Wisconsin landlords return to sanity after Wis. Supreme Court overturns Koble Investments decision.

Ruling (Wisconsin Supreme Court, 2026 WI 19, decided June 5, 2026): The Supreme Court unanimously reversed the Court of Appeals. Key holdings:

• The WCA (§ 427.104) does not apply to typical residential leases with monthly rent payments, as these do not constitute “an agreement to defer payment” (rent accrues monthly rather than being deferred from a lump-sum obligation).
• Even assuming the lease was void/unenforceable due to the missing notice, Marquardt failed to show any pecuniary loss caused by the violation, so neither she nor her attorney could recover damages, costs, or attorney fees under the relevant statutes (§ 100.20(5) or § 425.308(1)).

This decision provided significant relief to Wisconsin residential landlords by limiting WCA exposure and requiring proof of actual harm for certain tenant remedies in lease-defect cases
Facts: Koble Investments (landlord) sent tenant Elicia Marquardt a notice terminating her residential lease for nonpayment of rent during the COVID-19 eviction moratorium (a 60-day ban on such notices ordered by Governor Tony Evers in March 2020). Marquardt filed a counterclaim, alleging that this violated the Wisconsin Consumer Act (WCA), specifically Wis. Stat. § 427.104(1)(j), which prohibits debt collectors from attempting to enforce a right they know or have reason to know does not exist. She also claimed the lease was void and unenforceable under Wis. Stat. § 704.44(10) and Wis. Admin. Code § ATCP 134.08(10) because it included a provision allowing termination for a crime committed on the property but omitted the required notice of domestic abuse protections under § 704.14.Procedural History: Koble initiated an eviction action in Marathon County Circuit Court. It later moved to dismiss its own eviction claim (admitting the notice violated the moratorium). Litigation continued on Marquardt’s counterclaims. The circuit court ruled in favor of Koble, holding that the WCA did not apply to the residential lease and that the lease was not void/unenforceable (interpreting the lease provision as not triggering the notice requirement in this context). It also denied Marquardt’s attorney’s motions to intervene and recover statutory attorney fees.The Wisconsin Court of Appeals (in a published 2024 decision, 2024 WI App 26) reversed, holding for the first time that a typical residential lease qualifies as a “consumer transaction” involving an “agreement to defer payment” under the WCA. It found a WCA violation due to the eviction notice during the moratorium. It also ruled the lease void due to the missing domestic abuse notice and allowed recovery of double damages (as pecuniary loss under § 100.20(5)) plus attorney fees/costs for Marquardt and her attorney.
Key takeaways from Wisconsin Supreme Court's unanimous overruling of Court of Appeals:
1) A lease is not a debt, the Wisconsin Consumer Act does not apply to a residential lease, and a landlord is not a "debt collector."  2) A lease which contains an illegal provision (or omits required provisions such as the domestic abuse protection language required by statute) which renders the lease voidable does not entitle the tenant to return of all of their rent payments for the entirety of the lease duration.  This was one of the most bizarre and problematic rulings at the Court of Appeals.  Rather than considering the situation (tenant occupying premises without a lease due to the lease being void) as a month-to-month tenancy, the Court of Appeals ruled that the tenant had no lease and therefore was entitled to return of all rent payments made for however long they resided at the property!?!  Thankfully, this error has been overturned.3) Without the WCA claims, the fee shifting that made this case potentially very lucrative for the tenant's counsel has been removed.  

 For Supreme Court Decision, see Koble Investments v. Marquard.

CTA FinCEN BOI - FINALLY getting somewhere

 

Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies

March 2, 2025

The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.

https://home.treasury.gov/news/press-releases/sb0038

FinCEN BOI Confusion Unconfused

We've been trying to keep clients apprised of the changing landscape and legal requirements of the new "BOI" reporting required by the Financial Crimes Enforcement Network of the US Treasury Department.  

Here are the basics to know before trying to figure out the latest news regarding whether or not this entire system is constitutional.

#1 - What is the FinCEN BOI?   The United States Government, Department of Treasury Financial Crimes Enforcement Network (FinCEN) is attempting to determine who owns which small legal entities throughout the entire country. This effort is required by the Corporate Transparency Act (CTA) which was promulgated as part the larger National Defense Authorization Act of 2020 (NDAA). Congress passed the NDAA and overrode then-President Trump's veto of the act in January of 2021 with an effective date of January 1, 2024.  The Corporate Transparency Act requires virtually all small entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”).  (The stated rationale for the law is to reduce foreign money laundering, although it is difficult for some of us to understand how a database of people and small entities will assist in this endeavor or why they would exclude the large enterprises which undoubtedly are responsible for the vast majority of money-laundering activity.  There is no record as to why or how a HOA, for example, would be laundering foreign funds, but the fact that nobody really "owns" an HOA does not exempt them from the requirement to name their beneficial owners and to provide driver's licenses or passports for all beneficial owners with harsh penalties for failing to do so). The private "ownership" information is not supposed to be publicly available, but FinCEN will disclose filed information to U.S. federal law enforcement agencies, prosecutors, judges and other enforcement agencies and to financial institutions and their regulators.

#2 - Where is the BOI Filed?  https://fincen.gov/boi

#3 - What information is required? See the FAQs.  https://fincen.gov/boi-faqs#B_1

#4 - When is it due?  For entities filed in 2025, within 30 days of formation.  For older entities, the BOI was due by 1/1/2025.  However, there is pending litigation which has delayed the deadlines, and we do not know how this will be resolved.

#5 -  What are the penalties for noncompliance? As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

FinCEN BOI Reporting is back on! However, for the immediate future, compliance is voluntary. STAY TUNED!

 

FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines

Immediate Release

February 27, 2025

WASHINGTON––Today, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines. No fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed. This announcement continues Treasury’s commitment to reducing regulatory burden on businesses, as well as prioritizing under the Corporate Transparency Act reporting of BOI for those entities that pose the most significant law enforcement and national security risks.

No later than March 21, 2025, FinCEN intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.

FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements. FinCEN will consider those comments as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities, as well to determine what, if any, modifications to the deadlines referenced here should be considered.

Nationwide INJUNCTION against enforcement of BOI reporting requirements

Yesterday, December 3, 2024, the US District Court in the Eastern District of Texas issued an injunction against the US Attorney General prohibiting enforcement of the Treasury Department's "Financial Crimes Enforcement Network" BOI reporting requirements. (See posts below for a brief history of the CTA provisions applicable to most small businesses).  In Texas Top Cop Shop v. Garland, Judge Amos L. Mazzant issued a preliminary injunction against the Corporate Transparency Act (31 U.S.C. § 5336) (the “CTA”),

“[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.”

...

 “…the CTA, 31 U.S.C. § 5336, is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

Owners are still permitted to file the BOI report if they so choose.  The constitutionality of the CTA is already before the 11th Circuit Court of Appeals arising from NSBU v. Yellen, No. 24-10736 (11^th Cir.), and this matter may ultimately be determined by the United States Supreme Court.

Stay tuned! 

More Legal Challenges to FinCEN BOI Reporting

 From Thompson Reuters: 

Pushback Against Corporate Transparency Act Filing Requirements Continues

https://tax.thomsonreuters.com/news/pushback-against-corporate-transparency-act-filing-requirements-continues/

"On July 29, yet another case challenging the constitutionality of the Corporate Transparency Act was filed — this time in the US District Court for the District of Utah. (Taylor v. Yellen, No. 2:24-cv-00527) The case was brought by Utah business owner Phillip Taylor and the nonprofits The People Restored, Ranchers Cattlemen Action Legal Fund United Stockgrowers of America, and Utah OSR Land Cooperative. The plaintiffs’ complaint echoes those filed in other federal district courts that contend the Corporate Transparency Act violates plaintiffs’ Fourth Amendment rights against unreasonable search and seizure, privacy rights, and due process rights, and that Congress exceeded its authority in passing the law."

NEW Reporting Requirement for ALL ENTITIES in the US (unless exempt) - FinCEN BOI Report

 WHAT IS THIS NEW FINCEN BOI REPORTING ALL ABOUT?

The United States Government, Department of Treasury Financial Crimes Enforcement Network (FinCEN) is attempting to determine who owns which small business entities throughout the entire country. This effort is required by the Corporate Transparency Act (CTA) which was promulgated as part the larger National Defense Authorization Act of 2020 (NDAA). Congress passed the NDAA and overrode then-President Trump's veto of the act in January of 2021 with an effective date of January 1, 2024.

The Corporate Transparency Act requires business entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”). The information is not supposed to be publicly available, but FinCEN is authorized to disclose filed information to U.S. federal law enforcement agencies, prosecutors, judges and other enforcement agencies and to financial institutions and their regulators.

*PLEASE NOTE: This legislation is new, the process is new, and there is substantial uncertainty as to how this will play out in practice. We will attempt to update information as it develops, but do NOT substitute this general discussion for specific information and advice from your legal and tax advisor(s).

Is my entity a “Reporting Company”?

Short answer: Yes, it probably is. Generally, any and all entities created by filing a document with a government office, (such as an LLC, corporation, LLP, association, and possibly an unincorporated association) is a “reporting company” and must comply with the CTA requirements. There are exemptions for large companies (20+ employees and $5M+ in gross receipts), banks, credit unions, insurance companies, certain types of tax-exempt entities, and several other exemptions that likely do not apply to you.

What is a Beneficial Ownership Information Report (BOIR)?

Each reporting company must identify for Dept of Treasury every “Beneficial Owner” including their “full legal name, date of birth, current residential address (or business address for a company applicant if in the business of forming entities), and an ‘identifying number’ and ‘image’ from documents like a U.S. Passport or driver's license along with information about the reporting company including its name, any dba, its address and its EIN.

Who is a “Beneficial Owner?”

A “beneficial owner” is not necessarily an owner of a reporting company. A “beneficial owner” is any individual who, directly or indirectly, (1) exercises substantial control over a reporting company or (2) owns or controls at least 25 percent of the ownership interests of the reporting company.

When must I file the FinCEN BOI Report?

The deadline depends upon when the reporting company was created. Companies created before January 1, 2024 have a deadline of January 1, 2025 to file a BOIR. Companies created between January 1, 2024, and January 1, 2025 have a deadline of 90 days after formation. Companies formed after January 1, 2025, have 30-days after creation to file the BOIR.

How is the FinCEN BOI Report filed?

There are two methods which can be used to file the BOIR, a .pdf filing version and an online form. Both are found at https://boiefiling.fincen.gov/fileboir.

What happens if I don't file?

Companies that fail to comply with the BOIR reporting requirements (filing a BOIR, updating a BOIR due to changes) face civil and criminal penalties, including fines and imprisonment. Individuals who willfully provide false or misleading information may also be subject to penalties. Any person violating the reporting requirements of the Corporate Transparency Act is liable for civil penalties of not more than $500 for each day that the violation continues and criminal penalties of imprisonment of up to two years and fines of up to $10,000. 31 U.S.C. § 5336(h)(3)(A).

Is this new FinCEN BOI reporting permanent?

There are likely to be challenges to the CTA including whether it is constitutionally permissible. As of the writing of this post, the law remains in effect, but one federal district court has ruled it unconstitutional and there are several other pending cases.

.....................................................................

See American Bar Association. “The Corporate Transparency Act—Preparing for the Federal Database of Beneficial Ownership Information.” https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-may/the-corporate-transparency-act/

See US Dept of Treasury, An Introduction to Beneficial Ownership Information Reporting, https://www.fincen.gov/sites/default/files/shared/BOI-Informational-Brochure-April-2024.pdf

U.S. District Court rules CTA’s BOI reporting requirements unconstitutional

"A federal district court in Alabama held that the Corporate Transparency Act (CTA), P.L. 116-283, which requires the reporting of beneficial ownership information (BOI) by businesses, is unconstitutional.

The district court granted the plaintiffs' motion for summary judgment Friday in the case of National Small Business United v. Yellen, No. 5:22-cv-1448-LCB (N.D. Ala. 3/1/24)."

https://www.journalofaccountancy.com/news/2024/mar/federal-court-holds-corporate-transparency-act-unconstitutional.html

City Requiring Property Owner To Install Public Improvements Is Unconstitutional Exaction

The City of Brookfield conditioned approval of a property subdivision (3 lot division) upon the owner's agreement to construct and dedicate a new public street. The court of appeals affirmed the circuit court's  conclusion that this exaction was an unconstitutional taking and ordered approval of Fassett’s proposed property division. 

 https://www.wicourts.gov/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=511962

Wisconsin now has a 40 year statute of limitation to re-record easements

893.33(6) Actions to enforce easements, or covenants restricting the use of real estate, set forth in any recorded instrument shall not be barred by this section for a period of 40 years after the date of recording such instrument, and the timely recording of an instrument expressly referring to the easements or covenants or of notices pursuant to this section shall extend such time for 40-year periods from the recording.

https://docs.legis.wisconsin.gov/statutes/statutes/893/iii/33

Eviction Ban Ruled Unlawful

ALABAMA ASSOCIATION OF REALTORS, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Defendants No. 20-cv-3377 (DLF) UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

" The major questions doctrine is based on the same principle: courts “expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’” Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (emphasis added)); Am. Lung Ass’n v. EPA, 985 F.3d 914, 959 (D.C. Cir. 2021) (collecting cases). There is no question that the decision to impose a nationwide moratorium on evictions is one “of vast economic and political significance.” Util. Air Regul. Grp., 573 U.S. at 324 (internal quotation marks omitted). Case 1:20-cv-03377-DLF Document 54 Filed 05/05/21 Page 14 of 20 15 Not only does the moratorium have substantial economic effects,4 eviction moratoria have been the subject of “earnest and profound debate across the country,” Gonzales v. Oregon, 546 U.S. 243, 267 (2006) (internal quotation marks omitted). At least forty-three states and the District of Columbia have imposed state-based eviction moratoria at some point during the COVID-19 pandemic, see 86 Fed. Reg. 16,731, 16,734, though, as the CDC noted in its most recent extension of the CDC Order, these protections either “have expired or are set to expire in many jurisdictions,” id. at 16,737 n.35. Congress itself has twice addressed the moratorium on a nationwide-level—once through the CARES Act, see Pub. L. No. 116-136, § 4024, 134 Stat. 281 (2020), and again through the Consolidated Appropriations Act, see Pub. L. No. 116-260, § 502, 134 Stat. 1182 (2020). Accepting the Department’s expansive interpretation of the Act would mean that Congress delegated to the Secretary the authority to resolve not only this important question, but endless others that are also subject to “earnest and profound debate across the country.” Gonzales, 546 U.S. at 267 (internal quotation marks omitted). Under its reading, so long as the Secretary can make a determination that a given measure is “necessary” to combat the interstate or international spread of disease, there is no limit to the reach of his authority. 

...

In sum, the Public Health Service Act authorizes the Department to combat the spread of disease through a range of measures, but these measures plainly do not encompass the nationwide eviction moratorium set forth in the CDC Order

Legal uses of property become legal non-conforming uses which may be continued after change in zoning

Village of Slinger v. Polk Properties, LLC, 957 NW 2d 229 - Wis: Supreme Court 2021

 

Generally, when the zoning restrictions applicable to a property are changed, property owners may continue to use their property in a manner that was allowed under the prior zoning ordinance. See Wis. Stat. § 62.23(7)(h) (2017-18).^[10] Although prohibited under the newly applicable zoning ordinance, the existing use becomes a lawful nonconforming use. "Land use qualifies as `nonconforming' if there is an active and actual use of the land and buildings which existed prior to the commencement of the zoning ordinance and which has continued in the same or a related use until the present." Waukesha Cnty. v. Seitz, 140 Wis. 2d 111, 115, 409 N.W.2d 403 (Ct. App. 1987) (citation omitted). Section 62.23(7)(h) provides:

Nonconforming uses. The continued lawful use of a building, premises, structure, or fixture existing at the time of the adoption or amendment of a zoning ordinance may not be prohibited although the use does not conform with the provisions of the ordinance. The nonconforming use may not be extended. . . 

https://scholar.google.com/scholar_case?case=5803006789917064782&hl=en&as_sdt=6,50 

Why not give the seller the "right to cure?"

When buying a residence, most home buyers understand the benefit to hiring an independent home inspector to inspect the property.  When using the standard form offer to purchase in Wisconsin (WB-11 or WB-14), the buyer typically includes an inspection contingency.  One of the decisions the buyer must make in completing this form is whether to provide the seller with "the right to cure."  (Note: there are alternatives which can be written into any particular contract.  Your attorney can craft particular language which completely changes the way the inspection process will work.  This discussion relates solely to the unmodified form offer to purchase).

My recommendation to buyers invariably is that they should not provide the right to cure.  Why not?  Shouldn't a seller have a fair opportunity to fix problems with the property?

In order to understand my recommendation, one must understand both the form language and the practice of buyers and sellers which is not included in the form.  As to the form language, the standard offer inspection contingency states:

This Offer is contingent upon a Wisconsin registered home inspector performing a home inspection of the Property which discloses no Defects.

The offer then provides a timeframe within which the buyer must deliver notice of any defects.  Otherwise, the contingency is satisfied merely by the deadline passing.  In a case in which the buyer serves notice of defects, what happens next is governed by whether the seller has the right to cure.  If the seller has the right to cure, the seller can elect to kill the deal or the seller can elect to cure the defects.  If the seller does not have the right to cure, the buyer elects to kill the deal by serving the notice.

In case either party has elected to kill the deal, the deal may not be dead.  Obviously the parties are free to renegotiate a new offer.

In the case where the seller has the right to cure and elects to cure, the seller is supposed to cure the defect  in a good and workmanlike manner and then deliver to the buyer a written report detailing the work done within 3 days prior to closing.  Note that the buyer has no input into how the defect is cured.

What is the practice of buyers and sellers after the inspection?  The vast majority of the time, when the inspection reveals "issues," (note I did not say "defects," because we don't necessarily have to determine whether the issues arise to the level of a defect in most cases), the buyer proposes an amendment as to how to resolve the issues.  The seller either agrees or proposes an alternative.  And back and forth until the buyer and the seller agree on how to resolve the issues.  Then, the parties execute an amendment.  Neither the notice of defect nor the right to cure are specifically implicated.

TYPICALLY, IT IS ONLY WHEN THE BUYER AND THE SELLER DO NOT AGREE ON THE CURE THAT THE NOTICE OF DEFECT IS ACTIVATED.  Given this understanding, it should be obvious why the Buyer does not want to give the Seller the right to cure.  Whatever the Seller is proposing as the cure must be unacceptable to the Buyer, otherwise the parties will simply execute an amendment.  When the Seller's proposed cure is not satisfactory to the Buyer, the Buyer does NOT want the Seller to have the right to force an unacceptable cure.

For this reason, Buyer clients typically are advised NOT to give the seller the right to cure.  A buyer should not be forced to purchase a property after discovering a defect that will be addressed in an unsatisfactory manner.    

Home Seller Disclosure

There are 5 key points that a home seller in Wisconsin needs to understand about real estate disclosure:

#1 - The law, the industry and the marketplace all assume that most home sellers will complete a real estate condition report.  According to Wisconsin statutes, the seller of a property shall furnish a RECR (or may substitute a professional written report).  See sec. 709.02, Stats, reads:

709.02  Disclosure.
(1)  In regard to transfers described in s. 709.01, the owner of the property shall furnish, not later than 10 days after acceptance of a contract of sale or option contract, to the prospective buyer of the property a completed copy of the report under s. 709.03 or 709.033, whichever is applicable, subject to s. 709.035, except that the owner may substitute for any entry information supplied by a licensed engineer, professional land surveyor, as defined in s. 443.01 (7m), or structural pest control operator, by an individual who is a qualified 3rd party, or by a contractor about matters within the scope of the contractor's occupation, if the information is in writing and is furnished on time and if the entry to which it relates is identified, and except that the owner may substitute for any entry information supplied by a public agency. Information that substitutes for an entry on the report under s. 709.03 or 709.033 and that is supplied by a person specified in this section may be submitted and certified on a supplemental report prepared by the person, as long as the information otherwise satisfies the requirements under this section. A prospective buyer who does not receive a report within the 10 days may, within 2 business days after the end of that 10-day period, rescind the contract of sale or option contract by delivering a written notice of recision to the owner or to the owner's agent.

  Per 709.05,  the buyer may rescind in writing a contract of sale or option contract if a defect is disclosed in a RECR received after the contract.  Note, "The right to rescind under this section is the only remedy under this chapter."

#2 - The buyer can waive receipt of a real estate condition report.

709.08  Waiver. A buyer may waive in writing the right to rescind under s. 709.05. If a buyer proceeds to closing, the buyer's right to rescind under s. 709.05 is terminated. A buyer may waive in writing the right to receive the report required under s. 709.02.

#3 - The two key sources of liability for home sellers after closing are claims of title defects and claims alleging misrepresentation/failure to disclose adverse conditions.  There is no way to absolutely limit a seller's liability after closing.  However, wise sellers try to reduce the likelihood of getting sued after closing.  Title searching and title insurance are used to reduce the likelihood of title defect claims.  

This leaves the type of claim brought against the vast majority of sellers who get sued after closing - misrepresentation.  Misrepresentation claims against sellers often arise from the real estate condition report (which typically is incorporated by reference into the contract).  Remember that misrepresentations can occur through what is stated affirmatively as well as through what is not stated (misrepresentation by omission).  

To make matters worse for Sellers, Wisconsin has a false advertising statute which may apply to someone who makes a false or misleading statement to induce a buyer to purchase a home. Under § 100.18(11)(a), a successful buyer may be awarded their monetary loss (potentially doubled) plus costs and attorney fees.  The longer the seller defends against the claim, the greater the seller's exposure in the event of losing the case. 

#4 - While an "as-is" provision may provide some protection and certainly would be better than the standard form in terms of defending against alleged seller misrepresentation, an "as-is" provision may not entirely remove the risk of a suit arising from an undisclosed condition.  For example, in Green Spring Farms v. Spring Green Farms, 172 Wis. 2d 28 (Wis. App. 1992), some calves on the property had been killed by salmonella bacteria. The seller apparently believed that the problem had been alleviated and did not disclose the condition.  The seller sold the property "as-is," the buyer later experienced problems with the salmonella contamination, and the buyer sued the seller.  The Court held that the seller had a duty to fully disclose material adverse conditions even though the transaction was "as-is." The rationale is that the seller has this material information and the buyer is not able to discover the information.

#5 - The standard form real estate condition report asks the seller to disclose defects which are "known" as well as defects about which the seller has "notice."  What does "notice" of a defect mean?  The simple answer is we don't know.  We know it means something different than actual knowledge.  But we don't know whether the seller had "notice" of a later-discovered defect until the jury answers that question after a long and expensive legal battle.  

Consider a buyer who learns after closing of damaged shingles on the roof.  The buyer sues the seller seeking the cost of the new roof and claiming that the seller misrepresented the condition of the roof by checking "No" to the question "I am aware of a defect in the roof."  The seller checked "no" because the seller did not know about any defect.  But, again, the form actually is asking whether the person has "notice or knowledge."  Under deposition, the seller will be asked, "Were you not aware that there was a hail storm in 20__?"  "Did you not know that several of your neighbors suffered hail damage such that their roofs were replaced?"  "Did that not provide you with notice of the fact that your roof may have been damaged?"  

One might respond that the seller should have told the buyer about the hail storm in 20__.  But consider all of the myriad of facts that could provide some notice of a problem with any of the various components of a home.     

If a seller is going to disclose ANYTHING, the seller should disclose EVERYTHING.  If a seller is going to make any disclosure whatsoever, the seller should discuss any known or suspected property conditions which might arguably provide notice of a potential defect.

Because of the risks relating to allegations of purported misrepresentation, it may be advisable for a seller to refuse to disclose anything and to refuse to permit buyers to rely upon the seller for information about the condition of the property.  "What are you trying to hide?" and "Why not just be honest?" are two typical responses.  However, note that there are many people who have been sued for alleged misrepresentations who thought were were completely honest and forthright.  If the buyer feels as though information was withheld, they may allege that the disclosure was misleading.  

It is possible, though not common, for a seller to indicate that the seller will not complete a RECR, the buyer must waive receipt, and the buyer is not entitled to and must not rely upon any seller representations relating to the condition of the property.  The reason this is rarely done is that it makes marketing/selling more difficult.  The trade-off in giving a sales pitch is that one might later be said to have misrepresented something.  But a seller should be aware of the risks associated with making less than a complete disclosure.

If you are going to say anything, say everything.

RESOURCES: 

See, Fricano v Bank of America, NA, 875 NW 2d 143 - Wis: Court of Appeals 2015.  

​

Garvey v Krueger, 2018 WI App 39 - Wis: Court of Appeals, 2nd Dist. 2018

Young, Mark C., and Gregg C. Hagopian. "Protecting the Residential Seller." Wisconsin
Lawyer, vol. 66, no. 5, May 1993, pp. 18-56. HeinOnline.

https://heinonline.org/HOL/P?h=hein.barjournals/wilaw0066&i=824 (Note: references prior stats.)

Attorney James N. Graham of Accession Law LLC is providing a general answer which does not establish an attorney/client relationship and which is not legal advice. Contact attorney James N. Graham in order to discuss the terms of retainer and the information needed in order to obtain a legal opinion, recommendation, or advice. The first inquiry for an attorney is to know only the parties involved in order to check for conflicts of interest with current or former clients.

Interview for "Smart Choices" series

Interview with James N. Graham, attorney with offices in Madison and Blanchardville serving Dane, Green, Iowa, Lafayette, and Rock Counties in Wisconsin.

Q: Attorney James N. Graham is our guest to discuss real estate law and what people often do not understand when buying or selling a home.  What are some common misconceptions about selling or buying a home?

A: There are many and a wide variety of aspects that people misunderstand.  I tend to put misconceptions into a few broad categories such as first that real estate transactions are simple, second that the system for transferring real estate is transparent, intuitive, and fair, and third that people understand and properly address risks in their real estate deals.  There also is a common misunderstanding of the relationship between Realtors, brokers, real estate licensees, clients, customers and attorneys.  There also is a surprising refusal to accept black letter legal concepts such as the statute of frauds, time is of the essence, and unenforceability due to vagueness and uncertainty.  Where do you want to start?

Q:  Let's start with the idea that it is easy to buy a house.  Isn't that true?

A:  That can be true, but the misconception has a few angles.  First, most people won't buy more than a few homes.  Despite the fact that these are among the largest deals creating the greatest impact on their lives, they have an unusual confidence in their ability to foresee, understand and appreciate the issues inherent in a real estate transaction.  Once they've bought or sold 4 or 5 homes, they feel like they've seen it all.  Many of these people haven't even completely read, let alone understood the contracts and very few people have studied contract law in general as well as the legal authority interpreting the specific contracts and the issues that are or can be raised.  In order to make an informed decision, you need to understand the contract, you need to understand the law, and you be sensitive to problem areas in each.  I've personally been involved with over 800 real estate transactions, and I still see new issues and angles every year.      

Q:  You don't need to understand real estate law to buy a house, do you?

A:  Well somebody on your behalf had better understand the contracts, the law, the stakes and the multitude of complications.  Again, these are deals involving hundreds of thousands or even millions of dollars.  Contrast income tax preparation.  Most people with a positive net worth hire a CPA or other tax professional to prepare their tax returns.  A tax return is something done each and every year, and the most likely consequences if a person makes a mistake is that they'll owe a few hundred dollars in interest or penalties.  Yet they hire a professional to prepare tax returns rather than trying to do it on their own.  Most people do not buy or sell a home more than once a year and the ramifications on their net worth can be devastating.  Yet many people do it themselves because they've been through it once or twice before. Others rely upon salespeople for advice.  Isn't that remarkable?

Q:  But most people don't need an attorney to get the deal closed.

A:  That is my point.  People are taking more risk with greater stakes than they understand and appreciate.  They trust a system that they think they understand.  They don't know what they don't know.  They base their decision on the fact that they or people that they know have managed to close a transaction without hiring an attorney.  If they understood and were generally aware of the problems that arise, they would be much less confident.  People should be wary, skeptical and sensitive to the fact that problems can and do arise.     

Q:  The problems that arise, aren't those rare?  Most people are comfortable because deals usually go fine, their agent takes care of everything, and when there is a problem, it seems to be almost inevitable or accidental.

A:  Think about my tax return analogy.  An audit is fairly rare.  But that doesn't mean that one doesn't get value from having professional help.  You want someone who has done it many times, who knows the subject matter, and who can spot issues and answer questions.  They get the job done better, cleaner, with less risk of audit and with more likelihood of taking advantage of opportunities available in the system.  And you don't want to get tax advice from someone whose fee is contingent upon your tax return.  You asked whether problems are rare.  That depends upon what you mean by a problem in a real estate deal? 

Q:  Perhaps you can explain what you mean by a problem?

A:  There are many.  Read the Wisconsin reported cases involving real estate disputes.  Each of those disputes arose from a problem.  But there are problems that aren't even disputes.  For example, many times people are not properly assessing and addressing risks, often out of ignorance or a lack of advice.  I consider that a  problem.  Or a more specific example - a client comes to me because they have accepted an offer to purchase which is contingent upon a few items.  The items are entirely within the control of the buyer.  What the seller has done, I explain, is to give the buyer an option.  That means the buyer can purchase, but the seller can't force the buyer to purchase.  An option has value.  In any other financial market, the party giving an option expects to receive consideration for that option value.  However, in real estate, sellers commonly give buyers free options.  Why?  

Q:  Why?

A:  I can explain why, but the more important point is that the client should understand and make a knowledgeable decision rather than just going along because that is the way things usually are done.  I don't necessarily recommend against it if the terms are fair and reasonable, but I do insist on having the seller understand what they are doing.  I have had many clients come to me after having signed an offer to purchase which was really an unreasonably long free option.  They simply did not understand what they were doing and their agent wasn't about to explain it for fear of losing the possibility of a deal.

Q:  OK, let's move on, what was the next area of misconception, something about the systemic unfairness?

A:  Well we are nowhere near done with the complexity issues, but another of these is that the system may appear to be more fair and transparent than it really is.  People often don't understand even the basic definitions of the systemic players:  They think a real estate broker is an agent is a Realtor.  They think the Realtor they are working with is their agent.  They believe statements and representations by an agent and then sign a contract that they haven't read with a broker that they haven't met.  There is an ignorance of contract law and an assumption that the forms must be fair and reasonable and therefore that any deal using those forms should be fair and reasonable.  It is really strange to me that people who would read the fine print on a $10 grocery store rebate offer will simply trust a real estate salesperson to deal fairly with them when the implications involve thousands and tens of thousands of dollars.  Most consumers also have no idea about the differences between the requirements of law and the requirements of the Realtor's code and contracts and how these may affect the consumer.  

Q:  And how may it affect them, the law or the forms or the Realtor rules?

A:  I'll give 2 simple examples.  Regarding the forms, many home sellers are shocked to learn that the form listing contract, approved by the State of Wisconsin, provides that the broker earns a commission even in some cases where the home isn't sold.  I have talked to dozens of sellers who had no idea that they could end up owing a commission even if they didn't sell their house.    Regarding the Realtor rules, many sellers do not understand the fact that they may owe a commission to a Realtor that they have never heard of, that they did not know was involved in their transaction, and that is arguably owed a commission based upon their offer of compensation via the MLS.  There are many instances of brokers suing their clients for a commission on a transaction that never closed.  Run a CCAP search on your favorite real estate entity and see how often they've been involved in litigation.  Are those cases against their "clients?"  Pull the case files, and see what you find.  There also are instances where a Realtor has claimed to be owed a commission from a flat fee MLS seller when the seller had no idea that the Realtor was involved in the transaction whatsoever.  I would bet in those cases that the seller did not expect that result when he or she signed the listing agreement.  

Q:  Are you recommending that people not use Realtors?

A:  No, I am recommending that people not rely upon Realtors or other real estate sales people for recommendations or advice on contract matters, on risks, on ways to address risks, on rights, on responsibilities, or on their best interests.  I have been a broker in the past and was a member of the Realtors.  I also had other sales jobs during my life.  Sales people provide valuable assistance at selling.  If you need help marketing a property, it makes sense to get the assistance of someone with sales experience.  Do not rely upon the sales person for contract advice.  It is especially unwise to rely upon the sales person to advise you on the advisability of the contract between you and the sales person's employing broker.  I would think this would be obvious, but it must not be obvious to many people who sign up with brokers based upon the recommendation of a sales person and without considering the ramifications of the listing agreement.

Q:  You think home sellers should hire a Realtor and a lawyer?

A:  Home sellers should hire an experienced lawyer who will provide independent advice and who will look out solely for their best interest.  As for how to market the property, some of my clients sell for-sale-by-owner, some use a limited service listing on the MLS, and some use a full service real estate broker.  Which of these is best for a person to market their property depends upon many factors, and they are all good options for some people depending upon considerations such as cost, time availability and comfort level with showings, and ways offered to expose the listing to the market.  

Q:  What about home buyers?

A:  Home buyers likewise need independent advice.  They may or may not need the advice of a buyer agent on what is available in the market.  The mistake is in mixing up the two functions.  There is the common misimpression that a Realtor can do it all, that advice is rolled into their fees.  Although state law prohibits real estate sales people from discouraging the use of an attorney, they may say something to the effect that, "most transactions in Wisconsin do not involve an attorney."  The implication is that an attorney is an extra and unnecessary expense.  If unnecessary, who is going to provide independent legal advice in the absence of an attorney?  The sales person?  Obviously not, they are neither qualified nor permitted to do so.      

Q:  And you don't think people can do it themselves?

A:  I know that they can, I just don't think they should.  The last time I looked, we had over 2000 appellate case decisions in Wisconsin involving real estate matters.  First, consider that amount of legal authority that a person should at least read if not study.  More importantly, realize that 2000 disputes isn't even the tip of the iceberg showing the things that can go wrong.  The vast majority of mistakes never get litigated and the vast majority of those that do never reach the Court of Appeals.  Mistakes happen every day.  Attorneys commonly are called to solve problems after other people have screwed up the situation.  It is that professional experience even more than reading 2000 cases that cannot be obtained except through hiring an attorney.

Q:  How much does it cost to hire an attorney:
A:  It varies, some charge an hourly rate and some charge a flat fee.  I offer either option, but if you look at the numbers, the typical attorney fee is a bargain.   Let's look at an example:  Assume a $300,000 house considering a 6% listing.  That is $18,000.  There are many attorneys in our market who will represent the seller on a flat fee for less than $1,000.  If the attorney can negotiate the listing to a 4% listing, pay the brokers $12,000 and the attorney $1,000 and you've still saved $5,000 and gotten independent legal advice.  What did it cost?  Nothing, in that instance you gained $5,000.  People may fear that they get less service for 3% than they would for 6%.  With the assistance of your attorney, you should negotiate what you want done, what you will pay for it, and under what terms.    

Q: Any final tips?
A: Buy low, sell high.  Get good advisors and pay them enough to keep them happy.  Don't take wooden bitcoins.  That should about cover it.