Californina Depreciation Information for Landlords and Tenants
California Depreciation Information for Landlords and Tenants
Question
This is a clarification of a previously asked question regarding CA depreciation. I am concerned about depreciation as used when deducting damages from a security deposit or when suing for damages.
Answer
The depreciation that is allowed when charging for damaged carpet is not defined by law in most states. However, if the matter goes to court before a knowledgeable judge and with the tenant being knowledgeable or having a competent attorney then the method used must be reasonable. This usually means that when calculating damage the landlord must take into consideration:
- expected life of the carpet when new,
- condition of the carpet when the tenant moved in (if not new),
- length of tenancy,
- condition of the carpet when the tenant moves out, and
- That the tenant cannot be charged for normal wear & tear.
Proration replacement cost – You cannot charge the tenant for the total cost of replacing the entire carpet in the unit. There are two different issues regarding this issue. First, depending on the floor plan and the location of carpeting, it may be acceptable to replace carpeting in only certain rooms. Second, wherever carpeting is replaced you cannot charge for the full cost of carpeting, but must allow for depreciation. The percentage of cost of replacing damaged carpet (labor and materials) that may be charged against the tenant is determined by dividing the number of years the carpet has been in service (including the period the unit was occupied by the tenant who damaged the carpet) by the useful life of the carpet. There is more than one number that might be justifiable for useful life, but it is usually least arguable to use the number of years warranted by the manufacturer.
As examples, assume a carpet that the manufacturer had warranted for 15 years. If the carpet was 10 years old when the tenant vacated the unit, the tenant can be charged 5/15 = 33.3% of the cost of replacement carpet, whether the entire unit is re-carpeted or only some of the area. If the carpet had been new when the tenant moved in a year earlier, the tenant can be charged 14/15 = 93.3% of replacement cost. If the carpet was 14 years old when the tenant moved into the unit and the tenant remained for one year or more, the tenant cannot be charged for any part of the cost of replacement.
Similar considerations must be given to window coverings, appliances, and other components of a rental that would be considered capital items (have a typical useful life of longer than a year) when they require replacement rather than repair. The tenant can be charged the actual repair cost for anything being repaired due to the actions or inactions of the tenant or his/her guests.