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For the latest update on the Koble Case, <a href="https://www.michaelbest.com/insights/real-estate-reversal-wisconsin-supreme-court-overturns-koble-case-on-residential-leasing/">see our most recent Client Alert</a>.

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As the adage goes, “the devil is in the details” and Wisconsin landlords may now face a day of reckoning following the recent ruling from the District III Wisconsin Court of Appeals in Koble Investments v. Marquardt, 2024 WI App. 26 (“Koble”) if their leases violate the “Ten Commandments of Wisconsin Residential Leases” proscribed by the Wisconsin Legislature under Wis. Stat. § 704.44. Koble illustrates the detrimental impact a few sentences (or lack thereof) in a residential lease may have on a landlord. In Koble, the landlord’s simple misstep of omitting the “Notice of Domestic Abuse Protections” required by Wis. Stat. § 704.14 invalidated its lease with a tenant and enabled the tenant to recover from the landlord twice the amount of rent the tenant paid under the lease, plus other damages, all on the heels of the landlord’s attempt to evict the tenant.

Although the landlord in Koble petitioned the Wisconsin Supreme Court to review the decision, Koble is now effective law in Wisconsin and should provoke all residential landlords to closely review their leases in order to mitigate a court’s ability to render them void and unenforceable. Consequently, Koble may lead to an influx of litigation and significant monetary losses for residential landlords statewide.

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In Koble, after landlord’s filing of an eviction action against a tenant for non-payment of rent, the tenant asserted multiple counterclaims against the landlord, including violation of Wis. Stat. § 704.44(10) and Wis. Admin. Code ATCP § 134.08(10). The court ultimately ruled in favor of tenant, finding the lease void and unenforceable and ordering landlord to repay tenant twice the amount of rent paid under the lease plus reasonable attorneys’ fees pursuant to Wis. Stat. § 100.20(5).

Notably, Wis. Stat. § 704.44 sets out ten different lease provisions (i.e., the “Ten Commandments of Wisconsin Residential Leases”) that, if present in a residential lease, render the lease void and unenforceable. Specifically, under Wis. Stat. § 704.44(10) as well as Wis. Admin. Code ATCP § 134.08(10), a lease is void and unenforceable if the lease allows a landlord to terminate the lease for a crime in relation to the rental property where the lease does not also include the Notice of Domestic Abuse Protection language required by Wis. Stat. § 704.14.

The court in Koble (the “Court”) ruled that because the lease: (1) failed to include the Notice of Domestic Abuse Protection language; and (2) expressly prohibited the tenant from making or knowingly permitting “use of the premises for an unlawful purpose,” the lease was void and unenforceable under Wis. Stat. § 704.44(10) and Wis. Admin. Code ATCP § 134.08(10). The Court reasoned that if the tenant used, or allowed another party to use the rental property for an unlawful purpose, such action would constitute a crime as well as breach of the lease, and allowed the landlord to terminate the lease after its giving of proper notice and opportunity to cure. As the Court stated, “while not every unlawful act is a crime, every crime is unlawful.” Accordingly, the lease fell within the orbit of Wis. Stat. § 704.44(10) because it also did not correspondingly include the Notice of Domestic Abuse Protection language required by Wis. Stat. § 704.14, thus enabling the Court to render the lease void and unenforceable. (See Koble, ¶ 39).

The landlord argued that the lease did not automatically authorize termination of the lease (or eviction) based on the commission of a crime because the tenant maintained the right to cure the breach. However, the Court rejected this argument, emphasizing that the right to cure is an unworkable failsafe because it is unclear how a tenant could possibly cure a breach involving a previously performed unlawful act. In other words, the completion of an act that constitutes a crime cannot be undone. The Court further highlighted that the tenant’s right to cure is also inadequate relative to the construct of the statute because even if the tenant somehow cured the breach, the lease otherwise allows a landlord to later terminate the tenancy if another similar breach occurred within the following twelve months, and the lease otherwise did not provide tenant with a second cure right. Ultimately, the court heavily focused on the fact that landlord’s right to terminate the lease upon tenant’s use of the premises for an unlawful purpose was not accompanied by the required Notice of Domestic Abuse Protection language.

It is imperative that Wisconsin residential landlords engage in efforts to proactively reduce risk that a court could render its leases void and unenforceable, especially when this result also requires the landlord to repay the tenant twice the amount of rent paid under the lease, plus other damages.

If you are a residential landlord with rental properties in Wisconsin, contact Michael Best to have your leases reviewed for compliance with Wisconsin law in order to avoid disastrous results like the landlord in Koble.

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