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Inventories – the complete guide to the devil and the detail

In an ever-changing lettings industry, shaken by the impact of coronavirus and with more regulation on the horizon, property inspection reports and inventories remain a vital part of the rental process for letting agents, landlords and tenants.

During these uncertain times, the need for clarity and transparency at the outset of a tenancy is arguably more important than ever. A sharp, robust inventory should therefore be at the forefront of any tenancy to safeguard the interests of both tenants and landlords. While the majority of landlords are good and most tenants treat their rental properties with respect, even successful tenancies often end in a discussion over the condition and cleanliness of the property. This is where check-in inventories, mid-term inspection reports and check-out reports will be the primary pieces of evidence for negotiating.

In this guide, we’ll look at why you need an inventory, its significance at various stages during the rental process, and how to make sure you have a robust inventory in the event that you need it to support the negotiation. We’ll also provide our top tips to help safeguard both the landlord or agent and tenant in order to manage everyone’s expectations throughout the tenancy. Our inventory checklist is designed to help make sure that you have covered all areas in your inventory report.

What is an inventory?

A robust check-in inventory is a comprehensive list of the property’s contents and areas together with a schedule of condition, which records a detailed description of the condition of each room in the property and its fixtures as well as the standard of cleanliness throughout. The check-in inventory should also include good quality photographs which, if not embedded in the report, should be time and date stamped.

It’s important to get the tenant’s agreement to this record of condition, and this can best be done by visiting the property with the tenant to make sure they agree to the recorded condition at ‘check in’.

This report is the basis for everything that comes after it, when looking at how a tenant has lived in, and looked after, the property and any changes that are found during mid-term inspections and when the tenancy ends, at ‘check out’.

Why is an inventory so important?

You’d be surprised how much damage a tenant can do, but our team of adjudicators have seen it all! Whether the damage involves stains on carpets, broken windows, burns on worktops, holes in walls or broken doors, the list goes on – read our case study for a real life illustration. If you have no check-in inventory, or what you do have is not sufficiently robust, then you are immediately on the back foot in any negotiation with your tenant when the tenancy ends.

A good inventory can help to avoid a dispute when the tenancy ends. Remember – no inventory means no evidence to negotiate with, which then brings into question whether there is any point in taking a security deposit, as proving the tenant caused the damage will be almost impossible.

Why are mid-term inspections valuable?

Mid-term inspections can highlight any problems which crop up during the tenancy, particularly those which could, in some cases, potentially shift the responsibility from tenant to landlord. A good example of this would be a leak in the property which the tenant reported as soon as possible, and which the landlord did remedy, but without repairing the residual damage, for example repainting a water stained wall. As long as the cause of the leak was not due to the tenant’s actions, the residual damage, such as to the décor, would be the landlord’s responsibility and no claim from the tenant could subsequently succeed. 

Some tenancies are long, often spanning many years, and if no mid-term inspection visits are carried out at any point during the course of these tenancies, serious damage can accumulate which if not reported, may result in costs way in excess of any deposit.

What happens when a tenant moves out?

The check-in inventory report needs to be comprehensive so that it can be referred to when the check-out inspection is carried out at the end of the tenancy. A comparative check-out report should be produced using short, descriptive words about the condition and cleanliness that highlight any differences to the original report. Photographs or videos should be included to support the findings, and should also be taken from the same angle as those in the check-in inventory, as well as any additional ones which clearly show damage or deterioration that has happened while that tenant was living in the property.

Regardless of whether or not a security deposit has been taken from the tenant, the landlord or letting agent will need to have proof that the tenant is responsible for any damage, missing items or cleaning related costs at the end of the tenancy. Both negotiation and adjudication rely on the quality of inventory and check-out inspection reports to help identify changes throughout the tenancy.

When negotiating deductions at the end of the tenancy it is important for all parties to understand that the landlord or agent is not entitled to compensation to the extent that the property will be improved at the tenant’s expense. Whatever amount is proposed as a deduction must be reasonable and relative to the damage attributable to the tenant which is in ‘excess of fair wear and tear’.

Suzy Hershman, Head of Dispute Resolution at mydeposits, offers some valuable guidance to help landlords and agents understand what fair wear and tear is and how this can be judged by considering certain criteria in the mydeposits guide, Wear and tear- what is fair?

But what if the damage goes beyond wear and tear? Next, we take a look at the topic of negotiation.

Thinking about negotiation?

Being fully prepared by making sure you have all the evidence to hand is key to good negotiation, and the inspection reports will be the most important evidence. Managing everyone’s expectations at this point is the basis to start from – does the tenant understand what their responsibilities were and what they did not do, or is the landlord looking to replace something at full cost to the tenant without considering reasonable wear and tear? These are good starting points to discuss and think about.

Suzy adds, “Wear and tear is a topic that is open to interpretation and is decided on a case by case basis based on the facts. Giving your tenants good advice, managing the relationship and everyone’s expectations throughout, together with having quality evidence will reduce the likelihood of a formal dispute.”

What happens if negotiation is unsuccessful?

While negotiation between landlords or agents and their tenants is successful most of the time, there is still a minority of tenancies, with either a protected deposit, or an alternative product in place, which require our more formal dispute resolution services to reach an independent and impartial decision. You can find out more about how the mydeposits dispute resolution process works here.

If you are interested in seeing how deposit alternative schemes differ from traditional deposit protection, you can find out more about Ome, the chosen deposit replacement partner of mydeposits here. Ome uses the same independent adjudicators as mydeposits, ensuring reliable and impartial decisions.

Are independent inventory reports better than those conducted by landlords or agents in the event of a dispute?

When it comes to the age-old question of whether a landlord or agent should conduct the inspections or whether independent reports are the only way to go, there are a couple of factors to bear in mind.

As long as the landlord or agent can prove that the tenant was given the check-in inventory report on moving in and had the opportunity to make any amendments, it will be good evidence from a formal disputes perspective. Ideally a tenant would have signed the report, but emails which are time and date stamped, or declaration forms signed when the report was handed to the tenant with, for example, keys and a tenancy agreement, are all good evidence showing the report was received.

In our view, an ‘independent’ inventory report is generally one which is carried out by a qualified third party who has no potential for bias and, while the tenant’s signature is still best practice, it is acceptable evidence in the case of a dispute.

The crucial point is that a first class report will include detailed description and good quality supporting photos. Given the part that technology plays across this industry and with the many apps and templates available, some at very little cost, it is now possible for anyone to create a good quality report.

While we must remain independent and do not recommend any one inventory provider over another, it is worth checking what’s out there to make sure you are protecting all parties and offering the best service possible.

In this next section, we dive into the detail of how to do inventories and take a look at the inventory essentials.

Inventory essentials – top tips

This list of top tips aims to prompt landlords and agents, in particular those that choose to compile their own reports, on the most important things to include in the reports, which all help to safeguard both the landlord and tenant and manage everyone’s expectations throughout the tenancy. If using an independent third party for your reports, make sure they are giving you the quality report you need.

Remember to:

  • Include a list of each item and area in the property with details of its condition and the standard of cleanliness throughout. Tip: condition and cleanliness are two separate things, with fair wear and tear applying to condition only
  • Include photo and video evidence to support the written description – these should be referenced to the area that they relate to.Tip: take photos at checkout, from the same angle as they are in the check-in reports and use a measure (such as a ruler or finger length) to show the size and ratio of, for example, scuffs on walls and marks on carpets
  • Date the reports and, if they are only photographic or video reports, make extra sure the time of the inspection is clear. Note: this especially applies to student properties and blocks where the décor and contents are identical and where turn-around times can be super quick
  • Keep the terminology used the same when describing something on both check-in and check-out reports.Tip: descriptions can be short, yet explanatory for example, three dark stains on carpet, several furniture indents, worn throughout. DO NOT rely on ‘good’ ‘poor’ ‘excellent’ or just use tick boxes
  • Define any of the terms or abbreviations used within the documents for consistency. Tip: think about using a number to reference each item. This makes it easier to cross reference any item or area at a property visit or final inspection
  • Make sure any photos, not embedded in the main report, are digitally dated. If not, these should be sent to your tenant who can initial and date them separately. Tip: check the date is set correctly on your phone, device or camera settings
  • Don’t underestimate the value of mid-term property inspections.TIP: these can help build a clear picture of what happened during the tenancy, when it comes to discussing responsibilities and any associated costs at the end
  • Send all reports to the tenant who, in an ideal world, will sign them to confirm receipt. However, when it comes to negotiation or adjudication, you will need to be able to evidence that the tenant received the check-in report and had the opportunity to comment and make any amends. For example, a time and date stamped email or a declaration form when they took the keys. It is generally more acceptable for the check-out report to be sent to the tenant but not necessarily signed
  • Make sure check-in reports are completed before the tenant moves in, and check-out reports are completed after the tenant has moved out all their belongings, making sure there are no long gaps between these two events

A comprehensive check-in inspection report, combined with mid-term inspections during the tenancy and a thorough check-out inspection report at the end, are vital to a smooth running tenancy process. It’s also important to be able to compare these reports from the start, during and end of the tenancy. A comparable report format and consistent use of good descriptive words, will give all parties the best opportunity to agree who is responsible for what when the tenant moves out, and avoid the prospect of a formal dispute.

Our ‘Ins and outs of inventories’ checklist is designed to help landlords, letting agents and tenants avoid tenancy disputes by making sure that you have covered all areas in your inventory report.

Finally, it is always best to be prepared for the unexpected. Even with all the checklists and checks in place, sometimes things go wrong. The best precaution in cases like these is to take out landlord insurance, which protects the property owner against financial losses suffered in connection to a rental property.

Hamilton Fraser, parent company to mydeposits, offers award winning landlord insurance and has been providing comprehensive cover for landlords since 1996.

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