if it is for cleaning “routine” in nature, the tenant can sue for that $100 that was wrongfully withheld, doubling it to $200.

 

So, same example… miss the deadline costs $900, make the deadline costs $200.  However, in both cases if the tenant had an attorney, figure in another grand or so in legal fees.  A $100 carpet cleaning deduction could easily turn into a $2,000 judgment once you pay the tenant’s attorney.

 

A common trap is when the last month’s rent isn’t paid.  The tenant tells the landlord to use the deposit as last month’s rent, and the landlord obliges.  No statement is mailed because of this “agreement.”  If it was a $500 deposit and $500 in unpaid rent, and the landlord sent a statement saying the deposit was not returned because it was applied toward rent within 21 days, all would be well in the landlord’s world.  However, if they never sent any statement, the tenant could sue the landlord for double the deposit.  Although the landlord could counter-sue for the unpaid rent, in the end, the landlord would be out the rent AND owe the tenant money once the smoke cleared.

 

Hopefully that clears up how the 21 day rule and double damages work, at least here in theBadgerState.

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About drrent

Wausau, Wisconsin Landlord, past president of the Wisconsin Apartment Association, Host of the Dr Rent Radio Show on WNRB-LP, 93.3 FM, Wausau, WI
This entry was posted in ATCP 134, Carpet Cleaning, Double Damages, Legal Fees, Security Deposit and tagged , , , . Bookmark the permalink.

5 Responses to A Summary of How Security Deposits work in Wisconsin

  1. John says:

    Is there any information that you know of that could help me proceed when a 21-day notice is NOT filed? I am in the middle of contesting a double damage claim with some prior tenants and I have been looking for more information of the 21-day notice. I have read Pierce v. Norwick, but they sent the notice. Any help would be great.

  2. John says:

    As a follow up to my comment, I am interested in if I need to counter sue for the full double damages award, or if my damages and their security deposit are leveled then after all is said and done the double damages are awarded.

    • drrent says:

      John,

      I am not 100% sure of what your situation is as you describe it, I will help the best I can but anything I say here IS NOT LEGAL ADVICE, you are always encouraged to contact a lawyer with legal questions.

      If you are a tenant and the landlord did not either return your deposit or an itemized statement within 21 days of surrender, you would be entitled to double damages, plus reasonable attorneys fees. (Keep in mind, that if you did not give the landlord a forwarding address and they sent it to your old address, they are in compliance. Also, keep in mind if you vacated before the end of your lease, “surrender” didn’t happen until the end of the lease unless you followed certain procedures to cause surrender to happen earlier – this is why legal advice from a real attorney is always strongly advised.)

      If you did legitimately owe the landlord money, if you sued the landlord for double the deposit back, they could counter sue for the damages owed. If they missed the 21 day deadline, you double the deposit, THEN deduct the damages. If they made the 21 day deadline but withheld for something they shouldn’t have, only the amount wrongfully withheld can be doubled.

      If the landlord says you owe them money and are taking you to court, you would need to file a counter claim to get money back from the double damages. If the double damages would only reduce the amount you owe (for example, you owe $2,000 and there was a $600 deposit. If they sent you a statement on time, you would owe $1,400, but if they miss the deadline, you double the deposit and you would only owe $800), that I BELIEVE would just need to be brought up as a defense.

      Again, I cannot stress enough the value of proper legal advice from an attorney.

  3. Travis says:

    Can the landlord refuse to use your deposit as last month’s rent? I am currently in a “He said, she said” situation in which the landlord claims that he refused to use my deposit towards rent, then proceeded to rack up supposed damages. Any help would be appreciated.

    • drrent says:

      As a general concept, the Security Deposit cannot be used for the last month’s rent. The purpose of the deposit is to cover any potential unpaid rent, damages, and utility bills that may remain unpaid after the end of a rental agreement. Many standard leases specify that the deposit cannot be used in lieu of the last month’s rent.

      Unless there is a WRITTEN agreement, if the last month’s rent is not paid, the landlord has no legal oblication to apply the deposit to that rent before the end of the lease agreement, so therefore if there are any late fees in the lease for rent non-payment, those late fees would apply. The landlord also has the right to issue a 5-Day or 14-Day notice as applicable for non-payment of rent for that final month. After the rental agreement ends, the landlord then can apply the security deposit to cover unpaid rents, as well as damages, utilities and any other charges allowed by law or the rental agreement.

      However, even if the security deposit is completely used up by that unpaid rent, the landlord must still send you written notice 21 days from when the rental agreement ended itemizing the charges applied against your lease.

      (By the way, if the landlord did issue a 5-Day notice because the last month’s rent wasn’t paid, WI SS 704.27 would allow them to collect double rents for part of that last month depending on when you actually vacated the property, however these double rents cannot be taken out of the deposit in most cases).

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