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Fair Wear and Tear, Depreciation and Damage

 In Property Management

We often get asked the best way to handle damages that may arise at a final inspection following a tenancy.

There isn’t a section in the Residential Tenancies Act that specifically outlines the tenant’s liability for damages. As such, this information is based on our experience in the property management industry and mainly pertaining to industry experience dealing with the Magistrates Court, REIWA, and DMIRS. Should this issue ever be taken further, a Magistrate will factor in, age, depreciation, general use and wear and tear as a means to calculate the tenant’s liability. Most items have a 7 x year depreciation life span schedule when dealing with residential tenancy matters. They will also then factor in the proportionate area of damage, as unfortunately, tenants are only liable for the specific area of damage, regardless of whether a whole item/area needs to be replaced/repaired.

An example would be a situation where a tenant gouges a floorboard in a bedroom. Even if the entire floor in that bedroom has been re-sanded and sealed to rectify the issue, the tenant would only be liable for the specific area of damage, i.e. 20% of the room. This would mean that the tenant would pay for 20% of the cost and the owner would have to cover the remaining 80%. Then on top of this, it would also factor in age/depreciation.

For example, the floor has a 7-year lifespan and the flooring was 3.5 years old – therefore ½ of the floor’s depreciation value has already been expended.

If it costs $1,000.00 to sand/seal the floors in that room, we have to then factor in the existing depreciation of 3.5 years (1/2 life), reducing the cost from a tenants liability perspective from $1,000.00 down to 500.00 (being ½). Then from this remaining $500.00 allowing 20% = $100.00. This would mean the tenant would be liable for $100.00 and the owner would be liable for the remaining $900.00 of the repair.

Another example; should a tenant put an iron burn mark on a living room carpet that is 10 years old, if the owner elects to replace the carpet in this room, the tenant would not be liable to pay for the cost of the replacement carpet.

The existing carpet would have seen out its depreciation lifespan (being over 7 years) and therefore the owner has received the full value of the use of the carpet. An owner cannot enforce liability on a tenant to cover the cost of replacement carpet in this situation.

There are many different potential scenarios, so it is always best to discuss them with your property manager who will be able to best guide you.

 

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