Security deposits, unpaid utilities and broken leases
Automatic Renewals
Q. A lease has an automatic renewal provision whereby the tenant must give a 60-day notice if the tenant does not wish to renew. What happens if the tenant does not give the non-renewal notice? What happens if the tenant does not leave?
A. An automatic renewal provision is not enforceable against the tenant unless the landlord gives the tenant written notice pointing out the automatic renewal provision in a residential lease. Wis. Stat.§ 704.15 requires that the landlord give this notice to the tenant at least 15 days, but not more than 30 days, prior to the tenant’s deadline for giving a non-renewal notice to the landlord.
If the landlord gives the § 704.15 notice and the tenant does not give the non-renewal notice, the lease would apparently be renewed as specified in the lease. If the tenant gives the non-renewal notice, then the lease would end at the stated expiration date. If the landlord does not give the § 704.15 notice, then the lease again would end at the stated expiration date.
If a tenant remains in possession of the premises after the end of the lease term, the landlord may begin eviction action, enter into a new lease, or accept rent from the tenant, thereby creating a month-to-month tenancy per Wis. Stat. § 704.25.
Breaking the Lease
Q. The tenant’s lease goes through the end of August. The tenant gave notice in the middle of March indicating that he is moving out on or before May 15. The tenant is requesting that the security deposit be mailed to him at his new address. Is he allowed to break the lease?
A. Unless the tenant and landlord agree to early termination of the lease, the tenant may not break the lease without legal consequences. The tenant remains liable for the rent due on the balance of the lease term, subject to the landlord’s duty to mitigate as described in Wis. Stat. § 704.29. Rent that is currently due or past due may be withheld from the security deposit.
The return of security deposits is regulated by Wis. Admin. Code § ATCP 134.06. A detailed statement of claims must be given with a return of any security deposit balance owed within 21 days after the tenant “surrenders the premises,” as defined in the rule. Failure to comply is a violation of Wis. Stats. § 100.20(5), which allows the recovery of double damages, costs, and attorney fees. See Legal Update 03.07, online at www.wra.org/LU0307, for further discussion of security deposit rules.
In cases where the amount withheld from the security deposit does not cover the landlord’s actual damages, the landlord may choose to proceed with a small claims action against the tenant for remaining damages. The landlord may not sue for future rent, that is, rent that is not yet due.
Tenant Buying a House
Q. A real estate broker is working with a buyer who has a one-year lease. The buyer/tenant gave the landlord a 60-day notice to vacate. The buyer feels that he should be able to get out of the lease because he is purchasing a home. Is that correct?
A. There is no state law allowing a buyer to terminate a lease to buy a home. However, the lease agreement between landlord and tenant could have been negotiated to allow for such a termination. The broker should advise the buyer to consult with an attorney, as real estate licensees cannot provide legal advice.
Utilities Not Paid
Q. The tenant is not paying the utilities that are part of the tenancy. He has acknowledged that he needs to pay them, but he has not and continues to refuse to do so. Does the landlord have the right to give the tenant a five-day notice to pay those bills or vacate?
A. The tenant is a month-to-month tenant so there is no written lease agreement. The terms of the tenancy are based upon a verbal agreement and any other indications of the parties’ agreement. Without a written rental agreement, there is always the risk of a disagreement and the tenant might deny that he has acknowledged that he must pay the utilities as part of his tenancy.
Wis. Stat. § 704.17(1)(b) provides that if a month-to-month tenant commits a breach other than not paying rent, the landlord may terminate the tenancy by giving the tenant at least 14 days’ notice to vacate the premises. This notice terminates the tenancy and the landlord may commence eviction proceedings in small claims court if the tenant does not move out.
§ ATCP 134.04(3) provides that the landlord must disclose to the tenant before entering into a rental agreement or accepting any security deposit or earnest money if the charges for water, heat or electricity are not included in the rent. If this was not done, the tenant might be able to file a complaint with the Department of Agriculture, Trade and Consumer Protection.
Vacation Home Rentals
Q. If you open a vacation home rental service, must you have a real estate license?
A. Negotiation of lease terms, advertising and promotion of rental units, or entry into a lease by the rental agent are acts of real estate brokerage, and therefore require licensure. However, rental agents who merely show residential rental property, accept applications and provide information to prospective tenants are not regarded as within the definition of “broker.”
If a real estate license is required, then there must be an agency agreement with the property owners. See the discussion of the WB-37 rental listing and the WRA Property Management Agreement in Legal Update 01.02, online at www.wra.org/LU0102. Before providing brokerage services, the property owners should check the local ordinances to make sure that rentals are permitted under local zoning. Certain vacation rental businesses may also need to determine whether any lodging licenses may be required, for example, if they are deemed to be rooming houses or bed and breakfast establishments. For more information regarding lodging licensing, visit dhfs.wisconsin.gov/fsrl/index.htm.
Timing the Return of the Security Deposit
Q. The tenant gave a 30-day notice but moved out sooner. When does the 21-day window to return the security deposit begin?
A. The security deposit or a statement of claims shall be mailed or delivered within 21 days after the surrender of the premises.
§ ATCP 135.06(2)(b) provides that a tenant surrenders the premises on the last day of tenancy provided under the rental agreement, except that:
- If the tenant vacates before the last day of the tenancy and gives the landlord written notice that the tenant has vacated, surrender occurs when the landlord receives the written notice. If the tenant mails the notice to the landlord, the landlord is deemed to have received the notice on the second day after mailing.
- If the tenant vacates the premises after the last day of the tenancy, surrender occurs when the landlord learns that the tenant has vacated.
- If the tenant is evicted, surrender occurs when a writ of restitution is executed, or the landlord learns that the tenant has vacated, whichever occurs first.
Failure to comply with the security deposit rules may lead to penalties of double the amount of the deposit plus attorney fees.