The taxi pulls up a steep hill to a house that sits off the side of the cliff, held there by spidery, metal-looking stilts.
They meet their new guardian, Aunt Josephine Anwhistle. Although she is a kind old woman, she is frightened by many things. Ever since her husband, Ike, died in Lake Lachrymose after being eaten by the Lachrymose Leeches, she has developed many irrational fears about the lake and her own possessions. She won’t touch the phone, the radiator, the refrigerator, the oven, or even the doorknobs. She also has a terrible fear of realtors. Aunt Josephine loves grammar and possesses an enormous library on the subject in her home. The room containing her library has an enormous window (after which The Wide Window is named), which overlooks the lake.
After the Baudelaires tell Aunt Josephine that Hurricane Herman is coming, the children and their new guardian head down to town to obtain food and other household supplies. There they come across “Captain Sham,” Count Olaf in disguise. He tells them that he is the owner of a boat rental company and lost his leg after it was eaten by the Lachrymose Leeches. The children warn Aunt Josephine, but they cannot prove “Sham” is Olaf in disguise, since he has a wooden leg where the ankle bearing his tattoo of an eye should be. Furthermore, Aunt Josephine finds Captain Sham charming, and won’t listen to the Baudelaires, insisting that his (fake) business card is proof enough of his identity. Later that night, the children are awakened by a loud crash, and they rush to the library to find the window broken and their aunt’s suicide note.
The three siblings are shocked because the note says that the children’s new guardian will be Captain Sham. Klaus becomes suspicious because it is filled with spelling and grammatical errors, not something Aunt Josephine would have done. They decide that Captain Sham is behind it and call Mr. Poe using the telephone. Mr. Poe arrives, but they cannot prove their suspicions, as the note is written in Josephine’s hand writing. While Mr. Poe and Sham are discussing matters at The Anxious Clown, the children purposefully start an allergic reaction with the peppermints Mr. Poe had given them, and escape back to the house. By this time, Hurricane Herman is already arriving on Lake Lachrymose. At the house, Klaus discovers that all the spelling and grammar mistakes in the note form an encoded message, the words “Curdled Cave”, presumably a cave somewhere on the shore of Lake Lachrymose. As the children search frantically for a map of the lake, one of the stilts that supports Aunt Josephine’s house is struck by lightning, and the house begins to slide down the cliff. After narrowly escaping with their lives, the Baudelaires watch as Aunt Josephine’s house crumbles and falls to the depths of Lake Lachrymose.
The Baudelaires hurry down to the docks to steal a boat from Captain Sham’s rental company, but the rental company is being guarded by one of Count Olaf’s henchmen, the one who looks like neither a man nor a woman. Sunny outsmarts it, and the children manage to sail across Lake Lachrymose to Curdled Cave, where they find Aunt Josephine hiding. Aunt Josephine claims that Sham forced her to write the note, but rather than actually committing suicide, she threw a chair through the window and went into hiding, leaving only the coded suicide note behind.
The Baudelaires convince her to join them, but as they’re sailing back across the lake, Lachrymose Leeches attack. The children are puzzled, since they haven’t consumed any food within the last hour (The leeches are blind and attack only if they smell food) but Aunt Josephine admits to having eaten a banana shortly before the Baudelaires arrived. The leeches ram their boat and devour it as it fills up with water. Violet successfully invents a signal for help, and Captain Sham rescues them in another boat just when the boat sinks in the water. Josephine pleads with Sham to spare her life, offering to give him the Baudelaires and promising to go far away and never tell anyone. Josephine almost convinces Sham to let her do so, but Sham is angered when she fusses over a trivial grammatical error in his speech. Instead, Sham pushes her in the water, where it is implied that she is devoured by the leeches, and takes the children with him back to Damocles Dock.