An overview of entry and exit condition reports and bond claims

Two of the most important documents in any tenancy are the entry and exit condition reports. On a statistical basis, the significant majority of tenancies end on good terms with no disputes, or issues are clear cut enough that bond deductions are agreed upon without the need to escalate to a rental authority or legal administration. However, when there is disagreement it is fair to say it is often “not pretty”. This is where the importance of the entry and exit condition reports will come into play. 

Bonds

Before we talk about the reports, it is important to clarify some common misunderstandings regarding rental bonds. Disputes raised by tenants regarding bond claims often lead to conflict and frustration in the relationship between the owner and the property manager due to these misunderstandings.

Firstly, it is important to understand that fundamentally the rental bond paid does not belong to the owner, it belongs to the tenant. If you have seen a bond acknowledgement form provided by the RTA in Queensland, it lists the property address, the tenant names, and the amount of the bond. The owners name is nowhere to be seen! In other states where the owner is listed, such as NSW, the bond is still attached to the property. For example, when a property is sold to a new owner, the bond remains in place against the property and tenancy agreement. Hence, the onus is on the property manager/owner to prove the claim, rather than the tenant defend it.

Leading on from that, the second important thing to understand is that the property manager or owner does not “release” the bond at the end of the tenancy, they either make a claim against the bond or confirm no claim is to be made. Property managers are increasingly getting “outwitted” for want of a better term through a lack of understanding of the process and through tenants becoming more informed of their tenancy rights as they relate to getting their bond back at the end of a tenancy.

Entry and exit condition reports

The entry condition report is a snapshot of the condition of the property, and any inclusions, at the start of the tenancy. It can sometimes be confronting for owners to see an entry condition report for their property. A good entry condition report should be thorough, note all issues with the condition of the property no matter how small, and not try and minimise or overlook small issues. From an owners’ perspective, a blank entry condition report could be more reason to be concerned than one with a significant number of notes and comments.

The exit condition report should be completed in the same way as the entry report. The two are then compared to determine if any issues exist that require investigation, taking into account fair wear and tear (see below).

There is an important note to make regarding how and by whom the different reports are completed from a technical point of view. Common convention is that the property manager or owner completes both the entry and the exit condition report. In actual fact the requirements are different. The property manager/owner completes the entry condition report and provides a copy to the tenant. The reverse is true of the exit condition report, with the onus on the tenant to complete the report initially and provide to the property manager/owner for comment.

Photos and videos

Photos and videos have become common place now in entry and exit condition reports. There are no restrictions on how many can be taken so you should expect to see a significant number of pictures in your report. However, the number of photos does not correlate to the quality and integrity of the report. The photos need to correlate with what is written in the report. There is no real purpose in having a dozen photos from the doorway of a room, yet no picture of significant scuff marks in the base of the built-in wardrobe, or the crack in the light fitting on the roof.

A key point though when it comes to photos in your entry and exit report. It is very important to note that photos and videos support what is written in the report – they do not replace written descriptions of the issues!

Fair wear and tear

The concept of fair wear and tear has been the cause of many a bond dispute! Unfortunately, this scenario will more than likely continue, as the term itself is not defined in any act or regulation that applies to property. The RTA provides the following limited guidance:

“Normal use and ageing may affect the condition of a rental property over time. At the end of a tenancy the tenant must return the property to the same condition it was in at the start of the tenancy. Fair wear and tear should be considered when assessing the condition of the property.”

Every individual scenario will be different, so it is difficult to provide specific advice. There are however a few things to keep in mind. Normal use is not just specific to the item in question, for example carpet, but also in the context of the approved tenancy. The concept of normal use will have slightly different measurability if you have rented to a couple, as opposed to a family with three small children. This needs to be considered at the point of application approval. Additionally, if there is damage beyond wear and tear, compensation is based on the depreciated value of said item, in addition to the proportion of the item damaged. For example, a small dent in a wall does not mean you can claim the cost to paint the entire wall after patching. You may decide to do that, but a portion of that cost will be borne by the owner.

The above provides an overview and some pertinent points, but as always there are significant resources online to assist owners in educating themselves and understanding this part of the property management function. And of course we are always happy to explain the process and accommodate you as the owner in engaging in these functions.

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