A rental property is just like an automobile. It wears out as it’s used.
With an automobile, you have to change the oil and buy new wiper blades, new tires, new brakes, etc. A rental property is like this; it also wears out over time, and if you don’t maintain it, the property will let you down.
Depreciation and Wear and Tear
Even the federal government recognizes that rental properties wear out with the passage of time. The IRS allows landlords to depreciate their rental property due to wear and tear. Some components of a rental property wear out suddenly. A good example would be the air conditioning system. It can break down suddenly, and you very quickly have to repair or replace it. Otherwise, you will have a very unhappy tenant.
Cosmetic Fixes are Necessary
Other components don’t suddenly fail but wear out slowly. These include cosmetic items like paint and carpet. Cosmetic items become important when your current tenant moves out and you have to get your property ready for a new tenant. You must make the property rent ready before you list it and attract new tenants.
Using the automobile analogy again – if a buyer goes onto a car lot looking for a new automobile, it is important to them that the major systems like the engine and brakes all work. The buyer will also find the cosmetic items important. He or she is not going to want to buy the car if there is a big scratch down the side or a caved-in bumper. A rental property follows these same standards. Even if the plumbing and air conditioning and the roof are all working, a renter won’t want the home if the cosmetics are not good. If the interior paint looks tired or the carpet has heavy wear patterns, you have to address the cosmetic items. This is best done between tenants.
Landlord and Owner Responsibilities
Since systems and functions wear out over time no matter who is living in the property; you cannot charge a tenant for normal wear and tear. These items are usually a landlord expense. A landlord also cannot claim the full cost of items that have a service life and wear out with regular use. Carpets and paint have to be depreciated over the service life so if a replacement is needed, the cost is usually shared by the landlord and the tenant. For example, interior paint may only have a three to five year service life and if it’s older than that, a landlord should not be charging the tenant the full cost of repainting if the tenant has only lived there for one year.
The bottom line is: you cannot charge a tenant for normal wear and tear. Although tenants are expected to return the property in a condition that’s similar to what it was at the time they moved in, it’s nearly impossible to return it in exactly the same condition. Properties wear out, and as a landlord you should expect to get it back clean and without malicious or intentional damages.
If you have any additional questions about the repair costs you can and cannot deduct from a security deposit, please contact us at Hoffman Realty.