Many ADU owners have never been landlords before. Then the Certificate of Occupancy arrives, a tenant signs, and they are one. Wisconsin has no lighter version of the rules for a single backyard unit. The same statute (Wis. Stat. ch. 704) and consumer-protection rule (Wis. Admin. Code ch. ATCP 134) that apply to large apartment buildings apply to your ADU, and Madison adds a few requirements.
Here's what matters most for a one-unit rental. This is a practical overview, not legal advice. Have a Wisconsin attorney review your lease.
First: Do These Rules Even Apply to You?
ATCP 134 covers most Wisconsin rentals, but it doesn't apply to a unit you provide free of charge. If your mother lives in the ADU rent-free, the rule doesn't govern that arrangement. Once you charge rent, it generally does. It also excludes tourist or transient stays of less than 60 days. Short-term rentals fall under separate Madison permits (Can You Airbnb Your ADU in Madison?).
Before the Tenant Signs
Many obligations kick in before a lease is signed or a deposit is taken:
- Show the paperwork first. Prospective tenants must be able to inspect the written lease and rules before signing or paying a deposit, and they get a copy at signing.
- Disclose known problems. That means known, uncorrected code violations that significantly threaten health or safety, plus habitability conditions like heat that can't keep living areas at 67°F.
- Disclose the utility split. If water, heat, or electricity isn't in the rent, say so up front. If the units aren't separately metered, disclose how charges are allocated. This matters for ADUs. Madison requires a detached ADU to have its own electric meter and panel, but Madison Water Utility prefers one water meter per parcel, so many ADUs share water with the house. Put your water-split formula in writing.
- Identify who manages the property. In writing, give the name and address of the person who collects rent and handles maintenance, and an in-state address for legal papers. An owner-occupied structure with four or fewer units is exempt. If your ADU is a separate building, don't assume the exemption covers you. Including the information costs nothing.
- Credit check fees are capped. You can charge your actual cost up to $25, as long as you tell the applicant first and give them a copy.
What Your Lease Must Say — and What Voids It
Every Wisconsin residential lease must include the statutory Notice of Domestic Abuse Protections, in the lease or an addendum. Some clauses make the entire lease void. Under Wis. Stat. 704.44 and ATCP 134.08, that includes a lease that:
- Allows eviction other than through the court process
- Requires the tenant to pay the landlord's attorney fees
- Waives your duty to deliver and maintain the unit in a fit, habitable condition
- Says the landlord isn't liable for damage or injury caused by the landlord's negligence
- Accelerates rent on default or waives your duty to try to re-rent
- Penalizes a tenant for contacting police, health, or safety services
Any deposit deduction beyond the standard reasons must go in a separate document titled "NONSTANDARD RENTAL PROVISIONS," pointed out to the tenant before they sign. Generic national lease templates are where many of these problems start.
Move-In: The Check-In Sheet
Give every new tenant a check-in sheet at move-in. They get 7 days to note the unit's condition and return it. Before taking a security deposit, tell the tenant in writing that they can report preexisting damage and request a list of damages charged to the previous tenant's deposit. A brand-new ADU has no previous tenant, but the sheet is still required. Take dated photos.
Living 50 Feet Away: The Entry Rule
This is the rule ADU owners are most likely to break by accident. You can enter only to inspect, repair, or show the unit, with at least 12 hours' advance notice, at a reasonable time, and you must announce yourself first. The exceptions are narrow: the tenant requests or agrees to the entry, there's a health or safety emergency, or the tenant is away and entry is needed to protect the property. Any broader entry right has to be written into a signed nonstandard rental provision.
Living next door makes it tempting to pop over and fix a dripping faucet. The rule is the same whether you live across town or across the yard.
Move-Out: The 21-Day Deposit Clock
Return the security deposit within 21 days (when that clock starts depends on how the tenancy ends), along with a written, itemized statement of anything withheld. The standard grounds are tenant damage, waste, or neglect; unpaid rent; and certain unpaid utility charges. Normal wear and tear doesn't count, and neither does routine painting or carpet cleaning without unusual damage. Get this right: a tenant who loses money because of an ATCP 134 violation can sue for twice the loss plus costs and attorney fees.
Madison-Specific Requirements
- Register an emergency contact. Every rental dwelling unit needs an emergency contact on file with Building Inspection (MGO 27.04(2)(k)). You register once per parcel online and update it when the contact changes. If you don't, the City sends a notice and then issues a $691 citation.
- Know the fair housing ordinance. Madison's Equal Opportunities Ordinance protects a long list of classes, including source of income, receipt of rental assistance, student status, and homelessness. Apply the same written screening criteria to every applicant.
Planning for Rental From the Design Stage
Some of these issues are easier to solve before construction than after, especially metering and how water costs get split. We evaluate utility strategy as part of every project design, so if you plan to rent, tell us at the start. For the legal side, DATCP's free Landlord–Tenant Guide is a good plain-language reference. If you're still figuring out whether a rental ADU works on your lot, start with a free feasibility check.
