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The new standard for rental inspections

By John D. Finerty Jr.
Michael Best & Friedrich LLP

John D. Finerty Jr. is a trial lawyer and partner in Michael Best & Friedrich’s Litigation Practice Group. He oversees a team of litigators in the Banking & Financial Services Industry group that specializes in representing lenders, including REO and other property issues.

John D. Finerty Jr. is a trial lawyer and partner in Michael Best & Friedrich’s Litigation Practice Group. He oversees a team of litigators in the Banking and Financial Services Industry group that specializes in representing lenders, including REO and other property issues.

The state in February enacted Act 176, which created a prohibition against local ordinances that require routine inspections of rental units.

These ordinances typically required building code inspections before a change in occupancy, but without an administrative warrant. Some ordinances went further to require a property be registered with, or certified or licensed by, a municipality.

Milwaukee, for example, requires a Certificate of Compliance as a condition a landlord must fulfill before leasing rental units in specified neighborhoods in which the city has deemed the concentration of rentals or the quality of housing stock to be in need of monitoring. Such a certificate is valid for up to four years unless an inspection reveals code violations. When a violation is detected, the city may require a re-certification every year.

Various municipal interests were cited to justify these inspection requirements. Among them were the need: to preserve an aging housing stock in urban areas; to monitor student housing that is prone to overcrowding; and to uncover repairs and remodeling that tenants or unlicensed contractors might have undertaken and inadvertently created safety hazards.

Act 176 changed Wisconsin law on the inspection of rental units. It provides in part as follows: “No city, village, town, or county may enact an ordinance that does any of the following: … (r)equires that a rental property or rental unit be inspected except upon a complaint by any person, as part of a program of regularly scheduled inspections conducted in compliance with s. 66.0119, as applicable or as required by state or federal law.” The Act took effect on March 2.

Wisconsin law now requires that rental unit inspections comply with the administrative warrant standard of Wis. Stat. § 66.0119, which is consistent with Fourth Amendment limitations on municipal officials’ authority to enter private property. For example, in Camara v. Municipal Court of City and County of San Francisco, the U.S. Supreme Court held that an ordinance authorizing housing officials to inspect apartment buildings “at least once a year and as often thereafter as may be deemed necessary” was unconstitutional.

In that case, a tenant refused to allow an inspection of his rental unit and was arrested. The tenant argued that the ordinance violated the Fourth and 14th Amendments.

The U.S. Supreme Court held that the warrantless search of residential property under the ordinance by municipal inspectors was an unreasonable search. The court further rejected attempts to justify the warrantless administrative searches on the grounds that they make minimal demands on occupants; that obtaining warrants in such cases is unfeasible; or that area-inspection programs could not function under reasonable search-warrant requirements.

The court also wrote that due process must be afforded: “Administrative searches of the kind at issue here are significant intrusions upon the interests protected by the Fourth Amendment, that such searches when authorized and conducted without a warrant procedure lack the traditional safeguards which the Fourth Amendment guarantees to the individual(.)” The court noted, however, that a reasonable area-inspection program, set up in response to an example of known code violations or a reasonable appraisal of conditions in an area as a whole, may give a municipality probable cause to inspect.

A “For rent” sign is posted in front of an apartment complex at 11020 Greenfield Ave. in West Allis. The state has enacted Act 176, which does not allow local ordinances that require routine inspections of rental units. (File photo by Kevin Harnack)

A “For rent” sign is posted in front of an apartment complex at 11020 Greenfield Ave. in West Allis. The state has enacted Act 176, which does not allow local ordinances that require routine inspections of rental units. (File photo by Kevin Harnack)

A more recent case from the court held that local ordinances requiring government inspections may be unconstitutional without adequate due-process protections. In City of Los Angeles v. Patel, the court held that a Los Angeles ordinance was facially unconstitutional because it failed to provide hotel operators with an opportunity for judicial review before police were allowed to inspect hotel-reservation records.

The Los Angeles ordinance at issue in the case required hotel operators to keep specific records about their guests for 90 days and to make those records available to “any officer of the Los Angeles Police Department for inspection” on demand. The court wrote: “a hotel owner must be afforded an opportunity to have a neutral decision maker review an officer’s demand to search the registry before he or she faces penalties for failing to comply.”

Because of those holdings, municipal-inspection programs now must meet administrative standards concerning probable cause and due process.

The legislative history of Act 176 reflects legislative intent to bring Wisconsin municipalities into line with Fourth Amendment private-property rights. The original bill arose from an e-mail requesting that the Legislative Reference Bureau, also known as the LRB, draft a number of pieces of legislation, including this: “3. Landlord registration/inspection/licensure – We would like total preemption on certification, occupancy fees, and inspection requirements without a tenant complaint or other reasonable ‘cause’.”

The first drafts of the bill thus prohibited “an ordinance that requires that a rental unit be inspected without a showing of good cause, certified or registered.” That “good cause” language stayed in the bill despite subsequent amendments.

The state Assembly later attempted to amend the bill with this request: “We would like it to read: ‘complaint-driven or regularly scheduled inspections.’” That request, however, had no apparent influence on the final version.

The compromise was to allow a program of regularly scheduled inspections but incorporate the administrative-warrant standard into the statute as a “cause” requirement. The final version of the enacted bill allows for, “regularly scheduled inspections conducted in compliance with s. 66.0119, as applicable …”

Municipal inspection programs that do no call for “reasonable area-wide” rental inspections may be subject to a constitutional challenge as requiring a warrantless administrative search. The end result is that many local ordinances that require routine inspections only because of a change in occupancy are no longer enforceable as currently written because there is no underlying cause to require the inspections.

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