Security Deposits and Abandoned Property: Post-Tenancy Considerations

November 9, 2022 | Business | Landlord

A common call into our office is one from a residential landlord wondering what to do in the following scenario: a tenant moved out at the end of their lease, but they left a lot of property behind, and the landlord is wondering what their options are.

Security Deposit

The magic number to remember for security deposits is 21. A landlord must return any amount of the security deposit not withheld, plus an accounting for any withholdings from the security deposit, within 21 days. When that 21-day time period begins depends on how the tenancy comes to an end. Under ATCP 134.06, if the tenant leaves the dwelling on the day the lease ends, the 21 days start on the last day of the lease. If the tenant is evicted or abandons the dwelling prior to the final day of the lease, then the last day of the lease is the start of the 21 days unless the landlord re-rents the unit to someone else prior to the last day of the evicted tenant’s lease. If that occurs, then the first day of the new tenant’s lease is the start of the 21 days. If the tenant does not leave the dwelling (or is not evicted) until after the lease expires, then the 21-day time period starts on the day the landlord learns that the tenant has vacated or has been removed from the dwelling. The accounting and/or deposit must be delivered or mailed to the tenant’s last known address, even if the address is the actual rental property. Put differently, a landlord should not fail to mail an accounting or a security deposit because the tenant did not leave a forwarding address.

Also found in ATCP 134.06, a landlord can only withhold certain things from the security deposit.  Under this administrative code provision, landlords can withhold amounts reasonably necessary to pay for damage/waste/neglect of the dwelling caused by the tenant (to the extent it exceeds regular wear and tear), unpaid rent (subject the landlord’s duty to mitigate), and unpaid utilities and municipal permit fees that the landlord would be responsible for. Beyond that, landlords who want to retain security deposits for other damages, losses, or debts caused by the tenant must plan ahead and include these items in a separate written document entitled “NONSTANDARD RENTAL PROVISIONS”. In order to withhold from the security deposit for any term in a Nonstandard Rental Provision list, the landlord must specifically identify the term to the tenant prior to entering the lease.

Landlords should pay heed to their obligations with security deposits. Violations of ATCP 134 are punishable under §100.20 of the Wisconsin Statutes. Violations of §100.20 can lead to double damages, fee shifting, and even misdemeanor criminal penalties. This means that failing to return the security deposit when retention is not justified, or failure to send an accounting within 21 days, could result in a lawsuit where the landlord ends up paying back double the security deposit, as well as paying the tenant’s attorney fees.

In particularly egregious cases, a landlord could be staring down jailtime. In State v. Lasecki, 2020 WI App 36, 392 Wis. 2d 807, 946 N.W.2d 137, the Outagamie County District Attorney brought criminal charges against a landlord for failing to return a security deposit or accounting. Lasecki was convicted and brought an appeal arguing that a criminal court did not have jurisdiction, and the code/statutory scheme authorizing criminal punishment for improper security deposit retention was unconstitutionally vague. The Court of Appeals upheld the potential for criminal liability in such cases.

Property

The other substantial concern at the end of a tenancy is what a landlord can or should do with any property remaining. The Wisconsin Statutes state that if a tenant leaves personal property behind, the landlord may presume it to be abandoned and may dispose of it in any manner they see fit if their lease specifically states that the landlord will not store property left behind. (Wis. Stat. §704.05(5)). A major caveat to this is medical items. If the tenant leaves behind prescription medication or prescription medical equipment, the landlord must hold those items for 7 days from the date the landlord discovers them. Moreover, the landlord must promptly return the medical items to the tenant if requested before the landlord disposes of them. After 7 days, the landlord can dispose of the medical items in any appropriate manner.

The procedure for getting rid of property left behind is much more convoluted if the lease agreement does not specify that property will not be stored. The current Wis. Stat §704.05 actually incorporates the 2009 version of §704.05. Under this older version, a landlord cannot simply or immediately dispose of any property left behind. Instead, landlords must store the property and give the former tenant notice (personally or by mail to the tenant’s last known address) of the landlord’s intent to dispose of the property if not repossessed. If the tenant fails to repossess the property after 30 days from the date the notice is delivered, the landlord can then dispose of the property by any appropriate means. If the landlord chooses to sell the property, it must make the proceeds of the sale available for the tenant, but after 60 days the landlord must send the proceeds to the Department of Administration.

The landlord can charge the tenant for removal and storage if they send written notice to the tenant of the existence and daily rate of the charge. However, the notice must be sent within 10 days after the charges begin. For example, if the landlord begins storing the property on September 1, but does not send the notice of storage charge until September 15, the landlord can only charge for storage starting September 5. However, if the landlord properly gives notice, they cannot only charge for the storage but actually have a lien on the property stored. They cannot, however, factor the cost of damages to the unit or unpaid rent into the storage cost; purely the cost or value of the removal and storage of the property.

This is another area that carries with it potentially serious pitfalls for a landlord who does not adhere to statutory responsibilities. If a landlord mistakenly throws out or sells property they were obliged to save, they could end up paying for it in a significant way. A tenant could sue for conversion, civil theft or damage to property, or potentially shoehorn the violation into a landlord’s obligations under ATCP 134. Any such claim could carry with it a penalty beyond the actual value of the items, such as double damages or attorney fees.

For questions regarding security deposits, storage of abandoned property or other landlord related issues, contact Kramer, Elkins & Watt, LLC at info@kewlaw.com or 608-709-7115.