Renting out a property can be profitable, but there are also costs involved, like wear and tear.
Under UK law, Landlords must allow for fair wear and tear because that is an obligation placed on them under the tenancy agreement, but what can be considered as normal when it comes to wear and tear? This is an important question since wear and tear are one of the biggest causes of disputes between landlords and their tenants.
This article discusses what can be considered as fair wear and tear but also presenting some tips on how to easily reduce the amount of wear and tear.
What is normal wear and tear?
Since tenants often are living in the property over months and often years some allowance for fair wear and tear must be given when assessing any damages of the property. Thus, any contracts between landlords and tenants stating no allowance for wear and tear would be considered unfair by the courts.
However, if the deterioration condition of the items has been caused by negligence, misuse or use beyond reasonable wear and tear it may be considered as damage and not fair wear and tear.
It can be useful to separate between short-term letting, which is often less than 6 months, and long-term letting (longer than 6 months). While you may benefit from a higher rent by choosing short-term letting, short-term letting often involves a higher amount of wear and tear since more people are moving in and out of the property within a short period of time. Thus, this factor should be taken into consideration when choosing between short-term letting and long- term letting.
Even by choosing long-term letting, the amount of wear and tear may represent a significant cost for landlords as items will after years wear out and need replacement.
Fair wear and tear are based on the following factors
- If you are renting out to families with small children, or students sharing the property, you must expect more wear and tears compared to a couple without any children.
Consideration must be given to smaller children since the damage would still be assessed. For instance, it would be considered as damage if children have scribbled on the walls.
Also, if you allow pets you may also expect some more wear and tear.
- The length of the tenancy should be taken into consideration. You must expect the amount of fear wear and tear to be higher by renting out for a longer period (for example 5 years compared to 1 year).
- The age and condition of items should be considered at the start of the tenancy. However, you must expect a reasonable usage of the items during the tenancy and consider the expected lifespan of the items.
It should be noted that tenants have no obligation for the betterment of the property. Which means that tenants do not need to leave the property or contents in a better condition than it was at the start of the tenancy.
For example, if the carpet already had a few stains before the start of the tenancy, you, as a Landlord can’t charge tenants for a new carpet at the end of the tenancy.
The Replacement Relief
Before 2016, Landlords could deduct a flat rate, annual allowance for wear and tear from their taxable profits, reflect the general wear and tear on the furnishings of a rental property like sofas, beds etc. The allowance was available regardless of true spending.
After the introduction of the Replacement Relief in April 2016, landlords could no longer deduct an annual allowance and only claim for real wear and tear cost. After this change, the landlord could only claim for the replacement item, with a maximum value of a modern equivalent new item, the cost associated with disposal of the old item and the installation of the new one.
The Replacement Relief applies to all rented properties, both furnished or unfurnished. However, the Replacement Relief is only available on items that are provided for the sole use of the tenant.
In practice, Landlords will need to provide receipts in order to have the costs deducted from their tax. It should be noted that the Replacement Relief is not available to properties claiming under the Rent-A-Room scheme.
If you maintain property and items wear out or fail, and if it is not replaced, it may not only affect your tenants but also your insurance. This is mainly because home insurance normally does not cover wear and tear but is rather designed to protect against sudden and unexpected events. We will therefore strongly advise you to contact your insurance company to find out more.
How to reduce wear and tear?
As a landlord, there are some easy steps you can take to bring down the amount of wear and tear while renting out your property.
Step 1: Make sure that you are conducting a good reference check of all tenants over 18 years that are going to live in the property before letting out.
This can save you for a lot of hassle later. We can offer affordable independent reference check of all your prospective tenants.
Step 2: Make sure the property is always well maintained, professionally cleaned and tidy before the tenancy starts.
This will give some important signals to the tenants that the owner takes good care of the property and the tenants may feel more committed doing the same. These incentives can also be referred to as a moral incentive.
Step 3: Maintain a good relationship with your tenants and perform regular property evaluation. Tenants who have faith and are confident that their landlord will take care of essential repairs and maintenance are more likely to feel obligated to report any issues earlier.
It is therefore important to maintain a growing relationship of mutual concern, so tenants do not hesitate to proactively reach out for assistance when needed.
Step 4: Avoid void periods and encourage long term tenancies, by offer tenants Loyalty rewards. In this way, tenants will have the opportunity to earn and save while letting.
The loyalty rewards program may result in long term tenancies and motivate tenants to fulfil their other obligations as a tenant during the tenancies.
Financial incentives are said to exist where an agent can expect some form of material reward, especially money in exchange for acting in a particular way.
Financial incentives have for a long time proved to be an efficient way to correct/ reinforce human behaviour (Libby & Lipe, 1992, Kahneman & Peavler, 1969 etc.). For instance, it has been found that higher levels of incentives may have the largest effects on tasks involving judgment and decisions.
We at Abito Homes provide a loyalty program for our tenants renting fully managed properties by us. This is an incentive program in which tenants get rewarded for taking good care of the property, paying their rent on time and
We strongly believe that our Loyalty Rewards Program will benefit both tenants and landlord, resulting in long term tenancies.
Would you like to know more about our property management services? Please contact us online or call us at phone nr.: 07757 744440 for more information.