This article was originally published on 24/06/2019 and was reviewed and updated accordingly on the above date.
Fair. Wear. And. Tear. Four little words than can cause great bewilderment. So just what is the difference between ‘wear and tear’ and ‘damage’? We explain.
In residential tenancy legislation and proforma lease agreements, you will often see the words ‘fair wear and tear excepted’ in reference to a vacating tenant’s responsibility to return the premises to the same state it was in when they began their tenancy.
It might sound straightforward, but there can be a fine line between reasonable wear and ‘damage’ eligible for coverage under landlord insurance.
Wear and tear vs. damage is a ‘grey’ area for landlords and tenants alike. And as responsibility for repairing each sit with different parties, it is important to understand the distinction.
What is wear and tear?
This is normal wear and tear that naturally occurs over time in an investment property due to use and ageing. It typically results from the tenant’s day-to-day use of the property as a residence, like walking on the floors and using the benchtops. It can also simply be the result of the property getting older and being exposed to natural forces, like gutters rusting from rain or timber window frames fading in the sun.
Wear and tear is something that just happens over time with normal use of the property – something that has not been caused intentionally, on accident, or by neglect, misuse or abuse.
So who is responsible for repairing it?
Fair wear and tear is a cost of doing business that landlords should expect. Repairing or replacing worn fittings and fixtures is the responsibility of the owner. This is no different from wear and tear that occurs in all homes, including the home the landlord lives in.
Unless a contract states otherwise, tenants are not responsible for paying for fair wear and tear to a property. It is only when the tenant has been irresponsible, and accidentally or intentionally caused damage to a premises, that they are liable to pay for repairs.
If the wear and tear is unreasonable, for example excessive wear due to the property being used for business or illicit purposes without the landlord’s consent or knowledge, then the tenant is responsible for reinstatement.
Is wear and tear insured?
In a word, ‘no’. Wear and tear is expected and considered normal depreciation, so it is not covered by landlord insurance. Reasonable wear is not considered to be ‘damage’ by insurers and the PDS will clearly state this is an exclusion.
What is damage?
Damage caused by tenants isn’t the result of ageing or normal use. It is damage caused by misfortune, negligence, carelessness or abuse. Insurers generally recognise three types of tenant damage:
- Accidental – the result of sudden, unexpected or unforeseen events (such as a child scribbling on the walls with a permanent marker).
- Malicious – caused on purpose with intent to do harm, motivated by vindictiveness or spite with the aim of damaging the property (such as punching a hole through a door).
- Intentional – the result of an act carried out without permission but without malice, and with the full knowledge the action will alter the current state of the property (painting a wall a different colour).
Cover for these three types of damage varies between insurers, with most excluding at least one type. EBM RentCover provides up to $65,000 for accidental, malicious and intentional damage in all policies except Householders Rental (as tenant-related issues are not covered).
So who is responsible for repairing it?
Any damage caused by a tenant, their child, their pet or their guests, is the responsibility of the tenant. They have an obligation to repair or replace any damage caused.
A word about third-party damage: If the damage is caused by a third-party not directly connected with the tenant, or the tenant did not invite them onto the premises, or the event was outside of the tenant’s control (e.g. break-ins, floods or traffic accidents), then the repairs are the landlord’s responsibility and, depending on the policy, may be covered by insurance.
Is damage insured?
If the tenant does not make good on their obligations, landlords may be able to turn to their insurance to cover the costs of repair or replacement (depending on their policy).
Although the insurer will cover the expenses so the landlord can reinstate their property, the responsibility for the damage remains that of the tenant. And that is why an insurer may exercise their right to pursue the tenant to recover costs (though this often only happens where negligence or malice was involved in the loss).
Fair wear and tear vs. damage
A basic way to determine if something is wear and tear or damage is to decide if it is something that is likely to happen gradually over time, based on the normal daily use of a residential home (wear and tear), or something that has been misused, used for a purpose other than the one for which it was intended, or purposefully damaged (damage).
Disagreements about wear and tear vs. damage can be a bone of contention between landlords/agents and tenants and is often a sticking point when it comes to the return of the bond. If it is fair wear and tear, the bond cannot be used, but it can if it is damage caused by the tenant.
So, it is important to make sure the condition of the premises is well documented and updated at the start of the tenancy, during routine inspections and upon vacating. Thorough rental condition reports, which may include detailed photos and even videos, can be useful for avoiding or settling disputes over fair wear and tear. It is in the best interests of both landlords and tenants to make sure the reports are complete and signed. Insurance note: If the landlord needs to make a claim on their insurance for tenant-related damage, these reports will need to be submitted as supporting documentation.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.