Inventory
As a landlord, the importance of an inventory cannot be overstated.
So what is an inventory?
An inventory is the careful and accurate recording of the condition of your property, including its fittings, fixtures and contents, prior to the move in of your tenant. This recoding must be as meticulous as possible and must be understood by both the landlord and the tenant.
Why do an inventory?
The inventory is required so that at the end of the tenancy, both landlord and tenant can compare the state of the property with that recorded when the tenant moved in. This enables both parties to work out what deductions, if any, the landlord needs to make from the desposit.
The inventory should be approved by the tenant as accurate to ensure it is not disputed further down the line.
How to do an inventory
There are several ways to record the state of the property such as a video recording, pictures or just text. Whilst videos might sound like a great idea, I believe pictures are best able to capture more accurately the tiny things that a video cannot. So if a video recording is being used, I recommend supplementing with pictures to capture anything that needs to be focused on.
Start with the front door of the property so there is no doubt as to which property is being recorded or photographed, then walk in taking both far and close shots. If there is anything worthy of note, such as stains on the wall or intricate items where it is crucial to show there is no prior damage, then a close shot would be ideal. All rooms should be photographed, or video recorded, including the walls and floors. In the kitchen, all appliances such as oven and hobs should be photographed and the fittings in the bathroom such as taps and showers should also be recorded.
The videos or pictures should be dated as this again will give weight to the evidence if a dispute occurs at the end of the tenancy.
Once pictures are taken, a report needs to be prepared. The report should include the property address, tenants’ details, the date the inventory was done, the tenant move in date and details of who prepared the report. It should also include a general statement on the condition of the property such as if the property was professional cleaned or freshly decorated.
The report should be broken into sections for each part of the house to make it easy to read and understand. For instance, hallway, living room, kitchen etc. For each section a summary of the condition of the area should be included as well as the pictures. Each picture should be labelled indicating what it represents, and any important information noted next to the picture such as marks on the wall, immaculate condition, slight tear in curtain etc. This should be done for each section of the house. If there is a garden or patio, this area should also be included.
The meter reading should be taken and recorded if the meters are credit meters so both landlord and the tenant can be accurately billed.
Any other items handed over to the tenant should also be included and photographed such as keys and entry fobs.
Once the report is completed, there should be a section for both the author and tenant to sign agreeing with the contents of the document.
It is prudent to send the document to the tenant to agree or suggest amendments. Once all parties are in agreement, the document needs to be signed.
Things added mid-tenancy
If an item is provided or an upgrade is done to the property mid-tenancy, this needs to be captured and can be done by adding an addendum to the inventory, signed again by both parties.
Should I do it myself?
As a self-professed diy property manager, I’m all into saving costs and improving rental return. I therefore generally avoid using third parties where possible. However, if a landlord is not confident doing this themselves, then as usual I recommend using an agent or inventory clerk to do the inventory as it’s important to get it right.
Sending the inventory to the tenant
Whilst it’s a great idea to have the tenant available whilst doing the initial walkthrough, it is not always practical so the report may need to be sent to the tenant by email requesting their signature and once signed by both parties, a copy should be sent to the tenant and a copy retained by the landlord.
Checkout
When the tenancy comes to an end or when the tenant moves out, the landlord needs to do another inventory or what is commonly called a checkout. This process involves doing a similar walkthrough and capturing the state of the property post tenancy. The best way to do this to repeat the steps taken on check in. Ideally taking the pictures from the same angle as was done during the check in. This will help make comparisons easier for an adjudicator in the event of a dispute.
In the checkout report, the pictures should be put side by side, with a commentary if required. If a claim is to be made, the commentary should state what the discrepancy is and what is being claimed.
The meter reading should also be included in the checkout report which should be sent to the tenant. If there are no deductions to be made, this will be straight forward but if there are, the tenant should be given an opportunity to comment on the report and hopefully agree with its contents.
If the tenant does not fully agree with the deductions to be made, to avoid a dispute and depending on what the deductions are, the landlord may choose to be reasonable for minor things where they are able to. If an agreement cannot be reached then the landlord can pursue recovery through the courts or if agreeable by both parties, use the dispute resolution service offered by the government provided deposit protection schemes.
The landlord needs to obtain quotes for any damaged items to be replaced or remedial works to be done. This quote will be required regardless of whether the tenant agrees to the deductions or not.
Note that fair wear and tear needs to be accounted for and cannot be charged to the tenant.
Fair wear and tear
According to Merriam-Webster dictionary, wear and tear is the “the loss, injury, or stress to which something is subjected by or in the course of use”. In the case of a property, this can be referred to as the normal depreciation of a property and its fixtures whilst in use. This deterioration occurs as a result of normal and everyday use. Examples include wobbly door knobs, small scratches on or discolouration of walls
Fair wear and tear is also a factor of how long a tenant has been in the property so what may be acceptable for a tenant who has been in situ for 5 years may not be acceptable for a tenant who was there for 6 months. The landlord will also not be expecting to make a claim for brand new replacements where the damage may be minute.
Deposit
You are able to obtain a deposit to use as security against damages or unpaid rent. The maximum deposit that can legally be taken from a tenant is five weeks rent. This amount is sufficient in a case where there are little or no issues with the property at the end of the tenancy but not nearly enough in a situation where a tenant causes a lot of damage or is huge in arears.
The deposit must be secured within 30 days of receipt in a government backed protected scheme such as Deposit Protection Service, MyDeposits or Tenancy Deposit Scheme using either the Custodial Scheme or Insured Scheme.
Once a deposit has been paid by the tenant, you need to provide your tenant, within 30 days of payment, with the prescribed information which must contain:
- the address of the rented property
- how much deposit the tenant paid
- how the deposit is protected
- the name and contact details of the tenancy deposit protection scheme used and its dispute resolution service
- landlord or agents name and contact details
- the name and contact details of any third party who paid the deposit
- why you would keep some or all of the deposit – for example, because your tenants damaged the property and you need to fix it
- how to apply to get the deposit back at the end of the tenancy
- what to do if they cannot get hold of you at the end of the tenancy
- what to do if there’s a dispute over the amount of deposit to be returned at the end of the tenancy
Most of the government approved schemes have templates to help with the prescribed information. You will also need to send the terms and conditions of the deposit scheme.
Failure to secure the deposit or provide the prescribed information can lead to the court ordering the landlord to pay up to 3 times the deposit. The legislation allows the tenant to bring a claim against the landlord up to 6 years after the end of their tenancy.
Note that no section 21 notice nay be served to the tenant if the deposit has not been registered
Registering a tenants deposit
It’s easy to register as a landlord with any of the government backed desposit protection schemes, such as Deposit Protection Service, MyDeposits or the Tenancy Deposit Scheme by visiting their websites and following the instructions.
Once registered, the landlord will have access to the various resources and FAQ’s which will include details of how to register a tenants deposit and complete the prescribed information.
If you use an agent to secure a tenant, they will likely want to register the deposit on your behalf. This shouldn’t be a problem in itself but ensure they do not plan to charge you for the privilege of performing this otherwise free service. Some agents will even go as far as charging you a monthly fee for “managing” the deposit which, in reality, requires no management at all.
Note that as a landlord, you are ultimately responsible so if an agent fails to regster the deposit, you will still be responsible.
The custodial and insured schemes
With the custodial scheme, the landlord or agent pays the deposit received from the tenant to the one of the approved schemes.
With the insured scheme, the landlord or agent holds on to the deposit received from the tenant for the duration of the tenancy and pays a fee to one of the approved schemes for this privilege.
Serving the tenant
It is vital that you have a fool proof way of showing the deposit was registered and that the prescribed information was sent to the tenant within the required timeframe due to the heavy sanctions accompanying either the failure to do so or having the evidence of hacing done so.
The prescribed information includes a section for the tenant to sign to confirm the information given about their deposit is accurate. As long as the tenant signs this, it can serve as your prove.
End of tenancy
At the end of the tenancy or when the tenant leaves and you have performed your checkout as above, you will be in a position to determine if the entire deposit can be paid to the tenant or if deductions are to be made.
Where there are no deductions to be made, the landlord simply logs on to the website and approves the return of the deposit to the tenant in the custodial scheme. With the insured scheme, the landlord simply pays the deposit in its possession back to the tenant. The deposit must be returned to the tenants within 10 days of both parties agreeing how much they’ll get back.
Where the landlord has agreed the deductions with the tenant and the tenant is in agreement, the deductions can again easily be made from the secured deposit. As long as the tenant agreed the deductions on the site, each party will receive whatever is due them within a few days.
Where there is a disagreement on the deductions, both parties have the option of using the dispute resolution service provided by the individual schemes. If one party does not agree the dispute resolution service cannot be used.
Using the dispute resolution
To use the dispute resolution service, each party will be asked to submit their evidence within a specified timeframe. It is important that you submit the best possible case as there is no opportunity to add more information or change the information once submitted neither is there an opportunity to defend it in person or clarify anything to the adjudicator.
This is a!so the information on which a decision will be based. The adjudicator will base his or her decision purely on what evidence is submitted. Note that the burden of proof is on the landlord, the tenant does not have to prove anything and adjudicators will, without proper evidence and justification from the landlord, rule in favor of the tenant. It is therefore important to put your best foot forward.
This is where the time spent on the check in and checkout inventory will pay dividend as if done properly, should be able to help prove the landlord’s case.
If using the insured scheme, an amount equal to the disputed amount must be lodged with the scheme for the duration of the dispute resolution.
No deposit schemes
The no deposit option allows tenants to move into a property without paying the usual deposit. There are many companies offering this scheme where a tenant pays a fee in lieu of a deposit. This fee is usually approximately one weeks rent and the company acts as an insurer guaranteeing payments for damages caused by the tenant to the landlord. This used to purchase a deposit guarantee which pays the landlord in the event of a claim. The tenant remains responsible for any deductions and will be pursued by the company offering the rent guarantee. Flatfair, Zero Deposit and Reposit are the most popular Zero Deposit schemes.
Others documents that must be served at the onset of a tenancy
How to rent guide (Latest version)
This guide gives information to tenants to help them understand their rights and responsibilities. Failure to serve this means you cannot use the section 21 route to seek possession of the property from your tenant until it is served.
Gas safety certificate
If the property has gas appliances, a valid gas safety certificate must be given to the tenant at the start of the tenancy (and every time the gas certificate is renewed). This is also required should the landlord ever want to use the section 21 route for possession.
Electrical installation condition report
A valid Electrical Installation Condition Report (EICR) for the property must be supplied to the tenant.
Privacy notice
A privacy notice outlining how the tena.nt’s data will be used.
Smoke and CO detectors
Prior to the tenant moving in, the smoke and carbon monoxide detectors (fitted in every room with a fuel burning source) must be tested and confirmed as being in working order at the start of the tenancy.
How to comply
A simple checklist can be provided to the tenant to sign to confirm they have received all of the above documents prior to the commencement of the tenancy.
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