No records of security deposits  

A landlord bought a rental property currently occupied by a tenant. The previous landlord stated a security deposit was never paid and therefore was not reflected on the closing statement. The lease will soon expire, and the tenant stated they paid a security deposit and can provide proof of the deposit and the lease. What is the best way to proceed given these details? 

In the event there is a tenant occupying a property, Wis. Stat. § 704.09 states a buyer takes title subject to tenant rights. The sale of a property does not terminate a lease or rental agreement. When a buyer writes an offer on a currently rented property, the buyer purchases the property subject to the lease or rental agreement terms. The new owner will “step into the seller’s shoes” and must honor the current tenant’s rights, including the return of the security deposit.

The licensee should refer the current landlord/owner to legal counsel regarding the security deposit and any misrepresentation claim. Legal counsel can review the claim the previous owner misrepresented the fact the tenant paid a security deposit and did not transfer the security deposit to the current owner at closing per the standard terms of the WB-11 Residential Offer to Purchase. 

Security deposit refund  

The landlord refunded security deposits when three tenants vacated the rental property. The landlord cut three checks so each roommate received an equal third portion of the security deposit. One former tenant is upset with this arrangement, claiming she paid the entire deposit and should receive the entire refund. Is there a violation of statute or administrative rules?

Previously, Wis. Admin. Code § ATCP 134.06(2)(d) stated that “If a landlord returns a security deposit in the form of a check, draft or money order, the landlord shall make the check, draft or money order payable to all tenants who are parties to the rental agreement, unless the tenants designate a payee in writing.” Making the check out to all tenants was required unless the tenants provided other disbursement directions in writing.

Given the rule has been repealed, there is not a specific statutory or Wisconsin Administrative Code rule addressing the return of the deposit. Prudent practice would be to have a written authorization from the tenants as to the return of the deposit or maintain the former practice of making the check payable to all the tenants.

Unless the landlord has received written instructions from all tenants regarding how and to whom the landlord should return the security deposit, the landlord need only issue one check payable to all tenants for the total remaining balance of the security deposit. The tenants then are responsible for gathering the necessary signatures to endorse the check and deciding how the money should be divided. This method protects the landlord from getting caught in a tenant dispute and provides an easy mechanism for promptly disbursing the security deposit. 

See the April 2009 Legal Update, “Wisconsin Rentals,” and Legal Update 03.07, “Residential Rental Primer."

Tenant items discovered post-closing  

A transaction recently closed. Per the offer to purchase, the seller was to issue a 28-day notice to terminate the tenant’s month-to-month tenancy, and the closing was subject to the tenant vacating the premises. The buyer elected to skip a final walk-though. After closing, the buyer took pictures of items, which appeared to be the tenant’s personal property, in the home and garage. The buyer sent the photos to the buyer’s agent. What are the next steps in this situation?

The value of the pre-closing walk-through is to assure the seller has cleared the property of debris, refuse and personal property, and to confirm there has been no significant change to the property except for agreed upon repairs and ordinary wear and tear.

The Occupancy provisions in the WB-11 offers state:

Occupancy of the entire Property shall be given to Buyer at time of closing unless otherwise provided in this Offer at lines xxx-xxx or in an addendum attached per line xxx, or lines xxx-xxx if the Property is leased. At time of Buyer’s occupancy, Property shall be in broom swept condition and free of all debris, refuse, and personal property except for personal property belonging to current tenants, or sold to Buyer or left with Buyer’s consent. Occupancy shall be given subject to tenant’s rights, if any.

If personal property items owned by the seller are conveyed as a part of the real estate transaction, a bill of sale may be used to convey the ownership interest in the personal property. The bill of sale presumes there was consideration negotiated for the sale of the personal property. If there is no bill of sale, the buyer may not unilaterally assume the personal property was conveyed to the buyer.  

The fact the real property has been sold to the buyer does not convey the ownership of the personal property to the buyer. Considering the terms of the offer included terminating the tenancy of the tenant, the first question is whether the seller had the right to dispose of the tenant’s property at the end of the tenancy. If the landlord included the disposal of personal property left behind notice in the rental agreement, the seller/landlord may remove the property or dispose of the personal property in any manner the landlord in its sole discretion determines is appropriate. A practical approach would be to contact the former tenant and request the tenant return to the property to remove their property. 

Tenant property disposal: old vs. new rules   

A landlord had a written lease with a tenant several years ago, and the lease became a month-to-month tenancy. Given how long ago the lease was entered into, it never included language about the landlord’s disposal of personal property left behind by the tenant. Do the old rules for handling personal property, which indicate the landlord must store the property for a time and give the tenant notice before disposing of it, apply to the landlord? 

Personal property disposal

The statutes regarding the disposal of the personal property items left in the property, Wis. Stat. § 704.05(5), received updates in 2014. The new rules provide that landlords may presume the property left behind by a tenant is abandoned and may dispose of it in any manner the landlord believes to be appropriate if and only if the landlord first has provided written notice to the tenant. Notice must be given in the original lease, rental agreement or a renewal and must indicate that the landlord will not store any personal property the tenant leaves behind when the tenant vacates or is evicted from the premises.

The new provisions for disposal of tenant property left behind when the tenant is evicted or vacates a property do not apply to pre-existing leases, rental agreements or tenancies — only to those eviction actions filed on or after March 1, 2014, and only if the proper written notice was given to the tenant at the inception or upon renewal of the lease or rental agreement.

Old rules

To avoid personal property storage issues, the landlord may attempt to contact the tenant to remove the remaining personal property from the unit. If the lease predated the new personal property disposition rules and there was no language allowing the landlord to presume personal property left behind is abandoned and will not be stored, the old rules will apply.

The old Wis. Stat. § 704.05(5) provides that if a tenant vacates and leaves personal property, the landlord may store it on or off the premises. The landlord will have a lien on the property for the actual and reasonable costs of such removal and storage; or, if stored by the landlord, for the actual and reasonable value of storage. The landlord’s lien is superior to any security interest of a creditor of the tenant. The following procedures must be followed:

• The landlord must give notice of the storage to the tenant within 10 days after the storage charges commence. Notice may be given personally or by U.S. mail to the tenant’s last known address
• The notice shall state the daily storage charges and may not include any costs of damages to the premises or present or future rent
• The landlord must give notice of the landlord’s intent to dispose of the property. If the tenant or a secured party fails to redeem the property within 30 days following such notice, the landlord may sell the property by public or private sale or other appropriate means. Notice may be given personally or by U.S. mail to the tenant’s last known address.
• The landlord must hold the proceeds of sale, minus costs of sale and storage charges, for 60 days after the sale. If the net proceeds are not claimed within that time, the landlord must send them to the Wisconsin Department of Administration for use in homeless assistance programs.

For more information about disposal of abandoned personal property, see “The New Landlord/Tenant Law: Dispelling the Ugly Rumors” in the February 2014 Wisconsin Real Estate Magazine.