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How to Be Reasonable As a Landlord With Apartment Wear and Tear and Security Deposits

by Drew Sygit on July 30, 2014 · 15 comments

  

How do you go about determining what damage a tenant was responsible for after they move out?

There is always damage — that’s not a question. But it can be surprisingly difficult to determine, for example, whether water damage to a windowsill was caused by a spill that was left untended or by natural condensation that gathered on the window, fell, and dried up all while the tenant was sleeping.

Here’s what’s NOT reasonable: it’s not reasonable to charge the tenants for absolutely everything that might have been their fault. But it’s also far from reasonable to absorb 100% of the repair expenses yourself — that just leads to you feeling powerless and abused.

The Ideal Situation

The ideal situation makes the process fairly painless: before a tenant moves in, you take a camera, a video recorder, a floor plan on paper, and a pen, and you explore the house thoroughly.

Related: Landlord’s Guide to Security Deposit Best Practices

Take notes on absolutely everything that isn’t exactly what you would want to see in a perfect rental home. Then, take pictures of it all. Then, take video of it all. Then scan in those papers and save the digital versions of everything in a secure location, with a secure backup.

Take note of:

  • Paint quality
  • Damage to walls, floors, and ceiling
  • Window treatments
  • Window and door frames
  • Countertops
  • What appliances come with the property and their condition
  • Any and all pre-existing damaged spots
  • Stains in the carpet
  • And basically everything.

Take excellent notes, too: don’t just write “stain on carpet.” Write “Stain on carpet, NW corner bedroom, approx. 5′ across, splatter, red, probably wine. Won’t come up with steam cleaning or scrubbing.” Don’t just write “hole in bathroom wall,” write “fist-sized hole in bathroom wall opposite mirror behind freestanding shelf.”

Then, when the tenant moves out, you do the same thing all over again, using exactly the same process. Take all the same kinds of notes, just as detailed, with pictures and video. That will give you an excellent comparison between the move-in and move-out conditions, which you can use to estimate repair costs.

Wear and Tear

Now, a goodly portion of those repair costs fall under the umbrella of “normal wear and tear,” and a good rule for wear and tear is to compare how long you’d expect an item to last in your house vs. how long it’s been in this house.(NOT how long the tenant was there — how long the ITEM was there.)

Related: 10 Renovation Tips That Will Save You Time and Money

For example, the life expectancy of a dishwasher is about 10 years. If the dishwasher was 9 years old when the tenant moved in and the tenant was there for 32 months, you can expect to replace the dishwasher — and you can’t expect to charge the tenant, no matter what the dishwasher looks like when they leave.

For walls and ceilings, the informal standard is pretty well-set: if it takes more than a coat of paint to eliminate the problem, it’s gone beyond wear and tear.

For window treatments, fading is wear and tear; tearing, burn marks, or broken machinery are not. (That said! If you’re going to replace them because they’re faded, you can’t legitimately charge them for the wear and tear because it was already a cost you were going to bear.) While it’s made for a single county’s use, a pretty excellent guide is available here.

The Worst-Case Scenario

The worst-case scenario, at least in terms of determining cleaning charges, is that you inherit or otherwise acquire a rental property with a tenant living in it and have no records whatsoever of what the property looked like before they moved in.

Unfortunately, there’s no great way to handle this situation. To limit your exposure though, you should get into the property ASAP and follow the recording process outlined here to document the condition as of dd/mm/yyyy. While doing so remember that you’re not entirely responsible for any damages — and neither are they.

Probably the best way to deal with the situation upon their eventual move-out is to figure out the absolute minimum that it’ll cost to get the place ready for the next tenant, subtract any of those costs that are incurred by normal wear and tear, and then charge the tenant 1/3rd of that amount. Then, start the above-mentioned recording process promptly and be ready to never have to deal with that situation again.

Have you ever had an worst-cast scenario experience? Can you share how you handled repairs?

Be sure to leave your comments below!

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{ 15 comments… read them below or add one }

Darren Sager July 30, 2014 at 7:44 am

Great post Drew! One thing we always do is make sure we do a walk thru with the tenant and have them sign off a form which goes into detail on every room as well as back it up with pictures & video. And here’s an extra step we do with them: pull out the stove and fridge (if possible) to show them the place is completely clean.

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drew July 30, 2014 at 7:57 am

DARREN: we actually video tenant Move-In’s with them pointing out everything that is wrong with the property at the lease signing, which is done at the property. Michigan law also gives them another 7 days after the start of the lease to update their Move-In Checklist.

We know many of our competitors sign leases in their offices and leave it up to the tenant to send in the Move-In Checklist afterwards. The one’s we’ve spoken with actually hope the tenants don’t send it back, allowing them to charge whatever damages they want to the tenants when they move out. We don’t think that’s a sound biz strategy and prefer doing the checklist with the lease signing. The video though, is invaluable as we send the tenant a copy of their Move-In video, their Security Deposit Charges and a copy of the Move-Out video we do (without them present to try to intimidate our inspectors) – which takes care of 99% of any security deposit charge challenges:) Occasionally, we do make mistakes and the videos hold us accountable for correcting them with the tenant, so we think we’re very fair about the process.

Of course, there are always tenants that expect 100% of their security deposit back no matter what condition they leave the property in, but that’s a topic for another post…

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Adrian Tilley July 30, 2014 at 9:04 am

“Probably the best way to deal with the situation upon their eventual move-out is to figure out the absolute minimum that it’ll cost to get the place ready for the next tenant, subtract any of those costs that are incurred by normal wear and tear, and then charge the tenant 1/3rd of that amount.”

I would NOT do this. If you can’t show that the tenant was responsible for the particular damage for which you are charging, you can get in a lot of trouble (at least here in Colorado).

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drew July 31, 2014 at 6:35 am

ADRIAN: we clearly stated, “subtract any of those costs that are incurred by normal wear and tear”, but maybe should have emphasized, “anything the tenant was not responsible for”. Thanks for pointing that out so we could better clarify:)

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Wayne E July 30, 2014 at 1:26 pm

Drew,
How about carpet? I’m a new landlord experiencing my first turn over. The 12 yr old carpet was in great shape at check-in. And now it’s WASTED with pet stains and spills. The quote to replace carpet is $2,000. I’m going to go ahead and spend $5,000 on laminate. How do I determine if/how much to charge the tenant?

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Wayne E July 31, 2014 at 6:39 am

BTW, this tenant has resided in the property for only 8 months

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Ryan Swan July 31, 2014 at 10:09 am

After this learning experience, do yourself a favor and start to get rid of carpet in your rental(s). Having easily cleaned tile/concrete/laminate floors will eliminate so much headache/expense for you and tension between you and tenants. All of my rentals are ranch homes with slab foundations, so I’m just having the concrete slab polished and stained in each room. I couldn’t be happier.

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Kendall Todd August 4, 2014 at 5:05 pm

You might want to consider plank vinyl, it is much better for tenants, and I believe is waterproof. I put it in my rental this yr and so far am very happy with it. I did spring for a little extra cash though and buy the higher quality allure plank type. It is actually a floating floor. The problem with laminate is that water can get under it and sit there and mold.

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drew August 5, 2014 at 5:13 am

KENDALL: we’re looking into vinyl planking instead of the ceramic we’ve been using. Seems a tenant always manages to crack a tile or two and manufacturers area switching tile colors/textures so quickly these days that you can’t match them. We do keep a few extras onsite, but in the long run it’s going to be an issue with ceramic. Vinyl looks promising we just have fully completed our cost comparison yet.

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drew July 31, 2014 at 6:48 am

WAYNE: Carpet (and walls/paint) are probably two of the most difficult, if not THE most difficult, damages to assess. Everyone has different opinions on what “Normal Wear & Tear” is!

We no longer rely on just a written Move-In Checklist (how do you really define a “scratch” or “stain”?) and prefer video over pics to better address issues like these.

With carpeting you can also get into depreciation issues just like with your insurance company if you total a car. It’s a really good idea to keep any receipts for carpeting, flooring & painting to justify replacement/repair expenses you choose to charge a tenant. We’ve actually used them in court when a tenant has chosen that path to refute our security deposit damage charges (we really haven’t lost in court yet).

It really comes down to what you think is fair, with the understanding that you may upset a tenant enough that the may post something scathing about you/your company online and may choose to battle you in court over it. Often, it’s better to compromise with the tenant and avoid all that. Just remember to keep it a BUSINESS decision and keep your personal feelings out of it.

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Kimberly H. July 31, 2014 at 8:32 am

Great post. I am going to be figuring out soon what the charges are from my last tenant and that Montgomery county publication does help.

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Eric July 31, 2014 at 4:07 pm

I my Section 8 days, no one got a deposit back. The places were a mess. I have a few horror stories on my blog with pictures…

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drew August 5, 2014 at 5:11 am

ERIC: Section 8 tenants have to be screened just as well as any other tenant. There is also the “entitlement” mindset to deal with.

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Lynn Harrison August 1, 2014 at 12:07 pm

Drew, the part about inspecting and taking good notes before a tenant moves in is great advice.

However, with all due respect, many states and cities have very specific laws on what you can and can’t charge a tenant for. Carpeting, paint jobs, plumbing etc have specific years of “life” spelt out. In California (and possibly anywhere- law or not) charging a tenant for 12 YO carpet replacement for example would not stand in court and the landlord could be charged court costs, lost work hours etc in addition to having to return the money. Not to mention it would piss off the judge and he or she would be apt to null other expenses as well if they are spelled out in small claims court.

In smaller towns (and neighborhoods) what happens is word gets around if a landlord tends to keep all or some of the deposit no matter who’s fault. This leads to tenants refusing to pay last months rent in lieu of the deposit or worse…. leaves all of their crap behind and the place filthy or doesn’t fix or notify you of any repair work that needs to be done to protect your investment.

In the long run your reputation may be more valuable than a few short sighted hundred dollars.

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drew August 1, 2014 at 2:26 pm

LYNN: Thanks for contributing to the discussion. We’re not advocating charging what’s not legal or fair. We do agree that it is sometimes a better business decision to pay someone to go away as opposed to sticking to your guns:)

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