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wpd7

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Posts: 30
Reply with quote  #1 
I recently purchased a property which had tenants in it since Dec 15th, 2007.  I received possession of the property (tenants moved out) on April 30th 2009.  I closed escrow on this property on April 17th, 2009.

Prior to these tenants moving in, the previous owner replaced many things:

"Prior to him moving in last December 07' the unit had new carpet and linoleum installed.  The unit had a new heating system installed along with cook top and oven. It had been painted throughout and blinds were installed."

Since taking possession, I will be replacing the carpet due to multiple and severe stains as well as a strong smoke smell caused by smoking.  As far as I can tell, these guys chain smoked the entire time they were inside the home and never bothered to open the windows or smoke outside.

How do I calculate the draw on their deposit?  If I recall correctly, you deduct the remaining useful life of the carpet based on the depreciation schedule you used for the IRS, but I have never put in a depreciation schedule for this unit.

Do I need to contact the previous owner and ask how many years he used for the depreciation schedule or can I just pick a range for this point on and go with that.

ie. 5 years depreciation
60months - 16.5months = 43.5 months remaining life
43.5/60 = 72% remaining life

The deposit is $1500 and the total cost to replace carpet and padding is estimated at $4000.  I will have a more solid figure this Thursday...  I have already hired professional cleaners to clean the property when they left (it was extremely dirty with trash everywhere) and that have already eaten up $390 of the $1500 (7.5 hours of cleaning).

Any ideas?

OHlandlord

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Posts: 3,814
Reply with quote  #2 
First, the cleaning company receipt.  Make sure they itemize the cleaning.  It needs to specifically list what they did.  A receipt that says cleaning of Unit A, 123 Main St. isn't enough.  If they didn't itemize the receipt/bill, have them write a letter that states what they did.

Next, the carpet isn't depreciated because it was bought with the unit.  The last owner would have depreciated it.  You would have received the unit (and its carpet) under the value it had of the time of sale.  Since you can't determine what schedule the last owner used for depreciation, assuming the most favorable schedule for the tenant would be the safest way to go.  Get a written statement that the carpet was new on move in from the last owner.

You need to get a statement from a carpet cleaner which says the carpet cannot be cleaned.  If you don't have that, expect a fight on your hands since the tenants will claim the carpet could have simply been cleaned.  Have one come look at the carpet and possibly attempt to clean it prior to replacement.  Take photos of it as evidence.  Charge for cleaning any rooms that can be cleaned.

The calculation you have made is fine to replace any rooms of carpet that cannot be cleaned.  You cannot replace the entire unit's carpet, only those rooms that are ruined. The other rooms may not match, but you cannot charge the tenant with the cost of new carpet for rooms that are not ruined.  Unless the tenants had a no smoking clause in their lease, they were legally permitted to smoke and you cannot charge them for smoking.  If you replace, cut out a 1' square of the stained area and seal it in an extra large ziplock bag, just in case this is challenged in court.  (That makes a good impression on a judge and proves your case.) 

Additionally, if the pad is only just over a year old, why replace it?  You can replace just the stained portion of padding (if any) and leave the rest.  It shouldn't be worn out in only a year.  (Of course, the carpet guys will want you to replace everything since it gains them more profit.)  Leave the padding and tack strips alone if possible.  This is a rental.  No need to spend more than needed unless it is a really high end one.
wpd7

Registered:
Posts: 30
Reply with quote  #3 
I should have said I'm moving into this section of the duplex hence my overhaul of the entire carpet situation as well as smoke mitigation.  I am also painting the unit as well.

There are stains in every room, some dark (ash rubbed in), some yellow (I really don't want to know what that was), and many other dark reds and browns.  This is especially evident upon removal of the carpet(stains in the bottom of the carpet that wasn't 100% visible on top of it).

Tack is staying, but I am replacing the pad so I can place a thicker and denser pad for noise control between the top (mine) and bottom rental unit.

It's relatively high end as it's in San Diego and have an ocean view!  =)

OHlandlord

Registered:
Posts: 3,814
Reply with quote  #4 
As I said, you need a statement from a professional carpet cleaner that says the stains can't be cleaned.  Many can be removed.  You can only charge the depreciated value for carpet in rooms that cannot be cleaned.  Removing the carpet because you are moving in doesn't allow you to charge the tenants for it all.  Only the ruined areas.

If you replace good pad because you want thicker pad, you can't charge the tenants for the pad.  You pay for the thicker pad.

Hope you enjoy your new place.
wpd7

Registered:
Posts: 30
Reply with quote  #5 
Of course. I do have a note from the cleaners (professional smoke and stain mitigators) saying that the carpet is pretty much unsalvageable- it was pretty badly ruined.

Just to give you an idea of how badly they treated this place- professional cleaners took 7.5 hours to clean it top to bottom and took out enough trash to overwhelm a large trash bin.



OHlandlord

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Posts: 3,814
Reply with quote  #6 

7.5 hours!  Good grief.  Hope your next tenants are better.

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