When the value of an asset or building goes down over a period of time because of certain reasons like wear and tear, age and physical deterioration, it is called depreciation in real estate scenario. In real estate, the term is applicable only to buildings as land does not deteriorate over time. Usually, there is a difference between the commercial income and residential income properties as far as depreciation value of a building is concerned. Below are answers to few of the more common legal questions about depreciated value: How can I claim compensation from my tenants for damaging the carpeting and woodwork if the security deposit of my tenants does not cover the depreciated value of replacing the carpet as well as the other damages they made? The damaging was done by a pet that was kept unofficially by my tenants. In order to make sure that you get a proper compensation for the damages, all you would need to do is go for a final walk-through of the property with your tenants. This is probably one of the best options for claiming a proper compensation. While you do that, you should videotape all damages that your tenants have done to your property and then tell them that the amount of their security deposit does not cover the damages they have made to your property. Moreover, you should let them know that you are looking into pursing them through the small claims court in order to get the money they owe you. Now that you have done the final walk-through of the property and properly recorded all damages, you would need to make sure that you create a formal written detailed estimate of all the costs. Then you would need to send your tenants a copy of this document, requesting them to compensate for the costs. However, you must remember that all of this should be done within two weeks of their moving out so that there is no room for any accusation like you withholding damages or not informing them about it on time. Finally, after all this, if your tenants continue to refuse to cover the damages, you can straight away approach the court, produce a copy of the estimated cost as evidence of all damages and sue them to pay you off the money you are owed. If I want to replace a door that is probably ten years old, is my tenant responsible to pay the current value of the door or should he pay its reduced value? In this case, if your tenant has caused the damage to the door, then he or she would definitely need to pay the cost of a new door multiplied by the percentage of the useful life that the door has. Usually the materials that were used in making the door and the amount of exposure it had to the elements decide how long the door is going to be of use. For instance, a wooden door that has been exposed would have less longevity as compared to a metal door that is protected. However, if the tenant did not damage the door, then there is no obligation on the tenant’s part to pay for the damages. What value of the carpet do my tenants need to pay if they remove the wall to wall carpeting in my property? Is it the carpet’s original value that was taken off or the decreased value? In most cases, the carpets that are used in rental properties remain useful for about eight to ten years only. Therefore, if a tenant removes the carpet in a property that is rented, he or she would need to pay only the pro-rated or run down cost of replacing the carpet. Usually, the revenue that is generated by using an asset is the amount against which the depreciation expenses are charged. When an acquired real estate decreases in value, it automatically brings down your income tax liability as you are able to show a lesser income. If you need any clarification about your particular situation on the subject, you may wish to ask a real estate lawyer for legal insight based on an expert evaluation of your circumstances.
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