Is it legal to terminate lease due to depleted Security Deposit?

Question

My husband and I are considering accepting Section 8 again at a few select properties. We originally decided to no longer accept Section 8 because of damage at properties that we purchased with Section 8 tenants inherited from the previous owners.

We feel confident that once we apply our own screening criteria, we could find decent section 8 tenants, however, I am questioning, as a safe guard, if it's legal to give a tenant a notice of terminating a lease if the tenant has caused enough damage or incurred enough fees to deplete their security deposit.

For a prior experience example, our last Section 8 tenant (the "final straw" tenant) had a $650 security deposit and at one point, had the front door kicked in, breaking the door, both locks, and breaking the surrounding plaster (not due to a home invasion). We put in a new door and replaced the plaster with dry wall, just to find out later that there are now imprinted knuckle punches in the brand new door (ouch!), broken sections of the new dry wall, the garage man door was also kicked in, and the tenant also still owed a $50 late fee on rent. At the point of the repair for damages reaching the $650 security deposit limit, would it have been legal to give the tenant a 30 day notice to leave the property due to excessive damages?

If yes, take this example: What if there is an $800 security deposit, and the tenant gets enough late rent fees, or fees in other ways pertinent to the lease addendums, that they reach the $800? Granted, this is an extreme example, but if it's just from fees and not actual damages, would it still be legal (assuming the fees are legal to take from the security deposit, as stated in our current addendum)?

Any thoughts or ideas on this would be great, especially from any members in Wisconsin!

Corina Eufinger · Answer

Terminating the lease and filing an eviction for a depleted security deposit is a different issue than filing an eviction for money due. The earlier requires prior authorization from the tenant (either in a lease clause or written amendment) to apply security deposit to charges. You need their permission to do that. If you got the permission, and then didn't give the tenant "reasonable time" to pay back the security deposit you would be hard pressed to find a judge that would order an eviction.

The clearer way to do things like this is charge the tenant on their account, leave the security deposit as it is and give them X number of days to pay the charges then file eviction.

In regards to Section 8 acceptance. You are not required as a landlord to accept Section 8 assistance for rentals. The link posted above lists Wisconsin's protected classes. No where is status of eligibility for Section 8 listed. The person may be trying to make the point under the "lawful income" protected class, however case law does not recognize Section 8 as a source of income (Knapp v. Eagle Property Management Corp, 1995). In Knapp the Court decided that rental assistance is NOT to be accounted for under income like other types of assistance such as food stamps or SSI. Completely distinguishing Section 8 rental assistance as something other than an income source. Further, since it is not classified as an income source a person does not enter a protected class for having section 8. If you choose not to accept Section 8 be consistent and across the board with it because even if it's not a protected class you still have a duty as a landlord to be ethical and consistent with the enforcing of your screening criteria.

Peter M. · Answer

I am not familiar with WI section 8 laws but from a simply contractual standpoint there is no problem with something like this. How I would address this would be to bill back the tenant for damages. The lease would have a provision that says the tenant is responsible for any repairs not caused by normal wear and tear. After you do the repair, the tenant gets the bill. If he doesn't pay you should be able to evict him for breach of contract. My lease states that monies paid are first put towards outstanding fees, then rent. If they just paid the normal amount, it would not be enough to cover the rent and I have grounds to evict for non-payment of rent. Now is this feasible with Section 8 in WI? I am not sure but I wouldn't dip into the security deposit until the tenant is out. Even landlord friendly states usually have pretty severe penalties for misappropriating the security deposit.

Marc Winter · Answer

All the above comments have pretty well got it covered. I would like to add, that when we serve a section 8 voucher holder a NTQ because of being late on co-pay, or other unpaid fees (repairs where they caused the damages), we also notify the section 8 housing authority.

We inform the tenant of this, and let them know they may loose their voucher if they are evicted for non-payment or destruction of property. After eviction, we send a copy of the public transcript and judgment to the housing authority. We also file (for all evicted tenants) with credit bureaus and often record the judgments at the county level.

No, we are not being mean or trying to hurt anyone; we are trying to warn and protect others against bad tenants. If everyone would take these steps, and hold the tenants accountable for some of the unbelievable damages they can cause with impunity, there would be a reduction in the number of "bad" tenants, IMO.

Robert Gilstrap · Answer

@Casandra M. If a tenant is breaking the terms of your lease as to care of the premises then you can absolutely evict. The deposit thing doesn't come into play until the tenant has vacated the property so that's not the real issue. When you did these repairs you should have billed the tenant for them and if they failed to pay you should have evicted for that.

@Charlie MacPherson Depends on the reasons for saying "no". Source of income is the protected class and you can absolutely accept applications from section 8 tenants but deny each one not based on the source of their income but on the fact that the HAP program requires you to enter into separate agreements with the government that modify the terms and conditions of your lease which you do not have to agree to (assuming your state has a HAP addendum to the lease for section 8 tenants). Obviously everything I'm saying is nuanced by state law so she should really investigate closely.

Charlie MacPherson · Answer

@Casandra M. I don't know the answer to your specific question, but I have one word of caution.

Under Wisconsin Fair Housing laws, those receiving public assistance are a protected class, meaning that if you were to say "no Section 8", you could be fined or prosecuted.

https://dwd.wisconsin.gov/er/civil_rights/housing/...

Charlie MacPherson · Answer

@Robert Gilstrap I agree with you.

My original comment was just a note of caution to Cassandra on exactly that point.

Charlie MacPherson · Answer

@Corina Eufinger I respectfully disagree. Under the list of "protected classes", the 10th line item is:

"Source of Income The lawful source of a person’s income, including wages, a voucher having monetary value, social security, public assistance or other related payments."

Don't shoot the messenger, but I think that's pretty clear.

Rob D. · Answer

To answer your question in one word no.

S8 is protected as in what reason you can terminate a lease

You can screen sec 8 applicants like any applicants that are non sec 8. As long as the criteria is applied equally to ALL applicants you’re fine.

The only difference is one applicant has a Sec 8 voucher the other doesn’t. But if they have bad credit or eviction you can deny regardless of sec 8 qualifications as long as you deny every applicant with bad credit or a eviction

You can turn away Sec 8 on the grounds that your properties do not qualify as you are not registered or had approval from the program.

I don’t accept sec 8 on those grounds .

Casandra M. · Answer

Hi everyone - thanks for the input so far. Just to clarify, we have gone through the Section 8 inspections and approval in the past and are familiar with the workings of our section 8 units.... we decided to not renew our Section 8 contracts with our local city due to the negative experience. If accepting section 8 again, we would simply include the section 8 payments in their income criteria in order to fairly screen the tenant.

Is it legal to terminate lease due to depleted Security Deposit?

Is it legal to terminate lease due to depleted Security Deposit?

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