The Wisconsin Supreme Court granted review in Maryland Arms Limited Partnership v. Connell, No. 2008AP1700 to resolve an important issue in landlord-tenant law: Can a residential lease place responsibility for damages on the tenant, even if the tenant is not negligent?

But the July 7 majority opinion fails to even address the issue.

The majority opinion concluded that the lease was ambiguous and must be construed against the landlord, even if sec. 704.07(3) does allow the transfer of responsibility to the tenant.

Nevertheless, three justices did address the issue in concurrences and dissents, and all three concluded that nothing in the statute prohibits such a transfer of liability.

Maryland Arms leased an apartment to Cari Connell in 2004. In 2006, a fire broke out in the apartment. An investigation revealed that the fire was caused by Connell’s leaving her hair dryer plugged into the electrical outlet. Damages totaled more than $8,500.

Maryland Arms brought suit, and the parties entered a stipulation agreeing that the hair dryer caused the fire, but that Connell was not negligent.

At issue was a lease provision which provided: “Lessee shall be responsible for all intentional and negligent acts or breaches of this Lease by Lessee, Lessee’s occupants, guests and invitees. Lessee shall be liable for all damage to the premises and appliances and equipment belonging thereto, in any way caused by the acts of Lessee, Lessee’s occupants, guests and invitees.”

Maryland Arms argued that Connell’s act of leaving the dryer plugged in caused the fire, and therefore, Connell was liable. Connell argued the provision violated sec. 704.07.

The circuit court held the lease was enforceable, and Connell was liable for damages.

The Court of Appeals reversed in a published opinion, concluding that both the lease and the statute require the tenant to be negligent before liability can be imposed on her. 2009 WI App 87, 320 Wis.2d 147, 769 N.W.2d 145.

The Supreme Court granted review, and affirmed, but on different grounds.

The majority opinion by Justice Ann Walsh Bradley held the lease was ambiguous.

The court asked, “In order to avoid liability, did the parties intend that the tenant should routinely unplug such things as the washer and dryer, microwave, telephone answering machine, dishwasher, alarm clock, stereo, television, DVD player, lamps, computer, modem, and electric toothbrush — as well as the hair dryer?”

Unable to answer that question from the lease’s language — “all damage ... in any way caused by the acts of Lessee...” — the court interpreted it to mean only damage caused by the tenant’s intentional or negligent acts or breaches of the lease.

The court also concluded that interpreting the second sentence of the lease provision as proposed by Maryland Arms would render the first sentence superfluous, because all negligent, intentional or improper acts would be encompassed by the term “acts” in the second sentence.

Having resolved the case on that ground, the court declined to address sec. 704.07.

Justice Annette Kingsland Ziegler wrote a concurring opinion, agreeing that the lease was ambiguous and must be interpreted against the landlord. However, she wrote separately to clarify that parties are not precluded from allocating liability to tenants for non-negligent acts.

Subsection (2) of the statute provides that the landlord is responsible for repairing fire damage that results from its negligence. Subsection (3) provides that the tenant is responsible, if premises are damaged by his negligence.

Finding the statute silent as to financial responsibility when damage results from the negligence of neither, Ziegler found it permits parties to allocate liability by contract, provided it is done clearly.

Justice David T. Prosser dissented, in an opinion joined by Justice Michael J. Gableman.

The dissenters agreed with Justice Ziegler that sec. 704.07 does not apply when neither tenant nor landlord are negligent, but also found that the lease unambiguously made the tenant responsible for any act that is a substantial factor in causing the damages.

Prosser also warned, “This decision will increase insurance premiums for landlords who will now be responsible for damages caused by factors beyond their control. Renters throughout the state will, in turn, bear this burden in the form of increased rent.”

Case analysis

The dissent and the concurrence express overblown concern with liberty of contract. The concerns are overblown for the simple reason that residential landlord-tenant law is already so heavily regulated in favor of the tenant, that there is no liberty of contract left to mourn its demise.

There are many standard forms that landlords can use, from Wisconsin Legal Blank, or from landlord groups like the Apartment Association of South Central Wisconsin, Inc., one of the amicus curiae in this case.

In fact, the amicus curiae brief from that landlord association cites to the relevant provision in the AASCW form lease: “During the lease term, as a condition of Tenant’s continuing right to use and occupy Premises, Tenant agrees and promises, unless Landlord otherwise provides in writing, as follows: ... 11. To be responsible for all acts of negligence or breaches of his agreement by Tenant and Tenant’s guests and invitees, and to be liable for any resulting property damage or injury.”

This is a good provision. The amicus brief argued that a ruling for the tenant in the case at bar would call the legality of the provision into question. But the use of the words “resulting” and “negligence” in the same sentence clearly makes it enforceable, notwithstanding any interpretation of sec. 704.07.

The brief complained, “the Court of Appeals’ decision creates uncertainty for those who use these form leases.”

In practice, however, those who use good form leases like AASCW’s have little to worry about. It is those landlords who, like Maryland Arms in this case, draft nine-page leases on their own, who have problems.

A more valid concern was raised by the amicus curiae, in that, pursuant to Baierl v. McTaggart, 2001 WI 107, 245 Wis.2d 632, 629 N.W.2d 277, one illegal provision in a lease can result in the entire agreement being void and unenforceable.

But again, this is just one more reason why residential landlords should stick to form leases. When landlords draft their own nine-page leases, adding provisions in their favor on their own, they assume the risk that an experienced landlord-tenant lawyer will find some unenforceable provision and use it to void the entire lease.

It is too late to mourn the death of liberty of contract when it comes to residential leases.

Instead, attorneys need to provide their clients with short standard leases that track the language in the statutes and the administrative code, and they need to tell those clients, as firmly or as gruffly as needed, that if they make any deviation, they should assume the deviation is unenforceable.