They’re more common than you might think.
Becoming a landlord can appear quite attractive to the outside eye. You may envision additional spending money, mortgages and expenses being paid by rental income, and all the while the property’s equity will continue to grow.
Of course, landlords also carries a lot of responsibilities and certain obligations to tenants, such as adhering to both state and federal laws. For example, most landlords know that they cannot discriminate against someone based on that person’s race, color, gender, national origin, familial status, or disability. There are other laws that landlords need to know; otherwise, they could unknowingly find themselves in hot water.
Here are 5 common legal pitfalls that could get landlords in trouble:
1. Unlawfully Evicting a Tenant
As much as you may want to one day impulsively take back your keys, you can only evict a tenant with through a proper court order. A court order may be order based on non-payment of rent or for violating a provision in the lease agreement such as damaging the property or engaging in illegal activity. If you take self-eviction measures to force your tenant out such as by changing the locks or shutting off utilities, you are violating the law. Further, you cannot take steps to evict a tenant in retaliation if he or she made a claim against you regarding the condition of the premises or for exercising any other rights afforded tenants. If you wish to evict a tenant, you should engage an attorney to make sure the eviction is handled properly, or you could find yourself facing potential liability.
2. Mishandling the Security Deposit
Thinking about using that security deposit to update the light fixtures in the living room with a more modern flair? Think again. Security deposits ensure that you will have sufficient funds to repair the leased premises if the tenant damaged the property. Wisconsin law provides for specific items that can be deducted from a security deposit, such as tenant damage, waste, or neglect. Other items can only be withheld if they are identified as Nonstandard Rental Provisions in a separate written document that complies with statutory requirements (as discussed under Paragraph 5 below). Under no circumstances can you use the funds for normal wear and tear. For example, routine painting would be normal wear and tear, while painting needed to fix damage caused by a tenant (e.g. crayons, smoke damage, etc.) would be damages.
Also, if you plan on retaining any portion of the deposit for repairs, you have 21-days to send the tenant a written, itemized statement detailing the damages and the costs. If you do not, the tenant may bring a claim against you in small claims court and recover the entire security deposit, court costs, and possibly punitive damages for bad faith or willful failure to return the funds.
3. Failing to Mitigate Damages if a Tenant Leaves Early
If your tenant abandons the premises or simply leaves early before the lease term is up and does not pay the rent due, you cannot simply sit back and then sue the tenant for unpaid rent for the remainder of their lease term. You have a legal obligation to use “reasonable efforts” to find another suitable tenant. This includes advertising and using any other normal procedures to find a tenant. This does not mean you have to rent to anyone who applies, but if suitable prospective tenants are willing, then your failure to rent to them can result in the court denying you damages against your last tenant.
4. Giving Improper Notice to Vacate
Before you can kick a tenant to the curb, you will have to give the tenant proper notice. Proper notice is essential and is determined based on the terms of your lease and certain statutory requirements. If you are contemplating giving notice, the situation should be reviewed on a case-by-case basis with an attorney, which includes a full review of the lease, as the terms of the lease may provide tenants with greater protections than the Wisconsin statute if not properly drafted.
Generally, under Wisconsin law, a year-to-year lease can be terminated at the end of the term. Landlords must give at least 28 days’ notice except in the following cases: If rent is payable on a basis less than monthly, notice at least equal to the rent-paying period is sufficient; all agricultural tenancies from year-to-year require at least 90 days’ notice. Other notice provisions apply for nonpayment of rent or violation of a lease provision.
The notice must also comply with certain formalities, such as how notice is given and what is included in the notice. For example, notice must be in writing, formal or informal, and substantially inform the other party of the landlord-tenant relation of the intent to terminate the tenancy and the date of termination. If notice is given for nonpayment or violation of a lease provision, Wisconsin law requires the notice to include additional provisions.
5. Including Nonstandard Rental Provisions
Landlords can include certain nonstandard rental provisions in your lease provided these are clearly stated and the tenant signs or initials every single one of these provisions. Nonstandard Rental Provisions may address many issues, such as: rental payment, NSF checks, waterbeds, cleaning, damages, security deposit withholdings, entry into unit, guests, leaving premises unoccupied for extended period of time, abandoned property, snow removal, lawn maintenance, storage of campers or boats, or other issues that concern you or apply to your property. Careful drafting of these provisions can help avoid a lot of issues that can come up and can ensure that there are clear expectations from tenants from the beginning.
There are certain tenants’ rights that may not be waived in your lease agreement. The inclusion of an “illegal” provision can result in your entire lease being thrown out. For example, a rental agreement may be void if it, among other things:
- Authorizes eviction without following judicial eviction procedures required by law;
- Waives the landlord’s obligation to mitigate damages;
- Requires tenant to pay attorney fees or costs incurred by the landlord in any legal action or dispute arising under the lease;
- States that the landlord is not liable for property damage or personal injury caused by landlord’s negligence;
- Waives any statutory or other legal obligation of the landlord to deliver habitable premises;
- Allows the landlord to terminate the tenancy of a tenant based solely on the commission of a crime in or on the rental property if the tenant, or someone who lawfully resides with the tenant, is a victim, of that crime;
- Allows the landlord to terminate the tenancy of a tenant for a crime committed in relation to the rental property and the rental agreement does not include the specific notice required under Wisconsin law.
This is Just a Start
Your lease should be reviewed carefully to ensure it does not contain one of these or other types of provisions, that would make a lease void. Everything you do as a landlord should adhere to the Fair Housing Act. Before you begin leasing your property, talk to a landlord/tenant attorney about your rights and obligations as a landlord and what may or may not be included in your lease agreement. This can save you considerable time and expense and increase your chances of having suitable and satisfied tenants. If you’re interested in learning more, read our post Landlords Beware about other types of vulnerabilities to consider as a rental property owner.