Tenant Damage or Wear and Tear – What’s the Difference?
By Sarah Barton, Terri Scheer Distribution Channel Manager
It’s part of the unavoidable ageing process of investment properties, yet wear and tear is often misunderstood and miscalculated by some landlords across Australia.
Many property managers have likely dealt with landlords who are disappointed to find their property has not remained in exactly the same condition as when their tenants first moved in.
In addition, landlords may be confused about what is covered by their landlord insurance policy.
In general, landlord insurance should cover claims for tenant damage, however wear and tear is usually excluded. Landlords should check their insurance policies for the most accurate information on coverage levels.
Tenant damage is defined as being caused by a sudden and unexpected event, such as a broken window or a carpet stain caused by spilt red wine.
In contrast, wear and tear is damage which accumulates over time.
Timber flooring and carpets, for example, will deteriorate gradually as a result of daily foot traffic and will eventually need to be repaired or replaced.
As well as having an insurance policy covering tenant damage, it’s important for landlords to regularly set aside funds for maintenance and general upkeep that will address wear and tear.
This should form part of their overall investment property strategy and will create a pool of funds to draw on when required to maintain a property to a high standard, while also helping smooth out cash flow over time.
The distinction between tenant damage or wear and tear is important, and one that has financial implications. Property managers are best placed to support landlords by speaking with them early on about any signs of wear and tear on their property, and highlighting how this differs from tenant damage.
A good way to explain the difference is that it’s like living in their own home – over time there will be signs they have lived there, but the wear and tear generally cannot be claimed on insurance.
For further information, call 1800 804 016.