Why Have A Wear & Tear Policy?

Whether you manage 10 or 1,000 units, how you handle turnover costs will predict in part the financial success or pains of your property management business.  

When I first started managing rental properties, our lease agreement had a generalized clause for damage liability.  It was pretty straightforward - if you break it, you buy it. However, after a slew of turnovers one month, I realized that these costs - mainly carpet & window blind cleaning, painting and house cleaning -  were destroying our bottom line. We decided we needed to be more aggressive on charging tenants for these costs

After one particularly messy tenant moved out, we assessed a fairly large portion of the turnover costs to her and she received very little of her deposit back.  She took us to court over the charges because she felt her charges were not fair as they were typical "turnover" costs.  We were unfortunate to have a judge that declared our lease agreement too vague to charge for turnover costs as "every landlord knows they will have to get those items addressed before a new tenant can move in."  We were shocked by the judgment however it was a good lesson.  After we ate the costs and returned the tenant's full deposit, we re-grouped and came up with a more sound policy for bill-backs.  

Our first step was creating a wear and tear policy to incorporate into our lease agreements, clearly defining the circumstances in which a tenant would pay for expenses beyond the obvious broken items.   Our policy indicated that the tenant would be charged for any cleaning beyond 2 hours, carpet cleaning & window cover cleaning for tenancy less than 24 month and painting less than 48 months.  

With the help of our trusted vendors, we created a very detailed list of charges as they related to turnover costs.  We included all replacement costs for carpet, counters, window coverings, cabinets, fixtures and appliances as well as rates for maintenance service, carpet cleaning, hourly house cleaning, window-blind cleaning and touch-up or full painting fees.  We included this list as an addendum to the lease at move-in, requiring it be signed, and provided a copy of it when a tenant issued their notice to move.  

Not only did we avoid passing on excessive turnover costs to the landlords we managed for, we created a more stable way to predict & reach our properties' yearly operating goals, making our asset management team a hot commodity.

Janell is a member of Rentec Direct, a web-based property management software program designed to help streamline the day-to-day operations of landlords and property managers.