Generally, a security deposit is relevant when landlords and tenants are entering a lease agreement. Both landlords and tenants should know Wisconsin’s security deposit law that governs the landlord-tenant relationship. The state’s security deposit law lends specific protections to both landlords and tenants.
Quick Facts for Wisconsin
- Maximum Amount: No limit
- Duration for Return: 21 days after end of lease
- Other Return Requirements: Itemized list of any damages
The Purpose of a Security Deposit
Security deposits serve as a safety net for landlords should they suffer financial losses caused by the tenant doing damage to the rental property, or a breach of the lease agreement, or unpaid rent.
Security Deposit Maximum in Wisconsin
The state of Wisconsin has no established maximum amount that a landlord can charge a tenant for a security deposit.
Rental Agreement Before Accepting Security Deposit
A landlord must present a prospective tenant with the rental agreements and rules and regulations established, if in writing, for their inspection before a rental agreement is entered into, and before any security deposit is accepted. The tenant should receive a copy at the time of agreement (ATCP 134.03 (1)).
Written Receipt of Deposit
After receiving the tenant’s security deposit, the landlord must promptly provide the tenant or prospective tenant with a written receipt for the deposit, stating the nature of the deposit and the amount. Unless requested by the tenant, a receipt is not required in the instant where payment is made by check describing the purpose for which it was given (ATCP 134.03 (2)(a).
Requirements Before Accepting Deposit
Before entering into a rental agreement or accepting security deposits from a prospective tenant, the landlord must disclose to the tenant (ATCP 134.04(2)(a)(b)) (ATCP 134.04(3)):
- Any building code or housing code violation that affects the rental unit, presents a significant threat to the prospective tenant’s health or safety, the landlord had actual knowledge of, or violation that has not been corrected
- Conditions affecting habitability that the landlord knows or could know through a reasonable inspection, such as a lack of hot or cold running water, unsafe heating facilities, lack of electricity, or structural conditions in the dwelling unit that pose substantial hazard to the health or safety of the tenant
- Utility charges, even those not included in the rent
A landlord is required to notify the tenant in writing before he/she accepts a security deposit, or converts an earnest money deposit to a security deposit that he/she may do any of the following by a specified deadline date, but only 7 days after the start of tenancy (ATCP 134.06(1)(a)(b):
- Inspect the dwelling unit and notify the landlord of any preexisting damages.
- Request a list of the physical damages or defects, if any, charged to the previous tenant’s security deposit. A landlord can require that a tenant make the request in writing whether or not those damages have been repaired. The landlord must provide the list within 30 days after the landlord receives the request, or within 7 days after the landlord notifies the previous tenant of the security deposit deductions, whichever occurs later.
Returning the Security Deposit
Wisconsin landlords must follow certain procedures when returning a tenant’s security deposit (704.28(4)(a)(b)(c):
- A landlord must return a tenant’s full amount of security deposit, minus any portion that may be withheld and within 21 days after any of the following:
- The tenant vacates the premises on the termination date of the rental agreement
- The tenant vacates the premises or is evicted before the termination date of the rental agreement, or, if the landlord rerents the premises before the tenant’s rental agreement terminates, the date the new tenant’s tenancy begins
- The landlord learns that the tenant has vacated the premises or has been removed from the premises under s. 799.45 (2).
Accounting for Deductions
- If a landlord intends on withholding any portion of a tenant’s security deposit, he/she must deliver or mail to the tenant a written statement accounting for all amounts withheld within the required 21-day time period. The statement should describe each item that’s damaged or other claim made against the security deposit, and the amount withheld for each item or claim (ATCP 134.06(4)(a)).
- A landlord should not intentionally misrepresent or falsify any claim against a tenant’s security deposit, such as the cost of repairs, or withhold any portion of a security deposit for a claim that is intentionally falsified (ATCP 134.06(4)(b)).
- Tenant Fails to Provide a Forwarding Address: A landlord who follows the required return procedure is not in violation simply because the postal service has been unable to complete mail delivery of the security deposit and accounting to the tenant. A failure to deliver to the tenant doesn’t affect any other rights that a tenant may have under law when it comes to a landlord returning his/her security deposit (ATCP 134.06(5)).
Landlords can keep all, or a portion of a tenant’s security deposit to cover the following deductions (WI 704.28(1)(a)- 704.28(1)(f)):
- Damage, waste, or neglect of the premises.
- Unpaid rent
- Payment owed under the rental agreement for utility service provided by the landlord but not included in the rent
- Payment owed for direct utility service provided by a government-owned utility, to the extent that the landlord becomes liable for the tenant’s nonpayment
- Unpaid monthly municipal permit fees assessed against the tenant by a local unit of government under s. 66.0435 (3), that the landlord becomes liable for paying
- Any other payment for a reason provided in a nonstandard rental provision document
A landlord is not authorized to withhold any amount from a security deposit for normal wear and tear, or for other damages or losses for which the tenant cannot reasonably be held responsible under applicable law (WI 704.28(3))
Nonstandard Rental Provisions
Any nonstandard rental provisions must be provided to the tenant in a separate written document entitled “NONSTANDARD RENTAL PROVISIONS.” The landlord must specifically identify each nonstandard rental provision with the tenant before the tenant enters into a rental agreement. If the tenant signs his or her name, or writes his or her initials, by a nonstandard rental provision, it’s proof that the landlord acknowledges the provisions and that the tenant has agreed to it (WI 704.28(2)).
Last Month’s Rent
A security deposit is not intended to be used to cover a tenant’s last month’s rent, but the provision can be established in the rental agreement.
How to Get a Full Refund of Security Deposit
At the end of the tenancy, a full security deposit can be returned to the tenant if there is no damage to the rental property, rent is paid in full, all charges in the rental agreement are covered.
Security Deposits and Tax Filing
What happens to the deposit at the end of the tenancy determines how it is treated for tax purposes.
- Accounting for Security Deposits: Security deposits are treated as either assets or liabilities when filing taxes. Tenants shouldn’t deduct security deposits as expenses and landlords shouldn’t declare them as income when in escrow intended to be returned to the tenant.
- Security Deposit Write-off: If a landlord withholds part or all of the security deposit for losses, that amount should be included as income when filing taxes. Forfeited deposits should be declared as income.
“Normal Wear and Tear” vs. Damage
- “Normal wear and tear” is deterioration that occurs as a result of everyday use of the rental unit, and without negligence, carelessness, accident, or misuse or abuse by the tenant.
- “Damage” refers to destruction to the rental unit that occurs because of abuse or negligence by a tenant during the course of the tenancy and can affect usefulness, value, normal function of the rental unit.
Property Change Ownership
If a rental property changes ownership, a Wisconsin landlord must do one of two things:
- 1. Transfer the tenant’s security deposit to the new owner and notify the tenants in writing of the transfer and of the new owner’s name and address
- 2. Return the deposits to the tenants directly and notify the new owner that the security deposit has been returned to the tenants.
Tips for Wisconsin Landlords on the Right Practices for Security Deposits
- Charge tenants a security deposit amount that is appropriate in the absence of a statutory limit
- Provide tenants with an itemized list of deductions and the cost of each
- Return security deposits within 21 days after tenant vacates the premises on the termination date of the rental agreement, or after the tenant vacates the premises or is evicted before the termination date of the rental agreement, or, if the landlord rerents the premises before the tenant’s rental agreement terminates, the date the new tenant’s tenancy begins, or the landlord learns that the tenant has vacated the premises or has been removed from the premises
- Withhold security deposits for damage, waste, or neglect of the premises, unpaid rent, unpaid utility, unpaid monthly municipal permit fees, or any other payment for a reason provided in a nonstandard rental provision document
- Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant
It’s beneficial for both landlords and tenants to know and understand Wisconsin’s security deposit law. Landlords are required to remain in compliance with the state’s security deposit law. Tenants have a duty to adhere to their lease obligations, and in so doing, can get a refund of their security deposit at the end of their lease term. Wisconsin security deposit statutes can be found in Wisconsin Statute § 704.28 and Wisconsin Administrative Code 134.06.