Every single item in your investment property has a depreciation value – right from the chrome toilet roll holder to the handles on the kitchen cupboard drawers to the thick pile carpet in the bedrooms.
Depreciation is a reduction in the value of an asset over time, due in particular to wear and tear.
Just as a new car loses value the moment that you drive it out of the showroom, the carpet in a property will lose value with each year of age.
Typically carpets have a ‘shelf life’ of 10 years. Tenants who damage carpet in a rental property can only be held liable for the remaining shelf life of the carpet at the time that they vacate the property.
If a property investor installs brand new carpet in February of 2016 and these carpets were damaged when the tenants vacated 12 months later, the owner could claim 90% of the total cost of the replacement of the damaged carpet.
Carpet that exceeds 10 years in age no longer has any depreciation left and therefore a claim may not legally be awarded.