Wear and tear vs accidental damage explained
So your tenants have moved out and you’ve done the final inspection on the property. You’ve compared the state of the property to the official condition report and guess what your property doesn’t look as good as it did when the tenants moved in. You start to freak out and withhold the bond, while your tenant claims any damage is wear and tear…tensions rise and the next thing you know is the tenant has hit social media slamming you and your property manager and they have filed a report with their the Civil and Administrative Tribunal. Needless to say this isn’t something you’d be wanting.
The problem here often stems from the loose definition around exactly what is classified as ‘wear and tear’ and what is defined as ‘accidental damage’. To get clarity on this issue we spoke to Yolanda Webster from CoverWise Insurance, being experts in the area of landlord insurance they have dealt with this many times. She explained that in Australia, unless a contract states otherwise, tenants are not responsible for paying for fair wear and tear to a property. It’s only when the tenant has been irresponsible and accidentally or intentionally caused damage to a premises that he or she is liable to pay for repairs. She explained that because the insurance is not a maintenance contract insurers take the same view.
Let’s look at each of these to help give you clarity.
What is wear and tear?
According to NSW Fair Trading, wear and tear means the normal deterioration of a property from ordinary, everyday use. Exposure to the elements, time and day to day living can cause fair wear and tear. Although real estate tenancy laws vary across each state and territory, the industry broadly accepts this definition.
Fair wear and tear – Landlords are responsible for and not covered by insurance
- Faded curtains or frayed cords
- Furniture indentations and traffic marks on the carpet
- Scuffed up wooden floors
- Faded, chipped or cracked paint
- Worn kitchen benchtop
- Loose hinges or handles on doors or windows and worn sliding tracks
- Cracks in the walls from movement
- Water stain on carpet from rain through leaking roof or bad plumbing
- Worn paint near light switch
What is considered to be damage that is covered by some insurance policies
Yolanda states that with regards to CoverWise policies, tenants are only responsible for negligent, irresponsible or intentional actions that cause damage to the premises. (this may vary with your policy or insurer).
t - means an act carried out without permission but without malice, vindictiveness or spite and with the full knowledge that the action will alter the current state of the property.
Malicious Damage or vandalism
- means a wrongful act motivated by malice, vindictiveness or spite with the intention of damaging the property
- means sudden , unexpected or unforeseen loss to an insured property
Here is a look at some of the damage that tenants are liable for:
- Missing curtains or torn by the tenants pet
- Dog urine throughout the house
- Stains or burn marks on the carpet
- Badly scratched or gouged wooden floors
- Unapproved or poor quality paint job
- Burns or cuts in bench top
- Broken glass from one of the kids hitting a ball through the window
- Holes in walls left by tenants removing picture hooks or shelves they had installed
- Water stains or carpet caused by overflowing bath or indoor pot plants
- Paint damage resulting from removing decorations stuck with Blu-Tac or sticky tape
Proving fair wear and tear
Thorough rental condition reports – complete with detailed photos and potentially even videos – are very useful for avoiding or settling disputes over fair wear and tear. It’s in the best interests of both tenants and landlords to ensure that these reports are complete and signed. With a bit of care, consideration and proper documentation the outcome of a loss is predictable.
How to try and avoid disputes
One of the best ways to avoid disputes is to ensure your property manager or yourself carries out periodic inspections of your investment property to ensure it is being well cared for and any routine repairs are being made. Each state or territory has different allowances around the number of inspections per year.
These inspections should include the following:
- The lease terms are being honoured - no drug labs etc :)
- The property is being maintained in a clean and tidy condition.
- The grounds are being maintained in a clean and tidy condition.
- The property is not being damaged in any way.
- There are no more than the number of people specified on the tenancy agreement living at the property.
- No pets are housed at the property, unless otherwise agreed to.
Any maintenance issues identified can be attended to.
It is much easier to address any damage issues earlier on so the quicker you can identify these the better you will be in the long run.
Carefully read your policy’s Product Disclosure Statement
Yolanda stressed the importance of reading the Product Disclosure Statement of any insurance policy you are considering taking out so you can clearly evaluate the level of cover. She said “some policies do not cover Accidental Damage, or Pet Damage or do so only under strict conditions. Some Policies will not provide cover if the tenancy has moved to a periodic lease, whilst others may reduce claims by depreciation of fixtures and fittings or not provide cover for illegal drug clean up. Knowing this in advance is important as a landlord.