September/October 2017 Issue

Also in this issue: Budget Bill Eliminates Domestic Partnership Benefits     |     Department of Labor Overtime Rule Halted     |     Court Rejects Claim that Right-to-Work Law Is an Unconstitutional Taking     |     City of Madison Kicks Off 100% Renewable Energy Resolution Efforts

Wisconsin Court of Appeals Clarifies Municipal Authority to Issue Raze Orders

Julia Potter | 10.19.17

In a recent decision, Auto-Owners Insurance Company v. City of Appleton, 2017 WI App 62, the Wisconsin Court of Appeals upheld a raze order issued by the City of Appleton in the face of a multi-pronged challenge initiated by the property owner’s insurance carrier. This decision provides some clarity about the scope of a municipality’s authority to issue a raze order under Wis. Stat. § 66.0413(1)(b)1, which provides, in relevant part, that a municipality may issue a raze order ​“if a building is old, dilapidated or out of repair and consequently dangerous, unsafe, unsanitary or otherwise unfit for human habitation and unreasonable to repair.”

In 2015, the McLarty family home in Appleton caught fire and suffered structural damage to the attached garage. The home itself suffered extensive non-structural damage as a result of the fire, including water and smoke damage. The McLartys contacted a damage restoration company, which provided an estimate for the damage restoration totaling over $130,000. Under Wis. Stat. § 66.0413(1)(c), there is a general presumption that repairs are ​“unreasonable” when the municipality determines that the cost to repair a building would exceed fifty percent of the building’s value, according to a specified formula. Because property records showed the home’s assessed value was only $124,000, the McLartys contacted the City’s building inspector to inquire whether the City would issue a raze order for the building, as repairs appeared unreasonable under the formula set out in the statute.

After reviewing the restoration company’s repair estimate and the home’s property records, the building inspector concluded that repairs were not reasonable and issued an order for the McLarty home to be razed within thirty days. Razing the home would have required the McLartys’ insurance carrier, Auto-Owners Insurance Company, to pay the homeowner policy limits, so Auto-Owners challenged the raze order in circuit court under Wis. Stat. § 66.0413(1)(g).

Auto-Owners first argued that language in the raze order statute referring to ​“out of repair” buildings only authorized municipalities to raze ​“old” buildings that had deteriorated over time, not buildings that had suffered non-structural damage resulting from a sudden fire. The Court of Appeals rejected this argument, finding that the statute does not require that the condition rendering the building ​“out of repair” have existed for any particular length of time. Instead, ​“out of repair” can simply mean that some aspect of the building required fixing or was non-compliant with relevant housing codes for any number of reasons, including a sudden fire or rapid exposure to some other damaging condition or element.

Next, Auto-Owners argued that the City acted unreasonably in issuing the raze order because the raze order was instituted at the homeowner’s request, the building inspector did not personally inspect the property before issuing the raze order, and the City included remediation of smoke and water damage in its calculations of the cost of repairs. The Court of Appeals rejected each of these arguments in turn. It concluded that a raze order is not per se unreasonable simply because a municipality undertakes a raze analysis at the initial request of the homeowner. Similarly, the court found that nothing in Wisconsin’s raze statute requires a building inspector to personally visit the damaged property before issuing a raze order. In this case, the evidence available to the building inspector (which included the repair estimate and the property records) was sufficient to allow him to conclude that the home had suffered extensive fire and smoke damage that rendered it uninhabitable and that repairs would be unreasonable under the formula set forth in the statute, so there was no need for a site visit. Finally, the court concluded that the ​“cost of repairs” under the statute includes all repairs necessitated by the condition justifying the razing, including, in the case of fire, the costs to remediate smoke and water damage necessary to make the building habitable. In all, the court found that Auto-Owners’ interpretation of the raze order statute was ​“unsupported by the statute’s plain language and evident purpose” and would ​“produce[] an absurd result.”

- Julia K. Potter