By Daniel Bakken, Associate Attorney, Eckberg Lammers

To avoid a landlord dispute and the subsequent time and effort involved in resolving an issue, it is best to know your rights as a tenant under Wisconsin law by drafting better lease provisions prior to entering into any commercial lease relationship.

Here are a few helpful hints when drafting your next lease:

1. REMEMBER THAT WISCONSIN LAW REQUIRES THE LANDLORD TO MAKE CERTAIN REPAIRS UNLESS THE PARTIES SIGN A LEASE WITH CONTRARY LANGUAGE.

   1. Duties of Landlord in Absence of Contrary Written Provision

      Unlike Minnesota, which has no implied duty for landlords to make repairs, Wisconsin explicitly requires landlords to make repairs. Wisconsin Statute Section 704.07 outlines the duties of both the landlord and tenant in situations where the parties have not provided a contrary provision in the lease. Where no contrary lease provision exists, a non-residential landlord has the duty to do all of the following:

      • Keep in a reasonable state of repair portions of the premises over which the landlord maintains control.
      • Keep in a reasonable state of repair all equipment under the landlord's control necessary to supply services that the landlord has expressly or impliedly agreed to furnish to the tenant, such as heat, water, elevator, or air conditioning.
      • Make all necessary structural repairs.
        • Note: This does not say "all" structural repairs but only those repairs that are "necessary".
      • Except as provided in the duties of the tenant (below) repair or replace any plumbing, electrical wiring, machinery, or equipment furnished with the premises and no longer in reasonable working condition. [1]

   2. Duties of Tenant in Absence of Contrary Written Provision

      Wisconsin law also implies certain duties to tenants when no written lease provision to the contrary exists. The tenant is "under a duty to keep plumbing, electrical wiring, machinery and equipment furnished with the premises in reasonable working order if repair can be made at cost which is minor in relation to the rent." [2] Thus, while the landlord is responsible for major repairs to the plumbing, electrical, etc., the tenant is only responsible to minor repairs to these items. This means that a commercial tenant would probably be responsible for a new toilet or unclogging a drain but probably not ripping out the floor to install new piping. Additionally, "if the premises are damaged by the negligence or improper use of the premises by the tenant, the tenant must repair and restore the appearance of the premises by redecorating." [3]

   3. Remedies for A Landlord's Failure to Repair in Absence of Contrary Written Provision.

      If a landlord fails to make repairs in conformity with the provisions of Wisconsin Statute Section 704.07(2), the tenant is given several remedies. The remedy depends upon the type of violation and the consequences to tenant. Where the premises because untenantable because of a casualty such as fire, or water damage, or a violation materially affects the safety or health of the tenant, or the violation imposes an undue hardship on the tenant, the tenant may quit the premises without further payment of rent. [4] Where the violation is less severe and the tenant can remain in possession, the tenant may abate (deduct) a portion of the rent equivalent with the harm caused to the tenant. [5] It should be noted, that these remedies do not apply where the damage or condition is caused by the negligence or improper use of the premises by the tenant. [6]

   4. Impact for Commercial Tenants

      It is important for commercial tenants to know their rights under Wisconsin law because commercial tenants receive far greater protections than those in other states. However, those protections only apply if the landlord and tenant do not negotiate a contrary provision. Accordingly, commercial tenants should use the maintenance and repair requirements of Wis. Stat. § 704.07 as a baseline for the responsibilities of the landlord. Commercial tenants should keep these provisions in mind so that they do not assume duties which would already be the duty of the landlord. At the very least, commercial tenants should not negotiate these rights away without insisting on something in return.

2. REMEMBER THAT NEARLY EVERYTHING IS NEGOTIABLE AND TENANTS HAVE INCREASED LEVERAGE BECAUSE OF THE ECONOMY.

   Commercial tenants have increased leverage to negotiate provisions in leases because commercial vacancies are at historical levels and are not expected to peak until early 2011. On March 26, 2010, the National Association of Realtors released figures which show that retail vacancies will rise from 12.6% to 12.8% in 2011 before retreating. [7] The outlook for commercial office space is even worse with vacancy rates increasing from 16.9 % to 17.6 percent in the first quarter of 2011. While this means that businesses continue to face a difficult environment in 2010, it also means that new commercial tenants are in hot demand and have nearly unprecedented bargaining power. [8] Landlords are desperate to get new tenants and are willing to negotiate on items which may not have been previously negotiable.

3. REMEMBER THAT WHILE DRAFTING A LEASE "CLARITY IS KING".

   Clearly define what must be maintained by the Tenant. If you do not want to pay for an item, the best thing to do is expressly state that in the lease. Remember that nearly everything is negotiable and similar commercial spaces are available. If you are not comfortable paying for an item, do not pay for it. Bad leases can put good businesses out of business.

   The lesson learned from the dispute referenced above is: when it comes to maintenance and repair requirements, the tenant should expressly outline what it will and will not be responsible for paying. The maintenance provision should avoid vagaries such as Tenant is responsible for everything "within the outside perimeter of the Tenant's space." Instead, the lease should simply define who is responsible for repair of walls, ceilings, floors and foundations. Another potential issue to avoid is addressing the maintenance requirements in multiple locations throughout the lease. In the recent dispute, the lease contained conflicting provisions in both the body of the lease as well as the exhibits. Try to keep all maintenance requirements in one location to avoid arguments about which provision controls.

4. SAMPLE PROVISIONS.

   Below are two sample provisions from a lease between a shopping mall and a retail tenant. These provisions are for informational purposes only and may or may not be applicable to your situation and all commercial leases should be reviewed by your attorney. However, these provisions should provide the reader with some direction as to the types of items which can be negotiated.

   1. Sample landlord provision

      Landlord shall, at its sole cost and risk, maintain, or repair and replace any and all pipes, ducts, wires, mains or conduits which do not serve the Premises exclusively, the roof and the system for drainage of water therefrom, the foundation, the floor slab, the underground and otherwise concealed plumbing which does not exclusively serve the Premises, the exterior walls, and the structural portion of the Premises, excluding all windows, window glass, plate glass and all doors of the Premises. Tenant shall give notice to Landlord of the need for repairs, corrections or replacements, provided Tenant has knowledge thereof, and Landlord shall proceed promptly to make such repairs, corrections or replacements. When performing any repairs which involve the Premises, Landlord shall use reasonable efforts to keep interference with Tenant's business to a minimum and Landlord shall (i) perform such work in a good and workmanlike manner; and (ii) diligently prosecute such work to completion (including the restoration of Tenant's improvements and fixtures that were disturbed by Landlord to complete such work). Additionally, Landlord shall not locate any ducts, pipes, mains, wires or conduits in any part of the Premises which would materially interfere with Tenant's operation of its business. Landlord shall not be required to make any repairs to the Shopping Center or building of which the Premises are a part which have been necessitated by the act, omission or neglect of Tenants or its agents, employees or contractors, such repairs shall be performed by Tenant at Tenant's sole expense.

   2. Sample tenant provision

      Tenant shall, at its expense and risk, maintain all other parts of the Premises which are not required to be maintained by Landlord in good condition, including, but not limited to, the windows and doors of the Premises and all glass therein; the heating system, air conditioning equipment and plumbing which exclusively serve the Premises; and Tenant's improvements, trade fixtures and equipment; provided, however, that Landlord shall make any repairs necessitated by reason of a structural defect in the Premises or its foundation and any repairs necessitated by the act, omission or neglect of Landlord, or its agents, employees or contractors. Landlord shall, at its sole cost, promptly perform the repairs so necessitated, and Tenant shall have the remedies set forth in Section __ if Landlord fails to do so.

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