Providing an itemized list of damages will set a clear expectation for your tenants, should any property damage occur during their stay.
As careful as you are as a landlord, you may have to occasionally deal with property damage. Depending on the type of damage, when it occurred and how drastic it is, the tenant may be liable to pay for the repair.
In this article, we talk about the circumstances in which a tenant should pay to fix damage, where the money should come from and we provide you with an itemized list of damages template that you can add to your lease.
You should monitor the condition of your rental property before, during and after your tenants have lived there. This means carrying out a move-in inspection, routine inspections during the tenancy (for example, every six months) and a move-out inspection.
To help you keep track of the state of your property, you should utilize inspection checklists and also take photos and videos for your records. Important documents and photos should be stored safely and securely using purpose-built property management software so that they are properly organized and easily accessible via the cloud.
When you are carrying out the move-out inspection, you should look out for any damage and compare photos with those taken during the move-in. The original photos will serve as a reference point and evidence of the condition of the property before it was occupied.
If you do not have original photos of the property to look back on (or a checklist with written descriptions of the condition of the property, signed and dated by both you and the tenant), it will be hard to prove that the damage was not preexisting.
The security deposit, which is collected at the beginning of the lease, can be used to cover property damage, cleaning, key replacement or back rent. It is important to note that it cannot be used to cover the cost of fixing normal wear and tear.
How much you can charge as a security deposit varies by state, so you should check your local laws before requesting a deposit. Furthermore, the period for returning a security deposit also depends on the state so it’s important to check that too. This is relevant if you are using a security deposit to fix property damage that you notice during the move-out inspection.
To easily manage property damage and prevent any confusion down the line with your tenants, you should provide them with an itemized list of damages. This, along with the responsibilities of the tenant, should be included in the lease.
To help you determine the cost of repairs, it’s a good idea to get quotes from local contractors who will be doing the work. Note that any quotes you receive are estimates and subject to change (depending on the damage, the contractor fees and the cost of materials).
Considerations that should be taken into account are the age of the item, original cost, repair or replacement, time spent and special skills needed to repair.
Even if you are fixing minor issues yourself, bear in mind that you should be recording the time spent on the job, plus the cost of resources. For tax purposes, the maintenance of your property counts as a business activity. This means that even if you are not a real estate professional, you can qualify for the QBI deduction through the time spent doing repairs.
Property damage should be dealt with as soon as it is brought to your attention (either as the result of an inspection or if the tenant has notified you) so that a small problem does not snowball into a costlier, more time consuming one.
When scheduling repairs and maintenance, you will need to give your tenant sufficient notice to enter the property. The exception to this is when there is an emergency, for example there is smoke, fire or flooding.
Prevention is better than cure, so it’s a good idea to try and reduce the likelihood of property damage occurring in the first place. Aside from offering an itemized list of damages, which will hold tenants accountable as you set the right expectations from the get-go, you can also strengthen your tenant screening process.
While you could do everything by the book and still end up with careless tenants, thorough tenant screening can reduce the probability of accepting tenants with a troublesome history.
With Landlord Studio’s built-in tenant screening feature, you will receive a detailed report that outlines a prospective tenant’s credit score, rental history, eviction history and more. Furthermore, you can supplement this by collecting references from previous landlords to get a better idea of whether the tenant is responsible.
If you are ever asked to give a reference for one of your previous tenants, informing the new landlord of any issues related to property damage can help them with their own screening process.
It is not legal for a landlord to charge for normal wear and tear or to deduct from the security deposit to cover this. Normal wear and tear includes things like discoloration of the flooring, faded paint and squeaky door hinges.
The tenant should be expected to keep the property clean and tidy. Only in circumstances where the property has been neglected and a deep clean necessary, can the tenant be charged for cleaning.
Property damage is no fun for anyone involved. Nonetheless, it can be easily and fairly managed with some careful planning, diligence and the right tools.
By adding our itemized list of damages template to your lease, carrying out inspections and correctly managing security deposits, you could reduce or even prevent property damage, leaving you with more time to focus on growing your portfolio and achieving your financial goals.
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