Comparing Commercial and Residential Leases

Comparing Commercial and Residential Leases

Most individuals must navigate a residential lease at some point in their lives – typically for an apartment to live in before potentially purchasing a home later in life. In contrast, the majority of people will never need to negotiate or enter into a commercial lease – used for renting space to run a business. For those who do, it is important to understand the differences between the types of leases to avoid inadvertently making a bad deal. On the other hand, a business owner who has become familiar with commercial leases and then decides to invest in and rent out residential property should bear in mind the special rules for residential leases to avoid a costly mistake.

All states have some differences between laws governing residential and commercial leases based on the public policy position. While commercial tenants are presumed to be savvy parties operating a business and capable of negotiating and bargaining on an even playing field with their landlord, the average residential renter is unsophisticated and vulnerable to being taken advantage of by better positioned landlords. After all, renters tend to be younger and in a worse position financially than someone who needs to rent a space to operate their privately owned business. A commercial tenant is viewed as another equal player in the economic marketplace who is capable of, and therefore responsible for, the consequences of any contract they choose to enter into.

Wisconsin state law (primarily Wisconsin Statute Chapter 704) is a set of general rules that apply to all leases but that can be altered by contract (i.e. the lease), and then special rules for leases creating residential tenancies. Residential tenancy is further governed by state regulatory code (ATCP Chapter 134) providing more specific rules for residential landlords to follow. The list below highlights some of the major rules applying to residential leases in Wisconsin:

  • Requirement to provide a check-in sheet at the start of a lease which the tenant can make notes of any conditions existing on the premises (Wis. Stat. 704.08).
  • Requirement that leases must contain specific language notifying tenants of certain rights of domestic abuse victims (Wis. Stat. 704.14).
  • Required special notice procedures to remind tenants of deadlines related to automatic lease renewals (Wis. Stat. 704.15).
  • Minimum habitability standards that are generally waivable for commercial leases but required in residential leases (Wis. Stat. 704.07).
  • Certain provisions, when included in residential leases, make the lease void and unenforceable (Wis. Stat. 704.44). The ten provisions listed act as a sort of “guard rail” on the terms of residential leases keeping certain one-sided terms from being imposed on any renters in the state. The prohibition on such terms are not universal, and it is important to review any form leases obtained that are not Wisconsin specific for inclusion of these terms.
  • Strict rules on the receipt of, accounting for, and return of security deposits. (ATCP 134.06).
  • The requirement to highlight and separate out certain terms as “NONSTANDARD” making them easier for tenants to see (ATCP 134, throughout).

In addition to these special rules contained in the Wisconsin state statutes and regulations, certain municipalities also have local ordinances imposing additional requirements. It is important to review any local laws that may provide further restrictions on residential leases.

For Example: Outside of strictly defined differences in legal rights and requirements, residential and commercial leases tend to vary in other ways. The following are typical differences:

  • Commercial leases are generally longer. Typical residential leases are either month-to-month or annual. Such short terms are certainly possible for commercial leases, but three to five years with options to review for longer is more standard. Generally, commercial tenants will want short terms with many options to review, while commercial landlords will want the opposite.
  • Commercial leases more commonly involve the tenant making significant alterations to the property. It is rare for residential tenants to take out walls, install new equipment, etc., but commercial leases often allow tenants to modify the space to suit their business needs. The responsibility for and ownership of these changes should be defined in the lease.
  • Commercial leases tend to have the tenant take on more responsibility for maintaining the property and paying ancillary costs, like property taxes. A common subset of commercial lease is the “triple-net” lease, where, in addition to rent, the commercial tenant pays all of the property taxes, insurance and maintenance costs. Residential tenants pay rent and often pay the cost of utilities, but rarely are asked to directly pay for property taxes, maintenance or insurance costs.

For renters entering into a commercial lease for the first time, understanding the protections they may have benefited from without knowing about it in the course of their residential tenancies is important to fully review and potentially negotiate their commercial leases, where such protections do not apply. No one should ever sign a contract, like a lease, without carefully reading it first. Commercial tenants are exposed to the possibility of terms so burdensome the legislature banned them in the residential setting and thus need to review the lease carefully. For first-time landlords of residential properties, keeping these special rules in mind may be helpful in avoiding a costly mistake. Terms they may have grown accustomed to as “typical” in the commercial setting cannot just be inserted into a residential lease without first ensuring compliance with applicable laws.

In conclusion, whether you are entering into a commercial or residential lease for the first time you should be aware of the laws and rules in your state and local municipality. Please contact one of our experienced real estate attorneys if you have questions.

 

Large Claims v. Small Claims In Civil Lawsuits

Large Claims v. Small Claims In Civil Lawsuits

Most people have heard of small claims court and large claims court, but how do the differences between these two impact the claim that you may have?  Generally speaking, large claims civil lawsuits involve civil claims where the damages are more than $10,000.00, or more than $5,000.00 for a tort claim (such as personal injury or property damage). If you have a claim such as a breach of contract, business dispute, real estate dispute, employment dispute where the damages sought exceed $10,000.00, then this claim must be filed in large claims court. If someone has a personal injury claim such as tort claim and property damage claim in which damages exceed $5,000.00, those claims also must be filed in large claims court.

The process in large claims cases is more involved and more expensive than in small claims court. The filing fee in a large claims is several hundred dollars just to start the case. The litigants must draft their own legal documents to file and to serve in the case (there are no standard court forms for starting a large claims action). In addition litigants in large claims cases must abide by a scheduling order imposed by the court. A large claims case usually involves a lengthy process where parties are required to name witnesses, engage in written discovery and depositions by certain times; there are deadlines for filing motions; the parties are typically ordered to attend a mediation to see if they can settle their dispute. Then, after all of the above are completed, the parties may finally have their chance for a trial in front of a jury or a judge. Because of this more complex procedure involved in large claims cases, most litigants typically retain attorneys to assist in representing them throughout this process. It can take at least 18 months or more from the start of the lawsuit until a trial finally takes place in large claims court.

By contrast, a small claims case can be handled much more quickly and efficiently, and many people handle these cases by themselves in order to save on costs. Small claims court, however, may be used only for certain types of cases, such as the following:

  • Claim for money damages where the amounts do not exceed $10,000.00
  • Claim for property damage or personal injury (tort actions) if the damages sought are less than $5,000.00
  • Eviction actions, regardless of the amount of rent claimed
  • Repossessions of property (replevins) when it is a:
  • – Non consumer credit action or the value of the property does not exceed $10,000.00
    – Consumer credit transaction (personal property that was the subject of a lease or credit from a dealer) where the financed amount is $25,000.00 or less.

  • Evictions due to foreclosure
  • Return of earnest money for purchase of real property, regardless of the amount
  • Actions on an arbitration award for the purchase of real property, regardless of the amount.

Even if someone files a claim in small claims court where the damages exceed $10,000.00, the small claims court cannot award any more than $10,000.00 maximum, plus costs.

Unlike large claims cases, there are sample forms that individuals can fill out to initiate a small claims action. The filing fee is also much less than a large claims case. One of the most significant distinctions between large and small claims court is how fast the case goes through the court system. The entire case can be filed and tried to the Court in only a few months in some instances in small claims court, as opposed to a couple of years in large claims court.

It is important for individuals to be aware of the differences when selecting which court to file in. Seeking the advice of an attorney can be helpful in making this assessment as well as assisting with navigating the legal process.

What Are The Rules For Emotional Support Animals When Renting?

What Are The Rules For Emotional Support Animals When Renting?

What are the rules for landlords and tenants when it comes to emotional support animals?

For landlords there are important rules to follow to avoid running afoul with Wisconsin and Federal Discrimination laws.

An Emotional Support Animal (ESA) is defined in Wis. Stat. §106.50 as “an animal that provides emotional support, well-being, comfort, or companionship for an individual but that is not trained to perform tasks for the benefit of an individual with a disability.” That means that an ESA does not need any specific training in order to qualify under this statute.

In general ESAs are protected and landlords cannot discriminate against tenants with ESAs and must provide reasonable accommodations for owners of ESAs during the application process, when deciding on fees or in an eviction. The ESA must be necessary to afford the tenant the equal opportunity to use the dwelling and there needs to be a connection between the disability of the tenant and the accommodation the ESA provides.

Landlords can request the tenant seeking the accommodation to submit “reliable documentation” from a licensed health professional that shows (1) the tenant has a disability and (2) the related need for the ESA. If the disability and the need for the ESA are readily apparent or already known by the landlord, the landlord should not require the tenant to provide this documentation because that could be considered harassment.

Landlords can follow-up with the listed licensed health professional to ensure the professional is real and licensed. The health professional will not be able to discuss the tenant’s health with the landlord without violating HIPPA. However, it is likely that if the tenant supplies the landlord with a letter, the health professional will be willing to acknowledge they wrote a letter for the client. This should give the landlord comfort in knowing that the tenant is likely not lying.

If the tenant can provide the necessary paperwork, landlords cannot refuse housing, impose fines, evict or harass the tenant as a result of the ESA and must provide reasonable accommodations. The most common accommodations are (1) allowing the tenant to live with an ESA where the landlord normally has a no-pets policy or (2) waiving any pet deposit or other pet related fee.

From the legal perspective, ESAs are not “pets” and are closer to medical devices that the tenant needs in order to have an equal opportunity to enjoy the housing. This is an important distinction and can help landlords justify letting one tenant have an ESA but not allowing another tenant to have a pet.

Even though the tenant cannot be forced to pay a deposit or fee for having the ESA in the dwelling, the tenant is still liable “for sanitation with respect to, and damage to the premises caused by the [ESA].” This means that a landlord does not need to take on any extra liability when it comes to the ESA. Upon termination of the lease, the landlord should check for any sanitation issues with or damage to the property, because those are things that the tenant is responsible for and for which the tenant cannot receive accommodations.

Update On Private Roads, Joint Driveways and Easements Article

Update On Private Roads, Joint Driveways and Easements Article

This article was written in November 2018, now there are some important updates to share.

Many properties in Wisconsin have some form of shared access. It can be as simple as a portion of the driveway crossing the neighbor’s property to more complicated scenarios where an access road crosses multiple properties and provides access to numerous lots. Sometimes a “private road” may have been created when the land was subdivided.

As statutory and zoning requirements have become more sophisticated (and developers more aware), it is now more common to see properly-drafted legal documents describing road access rights and obligations at the time new lots are created. However, this is certainly not always the case. In addition, there are many joint driveways, access roads, and private roads that were created when the statutory and zoning requirements were not as stringent.

Where neighbors are friendly and know each other well, informal arrangements regarding shared access often work for years without problems. Of course, if an owner dies or moves away, the dynamics may change. However, even where the parties continue to get along, the lack of a formal arrangement may become an issue if an owner desires to obtain a mortgage on their land. Most banks that offer long-term, fixed-rate financing sell their mortgages in the secondary market. This is true even if the bank continues to service the mortgage. For the bank to be able to sell mortgages, they must comply with certain requirements. Those requirements can differ depending on whether the bank uses organizations created by Congress to buy mortgages such as Fannie Mae and Freddie Mac, or some other source to access the secondary mortgage market.

Why does all this financial mumbo-jumbo matter for shared access? Fannie Mae requires a legally enforceable agreement or covenant for the maintenance of any privately owned and maintained street that addresses: (i) responsibility for payment, (ii) default remedies if someone does not comply with his or her obligations, and (iii) an effective term of the agreement, which often is perpetual and binding on future owners. Without a recorded agreement, the bank will not provide financing. UPDATE unless there are default statutory provisions that provide basic rules regarding maintenance and repair of private roads.  Wisconsin Act 99, passed in 2021, created Wisconsin Statute Section 710.20 that now satisfies this requirement!  That new statutory provision provides, with certain exceptions, that “the beneficial users of a private road or driveway shall contribute to the reasonable and necessary costs of maintenance and repair of the private road or driveway”.  According to that statute, if there is no written agreement, “the beneficial users shall contribute to an equitable share based on the amount and intensity of each beneficial user’s actual use in proportion to the amount and intensity of all beneficial users’ actual use.”

While the new statutory provisions help fill a void for Fannie Mae purposes, having a well-drafted agreement in place can also provide owners with peace of mind that their property can be transferred or sold as part of their estate without undue complications.  A properly drafted agreement may also help minimize disputes between neighbors.  If you own a property with shared access or are thinking about buying a property with shared access, call one of our real estate attorneys to find out what you can do to protect yourself and your investment.

Please click here for the 2018 Article

Is It Time to Revise Severance Agreements and Employee Handbooks?

Is It Time to Revise Severance Agreements and Employee Handbooks?

The National Labor Relations Board (“NLRB”) returned to a longstanding precedent recently by holding that employers violate the National Labor Relations Act if they offer employees severance agreements that require employees to broadly waive their rights under the Act. This holding means that employers who use severance agreements should review them to make sure that the usual provisions that broadly require non-disparagement (the employee will not say anything negative about the employer, their products, etc.) and confidentiality are not overly broad. Employers should review their employee handbooks to check for similar overbreadth.

The severance agreement at issue in the case of McClaren Macomb contained overly broad non-disparagement and confidentiality clauses that the Board said tended to interfere with, restrain or coerce employees’ exercise of the Section 7 rights. Under Section 7, non-managerial and non-supervisor employees have the right to engage in concerted activity for mutual aid or protection. The Board held that non-disclosure provisions that contain a non-disparagement clause that advised the employees that they are prohibited from making statements that could disparage or harm the image of the employer and their officers, directors, employees, agents and representatives are unlawful. In addition, the confidentiality clause at issue advised employees that they are prohibited from disclosing the terms of the agreement to anyone except for a spouse or professional advisor, unless compelled by law to do so.

The ruling means that although severance agreements are not banned, they may need to be modified. Employers who use severance agreements should consider revising them to narrow the scope of non-disparagement and confidentiality provisions so that they pass muster under the Act. The general counsel for the NLRB has recently written that confidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be lawful. However, confidentiality clauses that have a chilling effect that precludes employees from assisting others about workplace issues or from communicating with the NLRB, a union, legal forums, the media or other third parties are likely unlawful.

In Conclusion, What should the astute employer do in light of the most recent NLRB ruling? It is not necessary to abandon severance agreements altogether. Rather, an employer should review their severance agreement forms and employee handbooks to make sure that the provisions relating to confidentiality and non-disparagement are consistent with the new rulings of the NLRB.

Please contact one of our experienced employment attorneys for additional assistance in reviewing your policies.

Is Joint Representation a Good Idea?

Is Joint Representation a Good Idea?

It is common for a group of people to want one attorney to represent them all in a legal matter. Whether it is a married couple looking for estate planning representation or if it is two people who own a property together and are both looking to evict a tenant or sell the property.

Attorneys can be expensive, so from an economic standpoint, it can be financially beneficial to have one attorney rather than paying two or more attorneys to work with you.

This may seem like a great idea, but for an attorney, it may cause some tricky ethical problems. Attorneys are inclined to zealously advocate for their clients. This can be difficult when there is more than one client involved. If the individuals that are being represented by one attorney, do not agree on the right way forward there can be issues. The individuals may even decide they want different things throughout the process.

In this scenario, you can expect the attorney to request to be allowed to withdraw as counsel because the attorney will not be able to take any action when it is against what one of the clients wants. If client “A” wants to dismiss the case, but client “B” wants to keep going, the attorney will not be able to do either action without going against one of their wishes and will need to withdraw.

Another issue for people considering joint representation is that the attorney-client privilege applies to the group of clients. That means if there is anything client “A” is trying to keep secret from the client “B”, the Attorney will be allowed to tell client “B.” Moreover, the attorney likely has to tell client “B” in order to protect client “B’s” interest in the matter.

If you are considering having one attorney represent you and another person or other people, be sure you have thought about what happens if you all disagree. You may save money if things go as planned. But, you may still have to hire a separate attorney to represent you, if complications arise between you and the other clients.

If you find yourself in this situation, please contact one of our experienced attorneys.