The end of a lease is an important event for landlords and tenants alike.
It can also be a time of conflicting expectations.
The landlord will usually expect their property to be returned to them in the exact condition that it was in when the tenants moved in –and if this doesn’t happen, are often happy to use the tenant’s security deposit to make it this way. Tenants, on the other hand, more often than not will expect their full security deposit back, even if there has been some damage to the rental.
In order to help manage expectations, and make the move-out process as simple and straightforward as possible, it’s important for both landlords and tenants to be on the same page. This includes having a good understanding of security deposits, and what they can and cannot be used for.
At the Time of Move-Out
At the time of move-out, the landlord or property manager is responsible for repairing any damages to the property, as well as assessing and documenting normal wear and tear. A good Property Manager will have a move-out routine that includes items like:
- Making sure the property is clean
- Replace all furnace filters
- Check smoke and CO detectors are in good working order
- Replace burnt-out lightbulbs
They’re also responsible for deciding who will pay for any repairs, maintenance, and cleaning that’s required to bring the property back into rentable condition.
This is the part of the process that’s often full of contention. When it comes to assessing damages, the landlord’s job is to assess the property and determine what falls under the category of damages, and what should be considered simply normal wear and tear. While damages are the tenant’s responsibility, things that fall under the category of normal wear, should not be taken out of the security deposit.
It's important that landlords not use the security deposit to pay for things that go above and beyond the scope of normal wear. They may attempt to use it for things like worn carpeting or faded paint on the walls, things that aren’t damages, but instead are just the result of normal usage. In most cases, landlords know to use the security deposit as intended, to repair damages to the property, only for the tenant to contest this, and seek to get it back. One important exception to this rule pertains to items spelled out in the lease. Examples might be cleaning or carpet cleaning. If these items are stipulated as tenant responsibility in the lease, the landlord is within their rights to use security deposit funds to pay for them, if the tenant left these items undone.
When it comes to repairs, though, the law stipulates that the security deposit should only be used for repairs to damage that goes beyond what’s considered to be ordinary wear and tear.
Colorado Law (C.R.S. 38-12-102) defines “normal wear and tear as “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 or chattels by the tenant or members of his household, or their invitees or guests.”
That’s a bit confusing for landlords and tenants alike. To help clear things up, here’s a list of examples of both normal wear and tear and damage.
|Normal Wear and Tear||Damage|
|Worn out Carpet||Torn, Stained or Burned Carpet|
|Faded Window Coverings||Torn, Mutilated or Missing Window Coverings|
|Worn out Keys||Lost or Missing Keys|
|Dirty Walls||Holes in Walls|
|Dirty Windows||Broken Windows|
When determining costs, the landlord will also make decisions about repairing versus actual replacement. In some cases, repair is the best choice. A good example of this would be a recent experience we had. A tenant had backed a car into the side of a home damaging a section of masonite siding. The siding was already in rough shape and the product was failing and the particular pattern was no longer available. The owner was planning to reclad the home in stucco in a couple of years anyway, so we just applied a patch using every the favorite body putty of every motorhead, "Bondo".
This repair worked out well because the owner already had a plan in place for new exterior stucco and was willing to kick the can down the road. Had this not been the case, the repair could have cost the tenant a lot more money. It’s important to note that in some cases, a landlord may charge replacement cost for an item that could be repaired with a short-term fix. So, for example, suppose a tenant punches a large hole in a wall. The landlord may choose to repair it in the short-term by simply patching it. While this temporary fix is fine for the short-term, the underlying fact is the wallboard is not the same, and the owner may choose to go back at some point and replace the entire wallboard so they are within their rights to charge for replacement.
Calculating Repairs Cost
If the item can be repaired, though, in most cases the landlord will choose to go that route. In this case, the landlord will deduct for labor, materials, and travel.
- Calculating Average Repair Costs-It’s also important for the landlord to determine material and labor costs based off of averages. This will help to avoid conflicts, and in the event of litigation, the courts will also require a list of repairs, and having average costs will make it easier to prove your case.
- Factoring in Depreciation-Depreciation also factors into how much the tenant ends up being charged for damages. Depreciation takes into account the fact that things have a life expectancy. This includes carpet, appliances, paint, tile, and more. This life expectancy needs to be factored into the cost of repairs or replacement.
For example: if a five-year-old carpet is destroyed and that particular type of carpeting had a 10-year life expectancy, the landlord may only charge the tenant 50% of the replacement cost. This is a good practice, and extremely important as it helps to prevent landlords from using deposit funds in order to upgrade their properties.
|Water Heater||10 Years|
|Carpeting (builder grade)||5 Years|
|Air Conditioning Units||7 Years|
|Interior Paint-Enamel||5 Years|
|Interior Paint-Flat||3 Years|
|Linoleum Tile||5 Years|
|Window Coverings (shades, screens & blinds)||3 Years|
These are estimates are produced by HUD. Manufacturer estimates will vary.
Assessing the Condition of the Property
Assessing the condition of the property is the responsibility of the landlord or property manager.
This will allow the landlord to determine whether there are any damages that are the tenant’s responsibility, and therefore should be paid for out of the security deposit. It also allows them to set the condition baseline before a new tenant moves in.
The challenge is determining and documenting the condition of the property before the damage occurred. This is important in the event that the tenant disputes the damages, or if the case goes to court, as having proof that the affected or damaged area was in good condition before will generally resolve the issue.
Documentation Methods Include:
- Written Reports: Written reports are an old method, but one that’s still in use today. With a written report, the landlord or property manager does a walk-through of the property and takes notes on its condition. Relying solely on written reports isn’t the best option, since it can be subjective, and doesn’t really provide much proof of the condition one way or the other. In most cases, property managers and landlords would be better served by using another form of documentation in addition to, or instead of a written report.
- Apps: Some landlords prefer to use an app that prompts them for pictures and notes. Although this certainly is a step above the old-fashioned written report, in that it makes it easy to capture images and notes to go along with your report, in some cases, they just aren’t thorough enough.
- Video: Video footage is an especially good method of documentation. To capture video footage, the landlord or property manager will perform a walk-through inspection of the home with a video recorder or phone, compiling a detailed video of the condition of the unit. However, this method can be problematic. When it comes to finding the affected item in question, having video footage means that the landlord will have to fast forward and rewind through quite a bit of footage. This can be time-consuming and uncomfortable in court. Just imagine fast forwarding and rewinding while the judge waits! Of course, you could capture image stills before you go to court, but again, this could be a time-consuming process.
- Pictures: Taking photos is one of the best ways to document the condition of a property. And it’s especially affordable since the advent of digital photography and affordable storage options. You can take hundreds of pictures of a property and if there's damage, it's fairly easy to go back and find the photograph that references the newly-damaged area. If you choose this method, just make sure you use your digital camera’s time and date stamp feature.
- 3D Imagery: Another new method for documenting the condition of a property, using 3D photography like the Matterport 3D camera allows landlords to do realistic virtual walkthroughs on properties. Since the footage is stored in the cloud, you can use the mouse to walk right up to the area that’s damaged and check to see what the condition was prior to their move-in. You can also take additional pictures inside cabinets, closets, and other places the camera can't see. A secondary benefit from these tours is showing prospective tenants –especially out-of-state applicants, the property before they agree to lease it.
Tenant Should Protect Themselves
Of course, there’s a lot that tenants can do to help ensure that they’ll get their deposit back at the end of their lease.
First, of course, tenants should ensure that they keep the property in good condition while they live there, and avoid anything that might cause damage to it.
Secondly, if a tenant would like to contest the landlord’s decision to apply the security deposit to damage, they can do so. The best way to do this is by being able to furnish proof of the condition of the property. In most cases, tenants should consider taking their own photos. Generally speaking, the more documentation, the better. Photos that are taken at the time of move-in could provide proof of the condition of the property, and images that are obtained, say; a month into the lease could be used as proof of damage caused by movers. It’s also a good idea to use a camera with a time and date stamp feature and to show any pictures of post-move-in damage to the landlord.
It’s also worth noting that if a landlord fails to follow Colorado security deposit laws, the tenant could be awarded up to three times the amount that was wrongfully withheld, plus attorney’s fees and court costs, so it’s important for landlords to ensure that they remain in compliance with the law, and handle the security deposit properly.
Being Clear on the Terms of the Lease
For tenants, it’s important to remember that normal wear and tear versus damage are broad definitions, and much of the detail about the condition that you’re required to leave the property in at move-out will be specified out in your lease.
It’s important to read the lease before signing it and to make sure you ask questions to ensure that you’re clear on what’s expected of you. For instance, in some cases a landlord may state that the carpets are to be professionally cleaned at the time of move-out, others will require you to perform regular, outdoor grounds keeping maintenance, so make sure you fully understand your responsibilities and requirements before you move in.
Successful and straightforward move-outs are always the result of good documentation and communication, from both parties. It’s important for landlords to spell out their expectations in the lease document, and for tenants to ensure that they’ve read the lease –and are clear on their responsibilities both in terms of maintenance, and the condition that they’re expected to leave the property in at the time of move-out.