Can Landlords Claim Full Replacement Costs for Damaged Items?

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Landlords can only claim the current value of items in a rental property when pursuing a damage claim. Past Tenancy Tribunal decisions highlight the importance of depreciation when determining compensation for property damage at the end of a tenancy.  

In a sample case discussed, a home occupier was ordered to pay more than $3,300 for damages, cleaning costs, and unreturned items, with depreciation applied to several claims. This case reinforces how depreciation is factored into the Tribunal’s rulings when determining a tenant's responsibility for damages.

How Does the Tenancy Tribunal Apply Depreciation to Damage Claims? 

The Tribunal considered the age, condition, and expected lifespan of items when deciding the compensation owed in Tenancy Tribunal damage claims. 

In this case, taken to the Tribunal in 2022, the adjudicator applied depreciation to various claims for damages and replacements, ensuring that the landlord was compensated fairly without being put in a better position than before the tenancy. The home occupier was held responsible for several damages, but depreciation reduced the amounts ordered in several instances. 

Which Rental Property Items Lose Value the Fastest in a Damage Claim? 

Some rental property items lose value more quickly than others. Curtains and carpets were shown to devalue at a fast rate in this recent case, with net curtains considered to have a lifespan of only 1-3 years. 

Depreciation was described as below: 

• Curtains and net curtains: The curtains and net curtains in the lounge and dining room were missing at the end of the tenancy. Curtains, which have an expected lifespan of 8 years, were 6 years old at the end of the tenancy. After applying 75% depreciation, the Tribunal ordered the tenant to pay $47.00 for the replacement cost. The net curtains, which have a shorter lifespan of 1-3 years, were considered fully depreciated, and no cost was awarded for their replacement. 

• Carpets: The carpet was damaged beyond fair wear and tear. At the start of the tenancy, the carpet was 3-4 years old, and by the end of the tenancy, it was approximately 7 years old. Considering the carpet’s age and its pre-existing stains, the Tribunal applied 50% depreciation, reducing the compensation from the full replacement cost of $2,449.99 to $1,224.99. 

• Electrical damage: The tenant was held liable for damage to light fittings, switches, and power sockets. The Tribunal assessed the cost of repair based on the condition of the property at the start and end of the tenancy. The compensation amount of $720.00 was awarded after taking depreciation into account and adjusting the original claim, which was based on the total cost of the repair invoice. 
  
  

How Does the Tenancy Tribunal Determine Compensation for Landlords? 

When determining compensation for damage claims, depreciation is a critical factor considered by the Tenancy Tribunal. Depreciation is applied to ensure landlords are not in a better financial position after the tenant vacates the property than they would have been had the tenant complied with all tenancy obligations.

What Do Landlords Need to Consider Before Making a Damage Claim? 

Landlords should consider how much their property items have depreciated before making a damage claim. The Residential Tenancies Act allows landlords to claim damages caused during the tenancy, but the Tribunal ensures that tenants are only liable for the current value of the damaged items, not their original cost. 

This case demonstrates the importance of understanding depreciation when calculating damages at the end of a tenancy.  

Find out more about Attending a Tenancy Tribunal Hearing and Common Tenancy Tribunal NZ Disputes. 

Crockers' View 

Crockers recommends that landlords record the condition and age of items in their rental properties at the start of each tenancy. This documentation can be crucial in cases where depreciation is applied, as it helps determine a fair compensation amount based on the current value of the items, rather than the cost of replacing them in full. Regular home inspections ensure tenants and landlords alike are adhering to the terms of the rental agreement. 

FAQs

1. How does depreciation affect compensation in a Tenancy Tribunal case?
   Depreciation reduces the amount a tenant may be required to pay for damaged or missing items. The Tribunal considers factors such as the item’s age, condition, and expected lifespan, ensuring that landlords receive fair compensation without profiting from the claim. 
   
   
2. What types of items are commonly depreciated in Tribunal damage claims?
   Items such as carpets, curtains, appliances, and fixtures are often subject to depreciation. For example, carpets with an expected lifespan of 10 years may have their compensation reduced based on their age and condition at the end of the tenancy. 
   
   
3. How can landlords prepare for potential damage claims? 
   Landlords should document the condition and age of rental property items at the start of each tenancy. Keeping detailed records and conducting regular inspections helps support fair claims if damage occurs and ensures accurate depreciation calculations in Tribunal cases. 

Need a hand managing your rental property? Reach out to our PM Business Development Team at pm@crockers.co.nz or call for a chat on 09 623 5952.