You’ll be aware of the term ‘wear and tear’, but are you one of the many landlords who’s not quite sure exactly what’s classed as wear and tear and what’s not? It’s one of the most commonly disputed things when it comes to the end of a tenancy, with a lot of tenants also unsure about where the boundaries lie.
Basically, it’s the gradual decline in the condition of a property’s fabric, fittings and contents. The House of Lords defines ‘fair’ wear and tear as: “reasonable use of the premises by the tenant and the ordinary operation of natural forces”. And there’s bound to be some confusion because what is ‘reasonable’ and ‘ordinary’ is subjective and your opinion might be different to your tenant’s – and to that of any third party settling a dispute!
It’s very important that you can properly establish ‘wear and tear’ at the end of a tenancy, because that’s when you need to make a decision about whether you’re entitled to retain some of the deposit. You’ve got to be able to separate what’s ‘normal’ wear and tear, where you’ve got to cover the cost yourself, and what’s actual damage caused by your tenant that you can charge them for.
Here are some guidelines for three of the main things that cause disputes:
|Item||Wear & tear||Damage|
|Carpets||Gradually becoming worn and dirty||A hole, rip or clear stain|
|Paintwork||Getting scuffs and marks over time||Deliberate marks, drink or food stains|
|Appliances||Needing periodically repairing and eventually breaking down||Breaking down as a result of misuse of abuse by the tenant|
If you’re making any deductions from the deposit, the basic legal rule is that the amount you take shouldn’t put you in a better position - either financially or materially - than you were at the start, or than you would have been at the end of the tenancy, allowing for fair wear and tear.
From a tax point of view, it’s also important for you to know what’s tax deductible and what isn’t. From April this year – the 1st for corporation tax payers and the 6th for those paying income tax - the law around wear and tear changed. The ‘automatic’ 10% of rental income you used to be able to claim every year as an allowance for general wear and tear costs was replaced by a new system. Now landlords can only claim what they’ve actually spent in that tax year on replacing furnishings, meaning the amount you can deduct from your income will vary from year to year. However, over the longer term, it should average out to leave you in more-or-less the same position as you would have been with the 10% rule.
Obviously, your accountant can answer any tax questions and there’s more detailed information on the government’s website, but if there’s anything else you’d like to discuss about wear and tear or making deposit deductions, then just pop in and speak to someone in your local Your Move branch.