When tenants move out, it's time to process the security deposit. How does a landlord define normal wear and tear vs damage? How do you decide when it's reasonable to charge a tenant and what amount to charge?
As property managers, we focus on making decisions based on sound reasoning and experience. Landlords don't like to pay for repairs, but tenants also want their security deposit returned. If we have to stand in front of a judge to defend why we charged a tenant for something, we cannot base the decision off emotion or how well we like the tenant. Overzealous landlords are why we have so many laws to protect tenants. The IRS is an established resource. We've also seen how different building materials hold up in many property types, so we can pull from our years of experience.
Materials are expected to deteriorate over time. Therefore, major components such as appliances and flooring have a depreciable life and general life expectancy. Not all flooring, blinds, appliances and paint are the same, but definitely a range of time exists for how long materials hold up under the average tenant.
As tenants pay rent, they are paying for use of all the components inside a residence. This means the landlord is receiving compensation for the use of those components. Therefore, if a tenant damages something, we cannot charge the tenant the full cost to replace something unless the item is new or nearly new. Repairs are generally charged at 100% of the cost, but replacements are prorated based on life expectancy and current age.
Steps to Address Damage or Excessive Wear and Tear:
1. Repair the item if parts are available and the repair will look reasonably good once completed. This saves the tenant money as well as the landlord.
Example 1: The tenant drops something in the bathroom sink and has a chip. The tenant is charged for the full cost of the repair.
Example 2: The tenant spills a large drop of red wine the size of a quarter on the carpet that won't come out. The carpet is fairly new and seams blend really well. A square of carpet is cut out that has the red wine and a piece of carpet is pulled from the hall closet to patch it. The tenant is charged for the full cost of the repair.
Example 3: The tenant mounts a TV to the wall. The hole will be filled and patched by the painter. The tenant is charged for repairing the hole and the painting the area as needed to match.
Example 4: The tenant leans too hard on a cabinet door and the door breaks away. The cabinet door is then repaired and the tenant is charged for the full cost of the repair.
2. Replace the item and prorate the cost for replacement based on the number of years reasonably left on the item.
Example 1: The tenant drops something heavy in the bathroom sink and breaks the sink. If the sink is really old and would be a needed improvement to the property, the tenant would not be charged. If the sink is five years old and will be replaced with the same kind of sink, then the sink replacement cost would be prorated based on a 27.5 year life span. If it costs $100 with installation, then the tenant would be charged $81.81.
Example 2: The tenant spills red wine in several places all over the living room carpet. The carpet is two years old. The carpet is prorated based on a five year life expectancy, so 60% of the life should have been remaining, so the tenant would be charged 60% of the cost to replace the carpet in that room and perhaps a hallway that is directly connected to the living room.
Example 3: The entire residence needs paint after one year of tenancy and had been painted just before the tenant moved in. The size of the unit and the quality of paint would be factored into how long paint should be expected to last. Various legal experts in Washington State have recommended using two years as the expected life of paint. HUD references three years. If two years is used as the benchmark, the tenant would be charged for the full cost to patch the walls as needed and then 50% of painting costs. If three years is used as the benchmark, the tenant would be charged approximately 65% of painting costs.
Example 4: The tenant is really hard on the cabinet doors and all doors are now in rough shape making replacement necessary, but the finish didn't look great at move-in. The cabinets are 35 years old and improving the cabinets would bring the owner more monthly rent and make the property easier to rent. The tenant may or may not be charged anything depending upon the circumstances such as length of time the tenant lived there and quality of the cabinetry. This is when having a list of reliable vendors to assess options for repair, replacement or improvement is vital.
If a tenant challenges security deposit charges in court, we need to be confident you have a solid chance at winning. We will be professional, go with great documentation and demonstrate our supported reasoning for the charges. Going to court is costly for an owner because we have to gather all the documentation to present in court, travel to court, sit in court to wait our turn which can take hours, and yet still have a chance at losing more of a landlord's money based on the opinion of the judge.
Setting reasonable standards for return of the security deposit prevents problems and also follows the intent of the landlord tenant laws. Our motto is to keep things moving forward as that is the most productive use of our time and your money.
Here are some U.S. government resources so you can educate yourself on reasonable life expectancy of common rental property components. Be sure to check with your own legal counsel prior to charging tenants for damages:
https://www.irs.gov/publications/p527 - see Recovery Periods Under GDS (General Depreciation System)
https://www.hud.gov/sites/documents/HSG-06-01GAPP5GUID.PDF - see page 7, Sample Life Expectancy Chart