Differences Between Repair And Replacement Explained

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If you are renting a property, there may be some contract clauses as to repair or replacement. There are specific differences in what each of these means in real estate law.

A repair is when you fix an existing system. A rental or leasing contract can also mean that you do what you need to maintain a system like an air-con or HVAC system. For a replacement, you must change something as the old one is broken or will not work. Generally, the equipment can be cheaper to repair than replace it.

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Repair Vs. Replacement Explained

In some rental or leasing contracts you sign, it can be stated that as part of your leasing agreement, you need to keep up some essential repair work, such as ordinary maintenance on an air conditioner or HVAC system.

Repairs usually cost less than replacements. A repair is when a product is fixed and not replaced. For example, the air con broke, and a repairman repaired it.

On the other hand, if the aircon broke and the repairman could not fix or repair it, then the aircon would need to be replaced, or a new unit would need to be purchased and installed.

Repair is to fix something so that it can continue to work. Replacement is to buy a new unit or buy something new and completely replace it.

Real Estate Rental Case Study To Explain Repair And Replacement For Tenants

If you are a tenant or leasing a property, this is where the differences between repair and replacement can get confusing. To illustrate this, we will use a fictional case study of a woman (Sue) who has leased commercial property for her art business.

Sue had an art business leasing a prime retail spot in a tourist destination. Her commercial lease on the property was for ten years.

Regarding her lease, she was required to pay for the HVAC, heat ventilation, and air conditioning system filters and have a quarterly inspection to show they were completed.

Sue had a contract with a reputable company and faithfully had all these systems checked as per the terms of her lease for nine years without any problems. As she entered her tenth year, she told the landlord she would not renew their lease.

The landlord was disappointed as he liked Sue, who always paid her rent on time. He started to market the space to find another tenant to lease it.

In the last year of her lease, the air condition unit suddenly stopped working. Sue called the repair man, who told me it could not be repaired.

Sue called the landlord, and he told Sue that she was responsible for replacing the air conditioning system as she had to leave the premises the same way she entered it with a working air conditioning system.

Sue felt it was not fair that the landowner was trying to get her to pay for the new air conditioning unit, so she called up an attorney to help her navigate this with the landlord.

The attorney looked at the contract and saw that it spoke about Sue being responsible for repairs. The attorney explained that under the terms of her agreement, Sue was only accountable for the repairs and maintenance of the system but was not responsible for any replacements.

Listen To Our Podcast About The Differences Between Repair And Replacement by clicking here.

Repairs mean fixing the system already in place and keeping the system in good working order. Sue had done this, and she had the quarterly inspections she had conducted to prove she had been diligent in keeping the system in good working order.

But as the system was old and could not be used, it needed to be replaced. A replacement was a new system that needed to be put in as the old system was no longer working and could not be fixed.

Of course, replacing the new system is much more expensive than fixing the old one, but the landlord, not Sue, should be responsible for the replacement.

This example illustrates how confusing it can be when it comes to repairs and replacement, especially when you are leasing or renting a property. You need to understand that a repair is not the same as a replacement.

Unless otherwise stated in the contract, replacements are usually something a landlord should handle as they also have to do with the value of the building. It is the landlord that will get the benefit of the replacement, not the tenant.

But if you are unsure, you should carefully read any contracts before you sign them and talk to an attorney to know exactly what repairs or replacements you will or will not be responsible for, especially if you are leasing a commercial or other property.

Many contracts will state that if you change a property, you need to put it back in its original state.

We once rented a property, and the owner painted it hideous blue. We painted all the walls white. But when we moved out, he insisted we had to paint the walls the ugly blue color again, so we had to repaint them as per the terms of our contract.

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Anita Hummel
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