Senate Bill 107 Eliminates Some Municipal Ordinance Risk for Landlords

November 28, 2011

A bill passed by both houses of the Wisconsin legislature, and likely to soon be signed into law by the Governor, will have an impact on how residential landlords and their tenants in the State of Wisconsin conduct business. These changes are perhaps most significant for landlords and tenants within the City of Madison, Wisconsin.

Senate Bill 107 (SB 107) would create a new section of the Wisconsin Statutes that prohibits cities, villages, towns, or counties from enacting ordinances that place certain limits on landlords. These limits include any ordinance that prohibits or places limitations on landlords from obtaining or using information on tenants or prospective tenants that relates to one of the following categories:

  1. monthly household income
  2. occupation
  3. rental history
  4. credit information
  5. publicly accessible court records (including arrest and conviction records)
  6. social security number or other proof of identity

In addition, SB 107 will not permit municipalities to limit how far back in time a tenant’s credit information, conviction record, or previous housing may be considered by a landlord. These provisions strike directly at restrictions currently in force under Dane County Ordinances and Madison General Ordinances (MGO) which create restrictions with respect to use of minimum income requirements and access to the Social Security Numbers of prospective tenants. SB 107, if signed into law, would also not permit municipalities to limit how far back in time a tenant’s credit information, conviction record, or previous housing may be considered by the landlord.

Other provisions of SB 107 prohibit limits on a landlord’s ability to show and lease a property. If the bill is enacted, a landlord will be permitted to enter into a rental agreement with a prospective tenant, at any time, even if the rental unit is currently leased to another tenant. In addition, the landlord will not be prohibited from showing the rental unit to a prospective tenant during the current tenant’s rental period. The MGO currently has an artificial cooling-off period, where landlords are not permitted to show rental units, until a quarter of the lease period has passed. Under SB 107, this provision would be unenforceable and landlords would have more time to market rental units.

Under SB 107, a landlord may not be subject to additional requirements regarding security deposits, earnest money, or pre- or post-tenancy inspections beyond the requirements that are already found in the administrative rules. This provision would eliminate the serious consequences that a Madison landlord currently may face if he or she fails to follow proper use of check-in and check-out forms. It would further likely render unenforceable requirements in the MGO that evidence of damages deducted from a security deposit be supported by photographic evidence (though this remains a good practice to preserve evidence of damage). In addition, landlords would no longer be required to pay interest on security deposits, regardless of the amount of the deposit, nor would they be restricted as to the amount of the security deposit they may require. The MGO currently limits the amount of the security deposit a landlord could require to no more than one months’ rent. If SB 107 is signed into law, there should be no regulatory reason to limit the amount of a security deposit.

Currently, nearly any failure to comply with the MGO administrative requirements regarding security deposits results in the inability of the landlord to lawfully retain any portion of the deposit, even if the Landlord otherwise has meritorious claims to the deposit for damage or unpaid rent. Moreover, the landlord may be subject to consequences similar to those outlined in Wisconsin Administrative Code Chapter ATCP 134 (“ATCP 134”), including being potentially liable for double damages, reasonable attorney’s fees, and court costs. The key language used in SB 107 is “no city…may enact an ordinance that places requirements on a residential landlord with respect to security deposits”. This means that any provision that goes beyond the Administrative Code requirements and the Wisconsin Statutes would be potentially unenforceable, including the entirety of the MGO provisions relating to security deposits. There may be some argument and litigation as to how far the phrase “requirements…with respect to security deposits” is intended to apply.

State-wide, landlords remain subject to the rules and regulations found in Wisconsin Statutes Chapter 704, ATCP 134 , as well as local rules not affected by the proposed SB 107 (for example, the City of Madison restricts the amount of late fees that may be charged by a landlord). These rules do provide substantial protections for tenants that would not otherwise be available under the common law (including attorney fee shifting provisions). For example, under ATCP 134, landlords are still required to provide a statement of claims describing damages in reasonable detail within 21 days after the tenant vacates a rental unit if the Landlord seeks to deduct amounts from the security deposit. Any remaining portion of the security deposit must be returned to the tenant within 21 days. Landlords should take steps to comply with these and the other provisions of ATCP 134. A violation of ATCP 134 allows a plaintiff to potentially recover twice his or her damages, plus court costs and reasonable attorney fees.

SB 107 is not yet law as of the date this article is first released. If SB 107 goes into effect, any ordinance that conflicts with its provisions will not apply and will be unenforceable.