Appropriate use of security deposit?

[sol]

Landlords,

We're losing a six-year tenant (and have a new couple moving in shortly).  Very soon, I will have to do the final walkthrough with the old tenant to inspect the place and check off the list of items that goes with the lease.

What is appropriate for charging against his (one month's rent) security deposit?

For example, the carpets were not in great shape six years ago, but they are much worse now and probably need to be replaced.  The electric glass stovetop is now chipped.  The front door hardware is broken.  Rooms need to be painted. 

We've been lucky with tenants in the past, and have always happily returned 100% of the deposit if they fixed whatever they had broken, but we've never had a tenant stay anywhere this long and there is some accumulated damage. 

I consider the painting and front door to be normal landlord maintenance issues, and would probably pay for those myself.  I think the chipped stove top is tenant destruction and he should pay to replace it.  The carpets I'm undecided about, since his kids really trashed them.  My wife doesn't necessarily agree with any of that.

If it matters any, his rent has been dirty cheap for the area, but he also doesn't call us very often for maintenance and he took pretty good care of the place himself.

Any advice for me?  I don't have a lot of time before decisions need to be made.

[ketchup]

I'd say they should pay to replace the stovetop.  The carpet is fuzzier.  Maybe charge them a pro-rated amount?  They put 10 years of wear on the carpets instead of 6, with a total expected life of 15 years for the carpet, so charge them for about 1/3 of replacement since you have to replace it sooner than you otherwise would?

The rest I'd chalk up as "normal wear and tear."

[therethere]

15 years for a rental carpet seems high. I'm not a landlord but I thought that the standard was 5-10 years life. They've been there 6 years. How long was the carpet in the unit before that? If it's more than 4 I would say that's all on you.

Similarly I thought paint in a rental was a 2-3 years life.

[Bruinguy]

I'd probably chalk the carpet up to reasonable wear and tear. Expected life is what, 10 years?  The stove is tougher and more likely above regular wear and tear.

[ketchup]

15 years for a rental carpet seems high.

I was just using 15 years as an example for prorating.  He should use whatever metrics make sense.

[ixtap]

Your state may have made these decisions for you. Or your tac software. What was the depreciation period on the carpet? In California, you must replace the carpet every five years, for example.

How old is the stove? What is the depreciation schedule? Honestly, that stove is the only one that even sounds like a maybe to me.

[tralfamadorian]

The electric glass stovetop is now chipped.

This is the only one I would charge against the tenant, presuming that the stove is not at the end of the depreciation schedule and due for a total replacement.  I would chalk up the rest to wear and tear. 

[Papa bear]

In my area, if it goes to court, you'll only be able to charge back based on a depreciable basis on the age of the product.  So after 6 years, you probably don't get to charge back much of anything. 

Plus you've probably got a tax cost basis of 0 in these things.  Good luck.


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[Ocinfo]

At most, he should pay for the stove top. Do you have evidence that the stove top was not chipped when he moved in (e.g., it was new when moved in or had a pre-move in damage checklist)? I tend to be pretty lax as long as they were a good tenant, especially as 6 years of normal wear and tear can result in some legit damage.


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[sol]

especially as 6 years of normal wear and tear can result in some legit damage.

Well that's kind of my question.  For a one or two year tenant I would charge for chipping a glass stove top, but at what point do we assume that a long term tenant is going to legitimately destroy everything without having to pay for any of it?

All of these appliances became rental equipment when the house was converted from a primary residence, so they don't have separate depreciation schedules.

[ixtap]

especially as 6 years of normal wear and tear can result in some legit damage.

Well that's kind of my question.  For a one or two year tenant I would charge for chipping a glass stove top, but at what point do we assume that a long term tenant is going to legitimately destroy everything without having to pay for any of it?

All of these appliances became rental equipment when the house was converted from a primary residence, so they don't have separate depreciation schedules.

Even for a one year tenant, you usually can't charge them if the appliance was at the end of its life expectancy. Generally, appliance life is considered about five years for tax purposes.

[sol]

Even for a one year tenant, you usually can't charge them if the appliance was at the end of its life expectancy. Generally, appliance life is considered about five years for tax purposes.

I understand that replaced appliances in a rental get a five year depreciation schedule, but that doesn't mean you are "supposed" to replace them every five years.  If I had to spend $1k per year just on upgrading appliances at every rental ($5k total every five years?), it would be a lot harder to make any money as a landlord.

[Papa bear]

Even for a one year tenant, you usually can't charge them if the appliance was at the end of its life expectancy. Generally, appliance life is considered about five years for tax purposes.

I understand that replaced appliances in a rental get a five year depreciation schedule, but that doesn't mean you are "supposed" to replace them every five years.  If I had to spend $1k per year just on upgrading appliances at every rental ($5k total every five years?), it would be a lot harder to make any money as a landlord.

Again, take what you think is fair. I would probably take 100 or so. But if it gets to court, the judge will give you 0, at least from my experience in Ohio.  Sucks, but you know, math.  You already depreciated the entire thing. You shouldn't be making a gain on the good with a security deposit.  Does the stove still work? Completely functional? Couldn't the argument be made that its cosmetic?

Plus 1,000 is a gross exaggeration on a stove for a rental, or even your own home. Even mid range new stoves in stainless steal, fancy self cleaning ranges, and convection ovens will run 500-600 on sale.  Plus with Craigslist or going lower end, but still functional, will only set you back a few hundred.




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[joonifloofeefloo]

As ixtap noted, some regions cover this in detail in their tenancy laws. e.g., Carpet cleaning dependent on length of tenancy, etc. So, be sure to check those out for your area before anything else.

[ixtap]

Even for a one year tenant, you usually can't charge them if the appliance was at the end of its life expectancy. Generally, appliance life is considered about five years for tax purposes.

I understand that replaced appliances in a rental get a five year depreciation schedule, but that doesn't mean you are "supposed" to replace them every five years.  If I had to spend $1k per year just on upgrading appliances at every rental ($5k total every five years?), it would be a lot harder to make any money as a landlord.

It may mean that you can't charge the tenant if they need replaced after that time period. It may also mean that you can only charge the tenant the remainder, rather than full value.

On the other hand, if the property is in Texas, you can probably do whatever you want.

[sol]

Plus 1,000 is a gross exaggeration on a stove for a rental, or even your own home.

I wasn't saying the stove would cost $1000, I was saying that if a landlord was forced to depreciate every appliance on a five year schedule, and that meant you were required to replace things on a five year schedule, then replacing EVERY appliance would cost $5k, or $1000 per year out of your rental profits.  But surely the five year depreciation schedule doesn't mean you are actually expected to replace them every five years, right? 

[TheGrimSqueaker]

Here's how you fix a chip on a non-glass regular stove. Go to Home Depot or a similar store and get a spray-on lacquer such as what is used to re-lacquer bathtubs. Follow the instructions and DIY a new stovetop surface. Easy, and will cost maybe $40 plus your time. I've made plenty of old stoves look new that way. Another cheapo stove upgrade idea involves new heating elements and drip pans. YMMV.

For a glass stove, yeah, that's a replacement.

The paint and the carpet are normal wear and tear especially if the carpet was worn when the tenant moved in. They've been there 6 years if I remember correctly. That's the average half-life of a pretty good carpet under normal conditions. If you haven't repainted or recarpeted during this time count yourself lucky.

[MommyCake]

I personally wouldn't charge them for any of that after 6 years.  Including the chipped stovetop.  Even if the stove was new when they moved in, it is now 6 years old (and is probably several years older, yes?)  A chipped stovetop does not interfere with the functioning of the appliance.  If I replaced everything in my rentals that needed cosmetic upgrade every time a tenant moved out, I wouldn't be making any income.  Rentals often have little flaws like a burn mark on a formica counter, or a scratch in a mirror, or holes in the wall from hanging stuff.  I've never had a tenant complain about minor stuff like that.  Paint and replace the carpets (on you, because after six years that's necessary in my opinion) and create a more specific lease to avoid these issues in future if you want the tenants to pay for these things.  Just my two cents.

[joonifloofeefloo]

I personally wouldn't charge them for any of that after 6 years.

+1

[MaikoTsumi]

Landlords,



For example, the carpets were not in great shape six years ago, but they are much worse now and probably need to be replaced.  The electric glass stovetop is now chipped.  The front door hardware is broken.  Rooms need to be painted. 

The carpets are fully depreciated out by now, you can't (technically) charge anything for replacing them. By technically, it won't hold up in court if it ever made it there, but who knows if the tenant would fight it.
What you listed are normal wear and tear items.  I've replaced working cooktops just to keep tenants happy.  If there are holes in the wall before painting, I would charge cost of patch ($8), +$25 for one hour of my time.  Charge cost of door hardware.

 I've made it a habit of trying to return as much as the SD as possible, instead of the other way around.  Especially for the longer term renters.

[Silverado62]

I personally wouldn't charge them for any of that after 6 years.  Including the chipped stovetop.  Even if the stove was new when they moved in, it is now 6 years old (and is probably several years older, yes?)  A chipped stovetop does not interfere with the functioning of the appliance.  If I replaced everything in my rentals that needed cosmetic upgrade every time a tenant moved out, I wouldn't be making any income.  Rentals often have little flaws like a burn mark on a formica counter, or a scratch in a mirror, or holes in the wall from hanging stuff.  I've never had a tenant complain about minor stuff like that.  Paint and replace the carpets (on you, because after six years that's necessary in my opinion) and create a more specific lease to avoid these issues in future if you want the tenants to pay for these things.  Just my two cents.

I agree. Keeping a tenant 6 years, and avoiding the turnover expenses associated with turnover has already been a big plus. If the only damage is cosmetic and normal wear and tear, then it's a "pick your battles" question. I would send back the entire deposit and move on.

[Bobberth]

What about taking this as an opportunity to do a little upgrade? Instead of replacing the carpet, replace it with either some engineered wood or some vinyl planking. I'm a big fan of vinyl planking as it's vinyl and nothing happens when something is spilled and tenants don't take care of it right away. I'm not sure how your market it, but I've gotten lots of compliments about how nice my "wood" floors are.

I say no to charging on the carpet and I'm not sure to the extent of the stove and if it really needs to be fixed or not. I guess it depends on your rental as well, mine get $150 stoves off of Craigslist so it's not a big deal to replace.

[Cowardly Toaster]

Ah take $100 for a cleaning fee and make the repairs. They were there for six years.

[Car Jack]

Glass stovetops are the stupidest thing in the history of the world.  We put one in about 7 years ago and there aren't just chips, there's cracks and chunks that have fallen out of it.  All from just simple mishandling of normal kitchen pans. 

I'd recommend replacing with something that's not glass.  Maybe a stainless unit.

As to charging them?  I wouldn't.  And if you do, you're giving them a reason to look into potential issues.  Do you have pictures of the stovetop at move in or was it brand new when they moved in?  (Judge says "nope").  Are you paying interest for the security deposit?  In my state, you have to pay 5% a year simple interest.  Handing them their security deposit back with a smile and a thanks for being such great tenants.......they have no reason to look for ways to screw you over.