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
the tenant has hit social media slamming you and your property manager
and they have filed a report with 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 what
exactly 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, as, being experts in the area of landlord insurance, they
have dealt with this many times. She explained that in Australia, unless
the 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.
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, as well as 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
Below are some common occurrences of wear and tear that 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 switches
What is Accidental Damage?
The definition of accidental damage is mostly standard across home insurance policies, and refers to damage that occurs suddenly as a result of an unexpected and non-deliberate external action. This will typically refer to an unintentional one-off incident that harms either the property or its contents.
In terms of home insurance, a reasonable interpretation of the word damage includes not only physical damage to an item, but also something that resulted in a loss of function. For something to be considered accidental, it must be sudden and as a result of an external, visible and violent cause.
It is important to know that many home insurance policies will not cover damage caused by chewing, tearing or scratching by animals.
What is Considered Damage Covered by Most 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, however, this may vary with your policy or insurer. Insurance policies also take into consideration accidental damage.
Definitions
Deliberate Act – 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.
Here is a look at some of the damage that tenants are liable for:
- Missing curtains or curtains torn by the tenant’s 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 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 address the following:
- The lease terms are being honoured
- 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
Another way to avoid disputes is by carefully reading the insurance policy’s product disclosure statement. Some policies will not provide cover if the tenancy has moved to a periodic lease. Whereas other policies may reduce claims by depreciation of fixtures and fittings.
Knowing what is in the fine print of the insurance policy and passing on to tenants what will and won’t be covered eliminates the possibility of later disputes. If the landlord is upfront about insurance coverage, then the tenants can’t argue that they weren’t properly informed.
