The Pitfalls of Security Deposits

Most residential landlords make the wise decision to collect a security deposit before renting an apartment to a tenant. While these deposits can be beneficial to a landlord if the tenant fails to pay rent or damages the apartment, improper handling of a security deposit can lead to harsh consequences for the landlord.

RULES FOR SECURITY DEPOSITS

Chapter 704 of the Wisconsin Statutes and Wisconsin Administrative Code Section ATCP 134 regulate the handling of security deposits. Most landlords understand that a security deposit must be returned to the tenant within 21 days of the tenant moving out of the apartment. If any money is withheld from the security deposit, the landlord must also, within that same 21 days, send the tenant a letter explaining the reason for each dollar not being returned to the tenant. If the landlord fails to return the deposit or to provide the letter explaining the deductions, the tenant can sue the landlord. If the tenant is successful, the Court can order the landlord to pay to the tenant twice the amount of the security deposit and to pay the tenant’s attorney fees.

RECENT COURT DECISION FINDS THAT CRIMINAL PENALTIES CAN BE IMPOSED AGAINST LANDLORDS FOR NOT FOLLOWING THE RULES

Recently, in State of Wisconsin v. Troy Lasecki, the Wisconsin Court of Appeals held that a landlord can also be charged with a crime for mishandling of residential tenants’ security deposits. Mr. Lasecki rented an apartment to two individuals. After the tenants moved out, they filed a complaint with the Wisconsin Department of Agriculture, Trade and Consumer Protection (“DATCP”), alleging that Mr. Lasecki withheld their security deposits without providing a written explanation as to why he was doing so.

Mr. Lasecki refused to cooperate with DATCP’s investigation, and ultimately the local district attorney filed criminal charges against him. The two charges filed, one for each tenants’ security deposit, each carried a potential penalty of a fine no less than $25 and no more than $5000 or imprisonment in the county jail for up to 1 year. Following a trial, Mr. Lasecki was convicted and ordered to repay $3140 to the tenants in restitution. He was also placed on probation for two years and ordered to spend 60 days in the county jail.

Mr. Lasecki appealed his conviction. On appeal, he argued that the prosecutor invented a crime that did not exist, by applying criminal penalties to an administrative code violation. Although the Court of Appeals reversed Mr. Lasecki’s conviction for other technical reasons, the Court did rule that a landlord can be charged with a crime for failing to return a security deposit, or for failing to provide a tenant with a written explanation of any deductions made in the security deposit.

In doing so, the Court pointed to Wisconsin Statute § 100.26(3), which indicates “any person . . . who intentionally refuses, neglects or fails to obey any regulation or order made or issued under s. 100.19 or 100.20, shall, for each offense, be fined not less than $25 nor more than $5,000, or imprisoned in the county jail for not more than one year or both.” The Court went on to point out that Wis. Admin. Code § 134 is a general order issued by DATCP and, therefore, subject to the criminal penalties provided in Wis. Stat. § 100.26(3).

DO YOU HAVE QUESTIONS OR NEED HELP?

Navigating landlord/tenant issues can be complex and fraught with significant negative consequences. The attorneys at West & Dunn have over 16 years of experience representing landlords in residential real estate matters. If you would like help from one of our experienced attorneys please feel free to contact us online.