When a lease ends, the rental property will need to be cleaned and any repairs fixed. Once a landlord has decided to charge the tenant’s security deposit you will next need to decide, how much to charge for repairs?
We have looked at what a landlord can charge in previous blogs, Today, I am going to dive into how much to charge the security deposit for repairs.
In the event of the security deposit charge being challenged by a tenant, and assuming a landlord is right in the assessment of responsibility the next step is to make sure the charges have been charged fairly. This can be broken down into two categories.
Are the Charges Correct?
Some repair items are quite simple to put a price tag on. If there are holes in the walls, a landlord would be entitled to charge what it cost to make the walls good.
It gets a little more complicated when we begin assessing charges for replacement items. If a tenant moves out, after destroying a carpet, a landlord probably feels they could charge for a replacement carpet. Unfortunately, this is not the case. The landlord can only make a charge on the security deposit based on the age of the carpet.
Furthermore, the IRS recommends that carpet has a life expectancy of 10 years. Therefore, even if the 7-year-old carpet was in great condition when her tenant moved in, she could only charge 3/10th of the original amount to replace.
Is the Amount Charged Fair?
It's relatively easy to demonstrate the cost of work when the landlord hires a vendor. There is an unwritten understanding that a landlord would never knowingly pay above market cost for service. As a result, vendor receipts are usually enough to prove to a judge that the cost of repairs is fair.
The matter is complicated somewhat when a landlord performs their own repairs. According to the IRS, landlord activity is a passive investment. Landlords cannot be rewarded for work performed on their property. This complicates matters when a landlord is trying to calculate the cost of their own time when performing a repair.
Can I Still Charge if I Don’t Make Repairs?
Contrary to popular belief, a landlord can make charges to a security deposit without making repairs.
As an example, let’s consider burn damage to a countertop. The landlord may decide the damage is cosmetic only and not worth replacing the countertop. This is a business decision and the landlord can still charge a fair amount for repair or replacement. A landlord would calculate the cost on either a repair basis (using estimates) or a replacement basis (using the schedule above)
As with most things in life, the recommendations we have discussed today are best practices. Also, the penalties are the worst case scenario. There are many landlords in Florida who successfully throw caution to the wind and apply their own rules. You just don't want to be the landlord that gets caught.
Finally, the landlord that arms themselves with knowledge and applies rules consistently and fairly, inspects their property regularly, and deals with repairs efficiently should be successful in their real estate goals.
Hungry for more? Check out the two blogs below or visit our Owner Resource Center here to find answers to all of your questions. Or give us a call at (941) 782-1559, we’d be happy to answer any questions you may have.