What You Should Know About "Normal Wear & Tear"
One of the most time-consuming processes as a landlord is the tenant turnover procedure. When one tenant moves out and a new one is slated to move in, there are a slew of steps you need to take to ensure everything is in order.are a slew of steps you need to take to ensure everything is in order.
At the time of move out, most landlords will assess whether or not the departing tenant will get their full deposit back or if the deposit is needed to cover the cost of damages caused during their stay. The difficulty with this part of the move out process is determining what is considered tenant damage and what is considered “normal wear and tear.” Due to the ambiguous nature of most landlord-tenant law in regards to “wear and tear”, it can be hard to decide what to charge for and what to eat as normal landlording costs. Read on to learn more about how you can determine the difference between wear and tear and tenant damages.
**Always be sure to consult with a local attorney who specializes in landlord-tenant law. Each location has their own unique set of laws and everything from how you store the deposit to how much you are required to give back varies greatly.**
What Is “Wear And Tear”?
First off, the law dictates why you are allowed to collect a deposit up front and what that money is to be used for. For example, in my home state of Colorado, a security deposit is defined as such:
“Also called a damage deposit, a security deposit is a tenant’s advance payment of money to the landlord to secure against future lease violations by the tenant, including nonpayment of rent and property damage beyond ordinary wear and tear”
What gets confusing is the second part of this definition, which references “ordinary wear and tear.” While it is simple to determine whether or not someone owes you for unpaid rent, it is far trickier to determine what damages are due to tenant negligence and abuse and what is a result of normal wear and tear.
To gain a better understanding, I looked further into the local law here. According to Colorado normal wear and tear is the “deterioration which occurs based upon the use for which the rental unit is intended, without negligence, carelessness, accident or abuse of the premises or equipment . . . by the tenant or . . . household or . . . guests.”
The Takeaway: For something to be considered normal wear and tear, the damage needs to correlate to everyday, normal use of the property. To be considered tenant damage, it should be caused by irresponsible unintentional actions or intentional actions.
Looking At Practical Examples
To better understand what you should be itemizing to deduct from your tenant’s deposit and what you should be factoring into normal landlording costs, check out the following chart. This information is based on the regulations HUD has outlined and covers some of the most common damages landlords find during walkthroughs.
When it comes time to send your tenants back their deposit, if you need to deduct money for damages, you will want to handle the process carefully. Make sure that you keep receipts and written records for all repairs.
How To Handle Deductions For Tenant Damages
When you send back a partial deposit, or a note explaining why you are keeping the entire deposit, you should include a Landlord Tenant Closing Statement.
On this statement include the original amount of the security deposit paid, then an itemized list of deductions including damages, cleaning fees, unpaid rent, uncollected late charges, and uncollected interest.
This ledger should subtract all the costs from the deposit and either dictate how much they will be receiving or how much is owed. An example of what the ledger might look like is found below.
Remember, there are a myriad of laws surrounding security deposits. If you are new to landlording, it is a good idea to spend time studying your local regulations to be sure you abide by the law. While it is never fun to inform tenants that they won’t be getting all their money back, if you follow your local law and keep things professional, you will save yourself from losing out on profits due to property damages.