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Whether you are a commercial tenant or a landlord, it’s important to know the difference between normal wear and tear and actual damage to a commercial rental unit. Landlords must know the difference to protect their investment and avoid breaking state laws by unlawfully seizing a security deposit. Tenants must know the difference so they can prevent damage and understand how much of their security deposit they can expect to get back when they move.

Normal wear and tear. Even the most conscientious tenant will cause minor damage over the course of a rental agreement. This is typically referred to as “normal wear and tear.” It might include small scratches on the walls or paint, worn or slightly stained carpeting, broken hinges, or other insignificant damage. Having to repaint the property, clean the carpet and repair a few scuffs or nail holes on the walls after each tenant moves out are to be expected due to normal wear and tear, and not something a landlord can charge tenants for.

Damage. Actual damage to a property goes beyond normal wear and tear. For example, instead of small scuffs or nail holes on the wall, large holes in the wall would definitely be considered damage. A carpet that’s ripped, permanently stained or otherwise ruined is also considered damage. Excessive garbage, furniture, or personal items left behind may be considered damage. Landlords can use the security deposit to cover the costs of repairing damages.

Protecting Your Rights

A damage policy should be included in any commercial lease agreement. The policy should state what is considered damages and what is considered normal wear and tear. Include examples, and state what happens if damages occur. Can the landlord seize the security deposit or deduct the amount spent on fixing the damage? Making these steps clear ahead of time prevents misunderstandings later. Check with your state laws to make sure your definition of “normal wear and tear” complies with the state definition.

The landlord and tenant should perform a walkthrough before the tenant moves in. Note any existing problems, scratches, or scuffs, or any known issues with the property on a “walkthrough checklist” and review it together. The tenant should sign the checklist and both parties should keep a copy. When the tenant vacates, use the checklist on another walkthrough to note any new damages or wear and tear.

In both walkthroughs, taking photos or videos can help clarify the condition of the property in case there is any dispute. For a landlord, documenting the state of the property will be useful should there be any difficulty in seizing a security deposit. For the tenant, it protects against being unfairly charged for normal wear and tear or pre-existing damages.

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