In 2007, tenancy deposit schemes were introduced by law.
These allow a tenant to dispute any deductions made on their deposit. A landlord or letting agent cannot just make deductions. Unlike office leases, a residential occupancy must allow for fair wear and tear. For more information on tenancy deposit schemes click here.
The wear and tear allowance refers to the tax-deductible expenses for landlords. This mainly relates to furnished properties. The allowance gave tax relief for the cost of white goods and furniture which is unavailable under capital allowance legislation. Wear and Tear allowance was broadly 10% of gross rental income in 2016.
The challenge with such an allowance is that ‘fair wear and tear’ is not readily determined. Landlords are expected to maintain their properties for rent which includes re-decoration. This means that landlords cannot charge a tenant for repainting dull walls. Damage done to the property because of the negligence on the part of the tenant is not fair wear and tear. Determining if the damage is negligent or reasonable is often the main source of dispute between the tenant and landlord.
House of Lords defines fair wear and tear as ‘the reasonable use of the premises by the tenant and the ordinary operation of natural forces.’ What is clear legally is that the landlord should not end up in a better financial position. They must accept that there is some fair wear and tear to any property.
The Association of Residential Letting Agents has some guidelines for its members.
This can be used to determine fair wear and tear on a property. Issues to consider are the following:
– Original age, quality and condition of any item a commencement of the tenancy.
– Average useful lifespan to value ratio (depreciation) of the item.
– Reasonable expected use of such an item.
– Number and type of occupants in the property.
– Length of the tenant’s occupancy.
The landlord must provide evidence on the state of the property at the start of the tenancy. To be able to prove in case of a dispute with a tenant.
Wear and tear allowance was of benefit to landlords where their rental incomes were high. The cost of furniture for allowances is low. However, HMRC deemed the wear and tear allowance too generous and abolished it as of April 2016. The relief that came into effect after April 2016 only allows replacing such items on a like to like basis. Landlords cannot qualify for tax relief for buying initial furniture on a rental property. The new relief also applies to all rented residential properties regardless of the level of furnishing. These laws are changing all the time.
If you would like to know more about the wear and tear allowance, don’t hesitate to get in touch. Harringtons Lettings provide landlords in Hove, Brighton, and the surrounding Sussex area with bespoke advice to ensure that they meet current legislation.
Making a claim.
It has become increasing difficult for landlords to obtain claims regarding fair wear and tear through the different providers for the deposit. There are guidelines which we will outline shortly we have found the schemes take the view of tenants when it comes to fair wear and tear. We have also noted over a period of time that they are unrealistic when they come to their costs.
Adjudicators however can only fall back on the legal definition of wear and tear. This is “reasonable, operational of natural forces”. As there are so many variable factors which affect wear and tear, they look at the evidence that is presented to them to make a reasonable conclusion as to what they believe has happened.
Landlords can only claim for excessive wear and tear, as it would be considered a claim for damages. This is particularly important in disputes when the tenant has lived at a property for a long time. For example, the adjudicator is unlikely to make an award for redecoration costs when a tenant has lived at the property for 5 or more years. This is due to the fact the landlord probably needed to redecorate anyway, regardless of anything the tenant has done.
There are some useful guidelines as follows;
Life span; Hallway, landing and stairs between 2 and 3 years.
Living rooms approximately 4 years.
Dining rooms approximately 6 years.
Kitchens and bathrooms approximately between 2 and 3 years.
Bedrooms approximately 5 years.
Life span; budget quality between 3 and 5 years.
Medium quality between 5 and 10 years.
Top quality up to 20 years.
Life span; washing machines between 3 and 5 years.
Cooker, oven and hobs between 4 and 6 years.
Fridges between 5 and 8 years.
However, what is more important to landlords is to ensure that they are aware that they must not do betterment.
What is betterment?
The landlords should not end up, either financially or materially, in a better position as to where they were at the start of the tenancy. Or than they would have otherwise been at the end of the tenancy after they have allowed for fair wear and tear.
In order to try and explain this if a carpet was brand new at the start of the tenancy and the tenancy lasted for 2 years. It would be a 2 year old carpet at the end of the tenancy. If it was damaged beyond repair and the landlord is claiming the full cost of replacing this, this would be betterment because they have got to take into account that the tenant has been there for 2 years.
Who has the burden of proof?
Unfortunately, many landlords don’t realise that the burden of proof is on them having a legitimate claim in order to share the deposit. The tenant has no obligation to prove their position. This is because the deposit remains the tenants money until the landlord has successfully proven their claim.
Landlords have to submit their evidence in support of their claim and tenants provide their own evidence supporting their position in response. It is then sent to an independent, impartial adjudicator who reviews the evidence and decides how the deposit will be repaid.
Is it important to have an inventory and a check out?
It is absolutely critical to have an inventory when the tenants first move in to the property. The inventory will outline exactly what the property is like and potentially will have photos which the landlord can then rely on to show what the property was like at the beginning of the tenancy. With a great inventory and check out it can make all the difference. An inventory can avoid a dispute over the deposit when the tenants move out, because it proves the state of the property when the tenants moved in.
How much should you claim?
Many landlords believe that the property should be returned to them in the same condition at the start of the tenancy. Deductions are often claimed from the deposit in minor damage that should be expected in normal use of the property. Landlords might want to replace items in the property which are coming to the end of their natural life, such as old washing machine where the door handle has broken during the tenancy.
The house of laws define wear and tear as “reasonable use of the premises by the tenant and the ordinary operation of natural forces”.
The word “reasonable” can be interpreted differently, depending on the type of property and who occupies it. It is an established legal principle that the landlord is not entitled to charge tenants for the full cost of having any part of their property, or any fixture or fitting, put back to the condition it was at the start of the tenancy. The landlord should therefore keep in mind that the tenants deposit is not to be used like an insurance policy where you might get “full replacement value” or “new for old”. The landlord also have a duty to act reasonably and not to claim more than necessary to make any loss.
An example of how this can be calculated is as follows;
- Cost of similar replacement
- Age of existing item
- Average use or lifespan of the item
- Residual lifespan of the item calculated as follows;
C – B
- Appreciation of the value rate as calculated;
- Reasonable apportionment to tenant as calculated;
D X E
An example of this for a carpet replacement would be as follows;
A = £500
B = 2 years
C = 5 years
D = 5 years minus 2 years = 3 years
E = £500/5 years = £100 per year
F = 3 Years X E = £300.00
Please note this would be the reasonable view when coming to an adjudication at one of the schemes. However, it is not always the appropriate approach. It can differ from case to case.
The landlord cannot do betterment.
Betterment is when the landlord is claiming the costs of making the property better than when the tenants originally moved in. This is not allowed under any of the deposit schemes. It includes for example, above expectation of tenants to return the property cleaner than when they moved in, as well as replacing old goods, fixtures or fittings with new or better, or redecorating the property at a higher standard than at the start of the tenancy.
However, landlords are entitled in the event that the property was fully professionally cleaned when the tenants first moved in to expect it to be fully professionally cleaned when they move out. Obviously, a residual lifespan needs to be taken into account so tenants aren’t left with the full cost of replacing furniture that can only have use for a couple of years as outlined above.
What would be a reasonable clauses?
To replace any items at the end of the tenancy and provide new. This is usually seen in student tenancies and relates to such items as mattress protectors. Any clause that receipts to transfer and obligation of the landlord onto the tenant.
Clauses allowing the landlord to enter the property at any time without prior notice.
What do the schemes take into account when dealing with adjudication?
It is almost impossible to understand how deposit schemes work as every Government backed scheme has a different way of dealing with it. However, there should be guidelines for adjudicators in relation to the deposit.
We would think the most common factors of a particular decision are as follows;
Length of tenancy.
Firstly, the longer the tenancy the more natural wear. Common sense but think for example how much of a wear the carpet in your own home is after one or two years then consider it at the beginning of the tenancy. Take this all into account before claiming for repairs.
The number and age of the occupiers.
The more bedrooms and the more occupants the higher the wear and tear should be expected in all the common parts. For instance passages, stairs, bathrooms, kitchens etc. If you are letting to a family with children that needs to be taken into account too. Scuffs and scraps are unavoidable in normal family day life. A property occupied by a single person should see far less wear and tear than a family of four.
Wear and tear VS actual damage.
When is it no longer normal wear, ie damage and in need of repairs? Breaking something is not wear and tear. This can mean it should be replaced or repaired. Light marks on the carpet may be viewed as unavoidable. On the other hand damage such as nail varnish spilt on the floor or iron burns would occur due to negligence and would see the tenant liable for the repair. Therefore, you need to consider whether the item has been damaged or worn out through natural use rather than negligence. It is a judgement call.
Quality and condition.
Consider the quality of the item at the start of the tenancy and what is originally cost to provide. It would be unreasonable for a landlord to provide cheap and flimsy bedroom furniture and then blame the tenants for damage through normal usage. Other considerations take into account the quality of fabric and the property itself. Many new blinds tend not to be quite as robust as older properties or conversations. Walls, partitions and internal painted surfaces tend to be thinner and therefore likely to have more stress. Particularly in higher footfall areas of the property. This inevitably means that there is a greater need for redecoration at the end of the tenancy.
Would you like us to manage your property for you? Why not contact us email@example.com or 01273 724000 to discuss this with us.