Landlord Lag Time in Wisconsin

Landlord Lag Time in Wisconsin

The benefit to renting over owning is avoiding unexpected repair costs, in contrast, it can mean having to wait for the landlord to make repairs. Who is responsible for making repairs and how long a landlord can take to make a repair depends on the issue. While a landlord is required to “promptly” make repairs for issues that affect the habitability of a living space, Wisconsin law does not provide a set amount of time in which a landlord must make repairs.

Of course, it is best if you never have to deal with a leaky faucet or a glitchy thermostat. If you tour a space and find things in need of maintenance or repair, you should make note of any problems and request that the landlord fix them. Any promises made by the landlord to a prospective tenant regarding cleaning, repairing, or improving the unit should be made in writing and specify a date or time-period in which the fixes are to be completed. Apart from being legally binding, having a set date for the fixes can create a sense of urgency for the landlord and peace of mind for the tenant.

A Landlord’s Responsibilities

It can be difficult to spot defects in a unit before living in it. Fortunately, landlords do have a responsibility to disclose to tenants any documented or uncorrected building code violations that pose a threat to a tenant’s health or safety if the landlord is aware of them. This requirement of disclosure only covers the following habitability conditions:

  • If the unit lacks hot or cold running water;
  • If the heating system is not in safe operating condition or is incapable of maintaining at least 67 degrees in living areas;
  • If the unit is not served by electricity or components of the electrical system are not in safe operating condition;
  • If there are structural or other conditions on the premises that could pose a substantial health or safety hazard; and
  • If the plumbing or sewage disposal facilities are not in good operating condition.

All of the above listed systems (heating, plumbing, electrical, and structure) are within the landlord’s sphere of responsibility. Additionally, the landlord must maintain common areas like hallways and laundry rooms in good condition. While a tenant is usually responsible for unreasonable damages the tenant themselves caused, a landlord still has a duty to innocent tenants in these situations to maintain the common areas. A landlord must also provide and maintain carbon monoxide and smoke detectors.

A Tenant’s Responsibilities

As mentioned above, a tenant is responsible for repairing or paying for the repair of damages caused by the themselves or their guests. To prevent damages to the unit, the tenant must keep the thermostat set at a reasonable temperature that will prevent freezing of pipes and keep the unit in a safe and sanitary condition. Part of keeping the unit in sanitary conditions includes maintaining a level of cleanliness that prevents infestations. If pest infestations are caused by the actions or inactions of the tenant, the tenant may have the duty to remediate the problem or pay for the remediation and repairs.

A tenant is also responsible for minor repairs to keep the unit in good working order, like changing lightbulbs or replacing batteries in smoke detectors.

A Timeline for Repairs

Repair or replacement of a non-working smoke detector, with batteries, is one of the few fixes that the law places timeline on. When a landlord is given notice of a faulty smoke detector, they have five days to fix it. Landlords are not given a set amount of time to fix other defects.

Remedies for Tenants

  • Wisconsin Statutes do provide some remedy to tenants if the landlord does not promptly make repairs to defects that affect habitability of a unit. A tenant may break their lease and move out if a unit becomes untenantable. A unit is untenantable if the conditions that exist are so poor as to affect the tenant’s health, safety, or impose an undue hardship on the tenant. If the tenant must move out, the tenant is not responsible for the rent payments after the unit became untenantable. Even if the tenant does not move out, rent abates, meaning it is decreased by an amount proportional to the amount the tenant is deprived of the full, normal use of the premises. As a tenant, the problem with these remedies is that they may not result in the desired repair of the unit. It can also be difficult to quantify when a premises became untenantable or what dollar amount of rent abatement corresponds with an unrepaired defect.
  • It is preferable for a tenant to work with a landlord to have repairs made on a reasonable schedule. Creating a paper trail is an important step. Tenants should request repairs in writing to keep track of what the issue is and how long repairs are taking. If the landlord does not make repairs in a reasonable timeframe, the tenant may consider contacting the local building inspector or the Wisconsin Department of Safety and Professional Services.

If the landlord still refuses to make repairs, please contact one of our experienced attorneys who can help you take the right steps in pursuing remedies like rent abatement. The Tenant Resource Center may also be able to provide information or support.


Are You Ready to Build a House?

Are You Ready to Build a House?

Are you ready to finally build the new home you always dreamed of? Perhaps you are considering adding on to your existing home. Construction projects are expensive. The last thing you want to discover after the project is over is that an unsatisfied construction lien encumbers your property.

When a prime contractor performs work on your project, the contractor acquires a lien on the improvements. However, in many cases, the prime contractor contracts with subcontractors to assist with certain aspects of the project. These subcontractors will also have lien rights on your property to the extent of any of their improvements.

Being aware of these lien rights is critically important. In many cases, the prime contractor pays subcontractors directly with your construction funds, often in draws taken throughout the project. Should the subcontractors go unpaid, they will have the right to perfect their lien rights on your property. An unsatisfied lien is a burden on your property, affecting your ability to sell it and putting it in jeopardy of foreclosure.

For these reasons, you should demand lien waivers from all contractors at the close of a project. With certain exceptions, where a prime contractor retains subcontractors to work on your project, you should receive notice of the contractors’ lien rights. You should receive notice of the prime contractor’s lien rights either in the written contract with the contractor or within 10 days of the start of any work on the project. Subcontractors must give you notice of their lien rights within 60 days of the start of any work they perform on the project.

If a subcontractor has not been paid, the contractor must first provide you with written notice of the contractor’s intention to file a lien. If the lien is not satisfied within 30 days, the contractor may file a lien on your property. There are time limitations regarding when the contractor must file the lien based on the last work performed on the project. If you discover the unfortunate news that a contractor has filed a lien on your property, you should consult with an attorney to determine if the lien was properly and timely perfected. Please contact one of our experienced attorneys to guide you through this process.

Deeds, Deeds, Deeds

Deeds, Deeds, Deeds

Often when individuals purchase real estate, their understanding of the transaction is that the Seller will convey the real estate by executing and recording a deed. However, there are actually various types of deeds, each with their own set of warranties or guarantees regarding the title being conveyed. Because of the differences between the various types of deeds, it is important to understand which type of deed is being used to convey the real estate in your transaction. Three of the most common types of deeds are the following: General Warranty Deed, Special Warranty Deed, and the Quitclaim Deed

The most commonly used deed is the General Warranty Deed. This type of deed provides the Buyer with the most protection by the Seller. Under a General Warranty Deed, the Seller is warranting or guaranteeing that they have lawful title to the property, the right to convey the property, and that title is clear aside from standard exceptions, such as municipal and zoning ordinances, recorded utility and municipal services easements, building restrictions and covenants, and taxes levied in the year of closing. Since the Seller is warranting that there are no issues with the title, even dating back to prior property owners, it offers the best protection to the Buyer. If the Seller conveyed the real estate to you using a General Warranty Deed and later a defect in title is discovered, the Buyers are able to sue the Seller, as they are legally responsible for the breach of the warranty.

Another type of deed used is the Special Warranty Deed. This type of deed is similar to the General Warranty Deed, except the main difference is that it limits the timeframe of the warranties that the Seller is providing. With a General Warranty Deed the Seller is warranting there are no defects of title all the way back to previous owners of the property. However, with the Special Warranty Deed the Seller is only warranting that no title defects have occurred during their time as owners of the property. Thus, the Sellers are not warranting or guaranteeing against any defects in title that existed before they became owners of the property.

Lastly, the Quitclaim Deed is another commonly used deed. This type of deed affords the least amount of protection to the Buyer.  With a Quitclaim Deed the Seller is not warranting or guaranteeing any ownership rights in the property. Instead, the Seller is simply conveying any title or rights that they have in the property. Pursuant to the statutes, a Quitclaim deed will pass all of the interest the Seller can lawfully convey, but does not warrant or imply the existence, quantity, or quality of such interest in the property. Therefore, if a title defect is discovered after the deed has been signed and recorded, the Buyer has no recourse against the Seller.

These were just three of the types of deeds that are utilized in real estate transactions in Wisconsin. As a result of the varying levels of warranties and guarantees provided by each type of deed, it can be helpful to seek the advice of a real estate attorney before purchasing or selling a property. A real estate attorney will be able to explain the differences between the types of deeds used for the conveyance, if a particular deed type is more favorable in certain transactions, as well as what your legal recourse or responsibility is based on the type of deed used. If you have any questions about types of deeds and what type of deed to use in certain transactions, do not hesitate to reach out to one of our experienced real estate attorneys.

What is a Real Estate 1031 Excange?

What is a Real Estate 1031 Excange?

In the field of real estate, a commonly used term is a 1031 Exchange. But what exactly is that? A 1031 Exchange is aptly named after Section 1031 of the U.S. Internal Revenue Code, which permits the deferral of capital gains tax in certain real estate transactions. Capital gains taxes are owed on the profits from the sale of most investments if they are held for at least one year. Due to the possibility of deferring the tax, there are many requirements in place that must be followed in order to receive the benefit of deferring the capital gains tax.

The first requirements is that a 1031 Exchange can only be used in certain real estate transactions. A 1031 Exchange is only applicable to the sale of real property that is held for productive use in a trade, business or for investment. Furthermore, the replacement property that is purchased also has to be held for productive use in a trade, business or for investment. Therefore, a 1031 Exchange would not be allowed in real estate transactions with property that is used for personal reasons, such as your residence.

The second requirement of a 1031 Exchange is that a qualified intermediary is required to facilitate the transaction by handling the funds. As part of the regulations, you (the owner) are unable to receive or control the funds from the sale of the property in a 1031 Exchange. A qualified intermediary can be a person or a company, however, they cannot be a disqualified person as defined in the Treasury Regulations. The qualified intermediary will take possession of the funds from the sale of your property and hold those funds until they can be transferred to the seller of the replacement property you are purchasing.

The next requirement is that there are certain time periods that must be met to complete the 1031 Exchange. Firstly, you have 45 days from the sale of the property to identify a replacement property. Secondly, you need to conclude the 1031 exchange within 180 days. If you miss any of these deadlines, then the 1031 Exchange will not be complete and you will not receive the tax benefit of deferring the capital gains tax.

Although these are three important requirements of a 1031 Exchange there are still other requirements and technicalities involved with completing a 1031 Exchange. For that reason, if you are considering utilizing a 1031 Exchange it will be helpful to seek the advice of a real estate attorney before selling your property. A real estate attorney will be able to help you navigate through the requirements and technicalities of a 1031 Exchange so that you may benefit from the deferral of capital gains tax. If you have any questions about completing a 1031 Exchange, do not hesitate to reach out to one of our experienced real estate attorneys.

Real Estate Interests

Real Estate Interests

Legal interests in real estate seem simple upon first consideration – someone may own a home, and when they sell it, the buyer owns it. However, even such “simple” purchase and sale arrangements are often layered with other forms of legal interests being retained or changing hands, such as mortgage lien rights, easements, tenant rights and restrictive covenants. Holding an interest in property does not mean just one thing and even the descriptor of “ownership” fails to identify important differences among ownership types. Financial, tax and estate planning goals often are best accomplished by using forms of property transfers outside of traditional sale and purchase agreements and understanding such mechanisms is important to making efficient decisions about your real estate.

It is helpful to first present a framework for which to analyze the differences between types of interests. The classic real estate analogy to help frame the various rights and obligations of land ownership is the “bundle of sticks” thought exercise. First, imagine a bundle of sticks, where each stick represents a right or obligation regarding a particular piece of real property. One stick, for example, is the right to occupy the property, another may be the right to build or destroy structures on the property. When someone has all of the sticks, representing every conceivable right to the land, they are the “owner” in the truest sense of the word for the land associated with the sticks. However, individual sticks are often removed from the bundle and given to others – thus the rights to the property are divided among different people and entities. In fact, no individual holds all the sticks to any given bundle because certain property rights are held by the government. Some examples of this are: the right to tax, to prevent certain uses of the property through zoning and permitting requirements, and to forcibly acquire property through eminent domain. The remainder of the rights are typically divided in one of the following classifications of interest in real estate:

Fee Simple Interest. An owner in “Fee Simple” holds the most rights to real estate any individual can enjoy. They can occupy and use the property as they see fit, exclude anyone they do not want to be there, sell or rent to whomever they like, and build or tear down any structures so long as they comply with the governmental limits to such powers. Their use of the property exists currently and there is no time limit on such use.

Leasehold Interest. The first interest in real estate most people acquire is the leasehold to their first apartment. This interest is also referred to as a “Lessee” or “Tenant” interest. Lease rights vary tremendously based on the terms of the lease contract, but in general, ownership is retained by the landlord and the right to occupancy, use, and enjoyment for a set length of time is sold to the tenant for the price of rent. While the ownership of the property is retained by the Landlord, those occupancy rights are temporarily transferred away from them. This transfer of rights is what separates a “tenant” from a “guest.”  For example, despite being the “owner” of the property, Landlords generally do not have the right to sleep or live in the rented space, invite guests over or tell their tenants who is and is not allowed on the premises – these rights are retained by the Tenant for the duration of the lease.

Landlord Interest. The opposite of the leasehold interest, the Landlord, also known as the “Lessor,” retains the rights not traded for rental payments to the Tenant. This typically includes the rights to make decisions regarding the improvements on the property (although some leases allow Tenants wide discretion to remodel or even build improvements), the right to sell the property to others, or encumber it with a mortgage to finance other projects, and to have the property returned to them at the end of the lease.

Life Estate Interest. Life estate arrangements transfer the “sticks” associated with a property after the owner’s death to another party, often as a gift but sometimes as a sale, but keep the “sticks” for use during one’s life with the owner. The rights to use the property during life is called the “Life Estate Interest.” This typically involves the holder being able to live in the property rent free for the duration of their life. In theory, the “Life Estate interest” can be sold to a third party, but because it terminates on the death of the original holder (it does not reset to the lifespan of the buyer), few people are interested in purchasing such rights. Life Estate interest holders are usually required to pay the property taxes and keep the improvements in good repair to protect the value of the remainder interest holder’s rights. Granting a Life Estate is fundamentally different than naming someone in a will, as the legal ownership of the right to use the property after the grantor’s death irrevocably transfers to that individual and cannot be rescinded.

Remainder Interest. The opposite of the Life Estate Interest, the holder of the remainder interest has no current use or occupancy rights but will assume full ownership of the property when the Life Estate interest holder dies. They also have certain rights to ensure the Life Estate Interest holder keeps the taxes paid and the property in good condition, as failure to maintain the property damages their future rights. A remainder interest holder can sell their remainder interest to other parties. The value of such interests is typically determined by the life expectancy of the Life Estate interest holder.

Mortgage Liens. Banks and other financial institutions own interests in a huge number of properties in the form of mortgage liens. Individual lenders may also acquire such rights. When a bank lends you money to purchase a home, or sometimes for other reasons, they may “secure” that debt by placing a mortgage lien on the property. This grants a “conditional right,” meaning that if certain events happen, the right comes into effect. The main conditional right with a mortgage lien is the right to seize the property from the borrower if payments are not made or if the borrower attempts to transfer the property without their consent, which is frequently called the “due on sale clause.” Lenders require these liens be granted to them to ensure that they will receive their money back from the sale of the seized home in the event the borrower stops paying the loan.

Land Contract Vendor. The Vendor of a land contract makes a contract with a purchaser or “Vendee” to sell specific land in exchange for a promissory note which is paid over time. In a traditional mortgage financed transaction, the seller is fully paid at closing from the money the borrower got from the bank and transfers the full interest at that time. In a land contract however, the payments are made directly to the Vendor over a number of years, and the title is retained until it is paid in full, at which point the Vendor is required under the contract to transfer the property by deed to the Vendee. Although title remains with the Vendor until the note is paid, for most practical purposes, the use and occupancy rights to the property transfer to the Vendee upon signing the Land Contract, at least for so long as the Vendee stays current on their payments.

Land Contract Vendee. The Vendee of a land contract agrees to purchase the property from the seller, or “Vendor.” The Vendee has a right to acquire the property when they have completed the payment schedule called for in the Land Contract. They typically have broad rights to use the property while paying off the debt, but also are typically required to maintain insurance and maintenance to protect the security of the Vendor. If they fail to make the payments, the Vendor may be able to seize the property back from them, as the legal title to the ownership never changed hands.

Easements. The owner of an easement right does not own the property it pertains to, but rather has specific rights to use that property for specific purposes. The most common form of easement is for access, also known as “ingress and egress easements.” If a lot is created that has no access to a public road because it is surrounded by other lots, it is common for the owner of that lot to negotiate for the purchase of an easement on someone else’s property for the right to travel across it to get to the road. Other common easements are for hunting or recreational use. Easements are presumed to be “appurtenant” to the land, meaning future owners automatically get the rights and obligations transferred to them when they buy the property. However, some easements are “in gross” meaning an individual owns the easement right (common with hunting easements). If an easement is vital to the use of a property, buyers should carefully ensure the rights will continue after the property changes hands.

Restrictive Covenants/Deed Restrictions. Where an easement is a right of another to use someone else’s property for a specific purpose, a restrictive covenant or deed restriction is the right of another to prohibit certain uses of a property by its owner. For example, the owner of a house on a hill may decide to sell some of their land at the bottom of the hill. Because they are worried about their view being blocked if the new owner builds a tall structure, they retain for themselves the “stick in the bundle” that represents the right to build structures over a certain height. The new owners take title to the land, but never obtain the right to build any structure that would block the view. The most common type of restrictive covenants are found in property developments, where the developer, to increase the value of the land or houses they are selling, puts use restrictions on all of the lots. While the value of a single property may be decreased if it comes with rules about what the owner cannot do with it i.e., “no barking dogs on the property” and “no non-running cars in the driveway,” the value may increase significantly if all the neighboring properties also are prohibited from owning barking dogs or leaving junk cars out front as buyers get the peace of mind in knowing their neighbors cannot do these things.

Option to Purchase. An option to purchase grants the legal right, but not the obligation, to acquire a property at a set price during a window of time. If exercised by the option holder, the owner is legally required to sell them the property. The owner may still occupy and enjoy the property during the interim and the option holder has no rights to the property unless they exercise the option. Options become more valuable if the land value increases, as the right to buy a property for $100,000 that has doubled in value since the option was granted obviously is quite valuable. Option rights are typically sold to purchasers when they express interest in a property they cannot currently acquire and want to secure their right to buy it in the future.

Right of First Refusal. A right of first refusal is a contractual right to have a property offered to be sold to the holder for a set price and terms before the owner can sell to anyone else. The right holder does not own the property or have any ability to force the sale, but if the seller wishes to sell, the right holder will be guaranteed a chance to buy the property themselves. The price is sometimes set to match the offer made by another party, requiring the right holder to match the outside offer to acquire the interest. Sometimes the terms call for a formula or appraisal-based price determination instead. Rights of First Refusal are often utilized in family land transactions when the real estate is sentimental in some way. For example, if two siblings inherit their family home, one sibling may wish to purchase it from the other to live in. That sibling may agree to the sale but only on the condition that before they could sell it to someone else, they would have to first offer it back to them.

If you have any questions about these types of interest in real estate, please do not hesitate to reach out to one of our experiences real estate attorneys.

What is the Foreign Investment in Real Property Tax Act?

What is the Foreign Investment in Real Property Tax Act?

When you are buying real estate there are many different documents that need to be executed at closing. One of those documents is the FIRPTA Affidavit. Although this document is only executed by the Seller, it is still important that the Buyer understands the implications of FIRPTA in real estate transactions and the execution of the FIRPTA Affidavit.

FIRPTA is the abbreviation for the Foreign Investment in Real Property Tax Act and was created to ensure any foreign person or entity pays the necessary taxes when they sell property in the United States. This law was enacted because the U.S. Internal Revenue Service (IRS) was concerned that foreign persons would sell their real estate and then leave the country without paying the tax due on the sale. Therefore, the IRS determined the best solution was to have the Buyer be responsible for making sure the tax is collected. The reasoning for this is, the Buyer will still be in the country after the sale and they have an identifiable asset, the purchased property, that the IRS could attach a lien to if necessary.

Therefore, under FIRPTA, the Buyer of the real estate must either pay, or withhold as a tax, up to 15% of the total amount realized in the sale if the Seller is considered a foreign person. If it is determined that the Seller is a foreign person and the Buyer has not paid or withheld the tax amount, then the Buyer could be held liable by the IRS for the unpaid tax. Furthermore, if the Buyer has not paid the tax or withheld the appropriate amount, a tax lien could be placed on the property.

Considering the potential liability to the Buyer, it is important that the parties execute the appropriate documents at closing to comply with FIRPTA. If the Seller is a non-foreign person, then he or she will often execute the FIRPTA Affidavit at closing. This affidavit is a sworn statement by the Seller, under penalties of perjury, that states the Seller is a non-foreign person in accordance with FIRPTA. In the event the Seller is a foreign person, the Buyer will need to withhold the required amount in compliance with FIRPTA.

Although FIRPTA was enacted to prevent foreign Sellers from leaving the country without paying the taxes from the sale, it has resulted in an increase in potential liability for the Buyers of real estate from foreign Sellers. Therefore, it is beneficial for the Buyer to understand the implications of FIRPTA and seek the advice and assistance from a real estate attorney in real estate transactions that involve a foreign Seller.

If you have any questions on this act please contact one of our experienced real estate attorneys, they would be happy to assist you.

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