It’s a familiar story. Tenant moves out. Owners get upset at what they see as damage to their property. Tenant gets just as angry, believing the damage is simply “average wear and tear.” The fight is ON! Dealing with damage to a rental property when a resident moves out can be a very stressful situation, not to mention a huge undertaking. In order to be successful as a landlord, it is imperative that you have a good understanding of what is “wear and tear” and what is “damage.” In this article, I would like to explore not only the differences between the two but also the steps you can take as a landlord that will help streamline the move in/move out process for you with as little stress as possible. What Is Normal Wear & Tear in a Property? “Deterioration that results from the intended use of a dwelling, including breakage or malfunction due to age or deteriorated condition.” Normal wear and tear is the expected decline in the condition of a property due to normal everyday use. It is deterioration that occurs in the course of living in a property, and it is not caused by abuse or neglect. Examples of normal wear and tear might include: A couple of small stains on a carpet A couple of scrapes or dings in a wood floor Color of carpet or hardwood fading due to exposure to sunlight Dirty grout Loose door handles Silver finish on bathroom fixtures beginning to wear away Dustiness Dirty blinds Small pin holes in the wall (unless they are excessive) Worn out batteries in smoke and carbon monoxide detectors Fading in curtains, paint, or wallpaper due to age or sun exposure Broken light bulbs Normal dirt and wear in carpets Plumbing issues arising from normal use Understand that expenses related to normal wear and tear cannot be deducted from your security deposit. The next question you need to ask yourself is what is not normal wear and tear. This would be damage caused by neglect, misuse, or excessive force and can fall outside the definition of normal wear and tear. Related: I’ll Never Evict a Tenant—Here’s Why What Is Damage in a Property? “Damage is not naturally occurring. It is harm that affects the value, usefulness or normal function of property. This damage can be committed on purpose or through neglect”. Examples of damage might include: A smashed bathroom mirror A broken toilet seat A hole in the middle of a door Damaged or missing door handles/locks Carpet soaked with pet urine Numerous or sizable holes in the wall Appliances broken as a result of misuse Unapproved paint on the walls Excessive dirtiness in bathroom or kitchen Pest infestation Broken doors or disabled locks Pet stains, burns, or holes in carpet Damage can be further defined as issues that are unexpected. For example, it is not normal or expected for there to be a large hole in a bedroom wall after a resident moves out of a unit. And like everything in life, there are other factors that must be taken into account when deciding how much normal wear and tear and how much actual damage is being done by a resident. An example of this would be the length of tenancy. If a resident stays in a house for four years, there will be more wear and tear than if they only stay for one year. Life expectancy of the item should also be taken into consideration. In this instance, think about flooring. Ceramic tile flooring would have a much longer life expectancy than carpet, etc. How to Avoid Disputes In order to make the rental process largely headache-free, here are some things that a landlord must always remember. Security Deposit The landlord should collect and hold a security deposit from each tenant. This is not the landlord’s money, however. This money is still the tenant’s money that is being held in lieu of the tenant not performing per the lease agreement. Many landlords think that they can spend that money or use it as a reimbursement to themselves as soon as they get it from the tenant. That money is legally still the tenant’s; the landlord is simply holding it in case of any damages. That mental shift is a large part of why these challenges happen. The security deposit disposition is the payout that the tenant receives after moving out, minus the amount that is deducted for a specified reason. This normally causes disputes between both parties (landlord and resident), regarding perceived damage to the rental property upon move out and what was expected to be returned to both parties. The security deposit disposition is the number one reason that landlords get sued. It is important to remember that different geographic regions and states have their own rules and regulations as to how much can or cannot be deducted, as well as the time frame as to when the security deposit must be returned back to a resident. For example, in Houston, Texas, you have exactly 30 days (postmarked) to get the remaining security deposit back to the resident—or you’re liable for three times the amount. The challenge with the security deposit issue is that often neither party really has any type of system or formula to determine how much of the security deposit they will (or will not) be returned. Quite often, this is an assumptive prediction based on the perceived level of wear and tear versus damage that’s done to the property. Frequently, the amount that is deducted from the security deposit is determined by how much work the landlord must personally have to do to get the property rent-ready or their opinion as to how badly the property was damaged. As a landlord, you must take into account the fact that there are rules, regulations, and laws that protect both parties in determining this amount. Who is responsible?! That is the burning question! The best way to know who should pay for the repairs is with documentation. This turns the issue into a fact and not an opinion about the property’s condition. First, document the condition of the house before the resident moves in. Do this with date-stamped photographs and video. Expect disputes regardless—but have the proof to back your charges. Move-In and Move-Out Walkthrough Inspections Doing an initial walkthrough with the resident is one way to avoid disputes regarding wear and tear versus damage. A landlord and new resident should walk through a property prior to the resident moving in. Pictures and video should be taken so that this can be used as a baseline, meaning there is no relying on memory a few years down the track when the resident moves out. I also suggest adding a checklist to your lease agreement of all rooms, appliances, fixtures, etc., where residents should note the condition upon move in. Related: The Landlord’s Ultimate 34-Step Property Management Checklist When the resident is moving out of the rental unit, the landlord and resident should again walk through the property to document any changes to its condition. Again, record everything with both pictures and video, so that there is no misinterpretation of what is (or is not) damaged or worn. The landlord can point out any issues he has with the current condition of the property and explain why he will be taking deductions from the resident’s security deposit to cover those damages. He can use the initial set of pictures and video to further justify his position. The resident can agree with this or dispute the landlord’s findings. Expectation Meetings I have always felt it is far more productive to have expectation meetings with your resident prior to moving in than to have to handle it post-move out. Why give them the opportunity to claim this was never discussed with them (this being the upkeep of the property)? One suggestion is to set price points before the resident moves in of possible costs of items that are damaged. Putting this into the lease agreement, which both parties are aware of up front, is a good way to set a baseline expectation that you are serious about keeping the property in good shape. Upon the move-in and move-out walkthrough, both landlord and resident should sign the document, acknowledging that they both agree with the current condition. Routine Inspections One of the best ways to avoid disputes is to ensure you carry out periodic inspections of your investment property to ensure it is being well cared for and routine repairs are being made. These inspections should address the following: The interior of the property is being maintained in a clean and tidy condition The exterior of the property is being maintained in a clean and tidy condition The property is not being damaged in any way There are no more than the number of people or pets specified on the lease agreement living at the property Lease agreement When in doubt, always refer back to what is in writing and signed. This is commonly referred to as the “lease agreement.” What is stated in this agreement is really what will prove or disprove your case in a court of law. You cannot dictate what you “think” or “feel” is the right way to get the property returned back to you when the resident leaves—or what you think is a fair amount of compensation—in retrospect. The more clearly it is defined in writing in the beginning, the easier things will be when it is time to discuss and address this situation. As I stated earlier: pictures are potentially worth thousands in words! The key is to have documentation of the condition of the property—in detail—prior to the resident moving in. And then, they should be documented equally as detailed at the time of move out. Without this, be prepared to give the deposit back! You don’t stand a chance in court. And if you lose, you might have to pay far more than the deposit in the end! In Conclusion Newer investors (or maybe people who are emotionally attached to their properties) tend to have a very hard time making these black and white calls. It could be because of their attachment to the property and/or because they failed to set the standard of what is acceptable and what is not in writing prior to move-in. Many times it becomes an emotional decision, not a mathematical or business one. I, personally, have never seen anyone who is upset make an emotional decision and later on tell me it was the right one—they were happy they reacted that way. Remember, this is a business; it needs to be treated as such. You will not always have all the answers; however, as things arise, you will be able to create standards for situations that will come up during your investing career. Pretty soon, you will see all possible scenarios, and you will use past experiences as lessons of what not to do again—or what you can do better in the future. Questions about the above? Points to add? Let’s talk in the comment section below.