March 12, 2026
The Court of Appeals decision in Koble Investments v. Marquardt has materially shifted the risk framework for owning residential rental property in Wisconsin. Under the current interpretation, if a residential lease contains one of the prohibited provisions under Wis. Stat. § 704.44, the lease can be deemed void and unenforceable, even where the tenant suffered no actual financial harm. The remedy being pursued in active litigation includes refund of rent paid, potentially doubled, plus attorney fees.
Since publication of the decision, 50+ lawsuits, including class actions, have already been filed .
The Assembly and Senate have passed a legislative clarification bill. Governor Evers has indicated he intends to veto the repair effort and instead codify the Court of Appeals ruling into statute. If that occurs, this liability framework would move from appellate precedent to permanent statutory law.
Why This Is a Capital Markets Issue
Multifamily assets are valued on predictable, durable cash flow. When rent collected under an executed lease can be subject to retroactive clawback because of a technical drafting defect, income durability becomes legally uncertain.
Capital markets respond to uncertainty in three predictable ways:
- Higher compliance costs | Increased legal review of lease forms, expanded reserves, insurance pricing adjustments.
- More conservative underwriting | Lenders factor litigation risk into DSCR and reserve requirements.
- Cap rate pressure | Even a 50–100 basis point shift tied to perceived risk can translate into 8–15% valuation compression.
Income predictability is the foundation of multifamily pricing.
The “Small Landlord” Reality in Wisconsin
This issue disproportionately impacts small operators — not institutional REITs.
National housing data show:
- Nearly half of all U.S. rental units are in properties with four or fewer units.
- Those properties are overwhelmingly owned by individual investors and small partnerships.
In Wisconsin, a significant portion of workforce housing inventory is delivered by these fragmented owners – duplexes, fourplexes, small apartment buildings. These operators:
- Do not have in-house counsel or compliance departments.
- Cannot spread litigation exposure across large portfolios.
- Face higher relative legal defense costs per unit.
- Are more sensitive to reserve requirements and insurance adjustments.
Large owners can absorb overhead through scale. Small landlords cannot.
What This Means for Our Clients
- Lease form compliance and legal review. Ensure current lease documents are reviewed by experienced Wisconsin landlord-tenant counsel. Small drafting issues now carry disproportionate risk.
- Reserve assumptions in underwriting. Evaluate whether additional operating or litigation reserves are prudent, particularly for smaller portfolios without diversification.
- Insurance and litigation exposure considerations. Confirm coverage scope, exclusions, and limits related to lease-based claims and class action exposure.
- Cap rate sensitivity to regulatory risk. Stress-test valuations for modest cap rate expansion tied to legal uncertainty and income durability concerns.
- Exit strategy timing if legal uncertainty persists. For some owners, advancing disposition timelines may reduce exposure; for others, scale and compliance investment may be the better strategy.
In periods of regulatory ambiguity, clarity becomes a competitive advantage. Our role is to help clients protect income, preserve value, and position assets intelligently within an evolving legal landscape.
Additional Resources
Rental Property Association of Wisconsin
Pettit Law Group | Landlord-Tenant Law Blog