In the land of the small-time landlord, a broken lease is a difficult thing. The small-time guys are the ones who rent out a room in their home (so they can afford a mortgage); the ones who work full-time jobs besides landlording, so they can build equity for retirement; the ones who accidentally become managers of a deceased parents' home they aren't able to sell. This post is for the small time landlords out there.
There's a cost to being a landlord, right? You know that you need to do the repairs to make the place livable, and that's expensive. Taking the time out of your regular job to show the place to prospective tenants, that's expensive, too. Sometimes it turns out that a tenant is unable to pay rent, and that's a process, to figure out if there's a way forward or not. But what about those times when a tenant, after a finally-successful-but-wearying application process, moves in and realizes that for some reason, this isn't going to work? What about when the tenant breaks their lease?
This is one of our top small-time landlord questions. "What do I do when my tenants break their lease?" Here is the basic answer:
- If tenants break a lease, it means that they are moving out before their legal (lease) obligation is over. Sometimes it's because they bought a house, they got laid off or transferred... there are many reasons this might occur. When talking to tenants, we encourage them to write a letter to the landlord, state the date that they will be moving, and then have all their possessions removed by that date. Though a letter is helpful, it isn't required, and in fact, no notice is required to break a lease.
- Once the tenants move out, the landlord needs to take steps to re-rent the apartment. These steps are the normal steps the landlord takes when renting an apartment. The landlord does not need to rent the now-vacant apartment before other units that might be available to rent, but it does have to be offered to prospective tenants, in the way that rentals are normally available to prospective renters.
- The landlord can charge tenants for lease obligations they didn't fulfill. Some examples of legal charges are: rent for the time that the unit was vacant, utilities for the bare minimum to keep the home safe, and other monetary obligations made clear in the lease. The landlord cannot charge for: time spent re-renting the apartment (it's assumed to be the normal cost of doing business), rent for time in which the landlord did repairs (when the outgoing tenants didn't cause the need for those repairs), rent for time in which the landlord was not making the unit available to prospective renters.
So, what exactly is "Mitigation?" It's part of the above process where the landlord is required to make a broken-lease-unit available for re-rental. Mitigation is when a landlord lessens the amount of money that a tenant owes (mitigation technically means "reducing the severity"), by taking normal/reasonable steps to allow another prospective tenant to rent the property under similar lease terms.
Here are the laws that make us think these things:
Wis. Stat. 704.29 is the law that defines mitigation, and the steps that the landlord must take. Some highlights include:
- "In any claim against a tenant for rent and damages, or for either, the amount of recovery is reduced by the net rent obtainable by reasonable efforts to rerent the premises" from Wis. Stat. 704.29(2)(b).
- "'reasonable efforts' mean those steps that the landlord would have taken to rent the premises if they had been vacated in due course, provided that those steps are in accordance with local rental practice for similar properties" from Wis. Stat. 704.29(2)(a)
- "Mitigation expenses that may be recovered are limited to necessary expenses incurred and do not include compensation for time spent in mitigating damages" from the notes at the end of Wis. Stat. 704.29.
ATCP 134.08 lists practices which landlords are not allowed to do. The mitigation-oriented highlight:
- "No rental agreement may... purport to waive the landlord's obligation to mitigate damages as provided under s. 704.29, Stats" from ATCP 134.08(3). In other words, landlords are required to mitigate when a lease is broken - there is no legal alternative.
But what about subletting? Some landlords don't allow a tenant to break the lease, but instead insist on subletting. Based on our reading of the laws, we do not believe this is legal, that it in fact is in conflict with ATCP 134.08(3) and Wis. Stat. 704.44(3m). It seems like saying that a tenant's only option (when they are hoping to break their lease and get the landlord to re-rent the property) is to sublet does indeed "purport to waive the landlord's obligation to mitigate damages." Wis. Stat. 704.44(3m), 2011 Wis. Act 143, Section 28. More on this here and here.
And what about eviction? If you, as a landlord, evict your tenant, then you need to take these same steps to lessen the total money owed. You need to make the apartment available to be re-rented, in the same way as if the lease had been broken. Only instead of broken, it would be more like forcibly moved because of a judge's order. And instead of a bill to the tenant at the end, you'd probably be explaining the total in a Rent & Damages hearing. But the basics are the same, and mitigation laws apply to evictions, as well. (Don't know that much about evictions? THERE'S SO MUCH MORE TO IT THAN THIS PARAGRAPH. You can learn more over here, but your best bet is a seminar sometime in the future. If you want the real goods.)
* Hi! Did you know that we are not attorneys here at the TRC? And this isn't legal advice, either. If what we've written here doesn't sound right to you, talk about it with someone you trust. For help finding an attorney, check out our attorney referral list.