In a significant recent decision affecting owners of residential property around the state, the Wisconsin Court of Appeals agreed with the owners of Juneau Village Towers, a residential complex in downtown Milwaukee, that they were owed a refund of more than $470,000, plus interest, by the City of Milwaukee in connection with Business Improvement District (BID) assessments paid between 2005 and 2012 [see DJK 59 LLC v. City of Milwaukee, 2016 Wisc. App. LEXIS 751 (Nov. 22, 2016)]. The appeals court clarified that BID assessments cannot be levied against property that is used exclusively for residential purposes.

What Are BIDs?

BIDs are creatures of Wisconsin state law. They are special districts created by municipalities to accomplish specific goals set by the property owners located within the district. In many instances, commercial property owners with close proximity of each other can propose a BID to a Wisconsin municipality, describe what parcels are to be included, detail what the district wants to accomplish by banding together, and detail the assessments to be collected from property owners within the district in order to carry out the plan. If the municipality approves the BID request, assessments are then placed on the tax roll as special assessments and collected by the local municipality through the property owners’ tax bills. Within the state, there are at least 85 local BIDs. More than 30 are found within the City of Milwaukee.

BIDS Do Not Apply to Property Exclusively Used for Residential Purposes

The BID assessment law has an important limitation related to residential property. The BID statute states that BID funding may only be collected from “businesses.” Assessments cannot be made against “real property used exclusively for residential purposes.” Some cities have argued that the exclusion applied only to single-family structures, not owners who were in the ”business” of renting apartments. The Court of Appeals decision reiterates that the City of Milwaukee’s view is mistaken. Multi-family residential property is just as immune from assessment as single-family property.

Before commercial apartment owners celebrate too loudly, they should, of course, recognize the importance of the word “exclusively.” For example, multi-use facilities – such as those with retail space on the ground floor and apartments in the upper stories – do not qualify for the exclusion from BID assessments.

Wisconsin Supreme Court Could Review the Decision

It is possible that the state’s Supreme Court might review the Court of Appeals decision. Until and unless that happens, the decision is final and affects owners of residential property within the state. Accordingly, BID assessments related to real property used exclusively for residential purposes may be recoverable by the owner, subject to the six-year statute of limitations.

Commercial Real Estate Can Be a Worthwhile Investment in Spite of Complex Rules

Financial experts agree that owning and managing residential real estate can be a good investment. There are, of course, a host of laws and regulations that affect such ownership. Most owners discover that they need the assistance of strong, experienced attorneys to help meet their goals.

Commercial Real Estate and Business Attorneys in Milwaukee

The Milwaukee business litigation firm of Kerkman Wagner & Dunn has more than 50 years of combined legal experience representing commercial real estate owners, property managers, landlords, tenants, and business concerns in Wisconsin. We have represented both landlords and tenants in court following disagreements. We have represented owners in tax disputes and other related matters. Our firm has big firm talent and provides small firm attention. Call us at 414-278-7000 or complete our online contact form.

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