Conducting a move-out inspection

Move-out inspections should be surprise-free. The horror stories of finding a rental unit in disarray, light fixtures dangling from wires, wallpaper torn down, minor leaks slowly turning into mould and mildew in the corners – these are all avoidable circumstances. Well, for the most part anyway.

Inspections are only as good as your protections. Protecting your investment means finding the right tenant, then ensuring they are happy, and therefore unlikely to cause damage in the first place.

When it comes down to it, the steps you take prior to having the tenant sign the lease are the most crucial to your success in the future.

Follow along as we walk you through how to conduct a move-out inspection and how to protect yourself from having trouble when your tenant moves out.

Tenant move-out inspection checklist

Performing a move-out inspection is part and parcel of the responsibilities a landlord upholds. The catch here is that the expectations a landlord has may be altogether different from those of the tenant. Including the landlord’s expectations in the lease is the ideal way of ensuring they are followed by the tenant.

If you chose your tenant well, then you should have some modicum of confidence in their ability to keep your rental unit in tip-top shape. Either way, attaching a “move-out checklist” as a rider to your lease is an excellent way to establish the expectations of the tenancy early on.

Sample move-out checklist

Append a document similar to this onto your lease, then have the tenant sign it. Give them a scanned and signed copy of the lease with this document, then remind them of the terms for move-out if and when they choose to move-out. Easy-peasy.

A bit about “normal wear and tear”

Before you get bent out of shape over damage to the unit, consider what actually constitutes “tenant damage”. Normal wear and tear is a protection that ensures tenants will not be charged for the replacement of items as they age. Likewise, "tenant damage" ensures landlords will not pay for damage caused by the neglect or abuse of the tenant.

The definitions are a bit vague, so it really comes down to the severity of the damage and age of the damaged item.

Worn out carpets with a stain or two would likely be considered “normal wear and tear”. However, rips and tears from a pet would be “tenant damage”.

Bear in mind how challenging it is for the landlord to pursue a tenant who causes damage. Instead of trying to track down a tenant who abandons ship, leaving the landlord to foot the bill, consider protecting yourself from those troubles in the first place with NaborlyShield. That way you will be free from the trouble of pursuing legal action.

At the end of the day, the age of the item that is damaged will be weighed against the length of the tenancy and severity of the damage. Generally, if the damage is superficial or related to the age of the item, then it will fall under “normal wear and tear”.

Returning a deposit (with interest)

After a move-out inspection, the landlord will need to return the tenant's deposit. Just about everywhere, this means returning the deposit with interest – though you should still check your local guidelines.

Security deposits versus rent deposits

Here in Ontario, we do not have security deposits. The only measure of protection landlords have is the rent deposit. In effect, the rent deposit ensures that a landlord is paid for the final month of tenancy ahead of time. Unfortunately, that money cannot be used to cover any damages incurred by the tenant during the tenancy. Such damages will have to be taken to court.

Further, rent deposits accrue interest, and that interest must be paid out every 12 months to the tenant. The amount of interest owed is equivalent to the rent increase guideline at the time the interest payment is due.

One way to simplify the process a bit is to deduct the interest due to the tenant from the amount of money the tenant needs to add to their rent deposit (if their rent is increasing). That way there is less money changing hands and fewer receipts to keep track of.

If, for whatever reason, the landlord has not made these interest payments to the tenant, they are still obligated to do so at the end of the tenancy. The landlord may calculate the payment due by applying the interest percentage – the rent increase guideline each year – to the rent deposit, then adding each of those together.

Example calculation for applying interest to a rent deposit

The tenancy ran from June 2015 to July 2019 with a rent deposit of 1000 dollars. That means interest is owed for the calendar years 2016, 2017, 2018, and 2019.

So, we’ll check the rent increase guideline for Ontario for each of those years to find 2.0 percent, 1.5 percent, 1.8 percent, and 1.8 percent are due for each year respectively.

Now, let’s do a bit of math:

Next step is to add those totals together:

That’s all there is to it. Not so bad, right?

Just remember – you cannot deduct the cost of repairing damage to the unit from the rent deposit.

What to do if a tenant damaged your rental unit

In a nutshell, you will need to take it to small claims court. Since the tenancy is already ending, you may not move for eviction with damages and so the Landlord Tenancy Board (LTB) is no longer in charge of the relationship. Threatening a tenant will do nothing to help the situation and may end up with the landlord suffering further losses.

Avoiding this situation is generally the best course of action. Take care to screen your tenants and ensure you are protecting your investment from any potential pitfalls that may occur. That way, you can rest easy knowing your rental unit is generating stable income during the tenancy.

Want to know more? We have a help centre with answers to your pressing questions, and a blog for all the rest!