The Importance Of A Landlord’s Condition Report

When you own property and rent it out as a landlord, or whether you are a managing agent looking after properties that are rented out by a number of landlords, one of the things that you really must do is carry out an inventory on a regular basis. It is not a legal requirement that you do so, but if you don’t, it can cause all sorts of problems when the time comes for your tenant to move on.

An inventory, or condition report as it is sometimes known, is a written report on the condition of everything within the property, and it should be done at the point when the tenant moves into the property so that both landlord and tenant are agreed on the state of affairs at the outset. In some cases the property may be empty, but in others the landlord may provide furniture, a cooker, refrigerator, freezer, washing machine, and so on, and the condition of everything that belongs to the landlord should be recorded. The condition report should also contain photographs of many of the items so that there can be no doubt of the condition at that point. It should also have photos of any damage, so that, for instance, if there is a scratch on the fridge door the tenant cannot be blamed for that later.

An inventory should also be undertaken at regular intervals during the tenancy. How often this should happen is a matter of opinion. Some people suggest as regularly as every three months, other say six, and still others think that once a year is sufficient. Carrying out an inventory on a regular basis allows any dilapidations to be noted more or less as they occur.

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Property Inventory Software Can Help You As A Landlord

When you rent out a property as a landlord you have one big advantage: you have money coming in regularly every month – or at least you should have. If you have capital invested in the property, or even if you don’t because you inherited it, having a regular income for basically doing nothing is always a good thing. Who wouldn’t want that?

However, it isn’t quite as easy as that. It would be lovely to think that you have money coming in, but there is another side to the coin and that is any problems that occur. For example, there could be a tremendous storm which causes tiles to fall off the roof. Fixing it is your problem, because you own the building. The plumbing could leak: that could be even worse because it could cause damage to the furniture which is actually owned by your tenant. 

Then there is the problem of damages caused to your property by your tenant, either deliberately or as a result of neglect. These are known as dilapidations and are the responsibility of your tenant. However, they can be the subject of considerable disputes. For example, carpets can and do wear out, and that is not a dilapidation but simply wear and tear. You cannot recover money from your tenant’s deposit for fair wear and tear. Equally, you can deduct money from the deposit for dilapidations.

The problem is that when the time for checkout arrives, who decides what is fair wear and tear and what are dilapidations? Unless you do regular inventory checks it can be hard to decide. This is why inventory on check in and checkout is essential, but even more why periodic inventory is vital.

When you do periodic inventory, you can take photographs which show fair wear and tear and also show dilapidations. Today, you can get property inventory software to help with this, and in some cases it is free to download. Using property inventory software will give you a considerable amount of assistance when carrying out checks because it will remind you of certain things to look for and can also help you by taking photographs of items as time goes by.

Inventory Reports Are Time-Consuming But Essential

If you are a landlord or a managing agent, there is no law that says that you MUST carry out inventory reports. However, you are far better off doing so because if you don’t there can be never-ending disputes about who did what and when, and what was already damaged when the tenant moved in, at the point where the tenant moves out. 

As the landlord, you have the right to claim any damages from the tenant’s initial deposit when that tenant moves out in order to carry out any repairs that may be necessary, and that is only fair enough. However, this can lead to arguments over what is “damage” and what is fair wear and tear. After all, fair wear and tear actually does exist, and if you have a tenant for ten years it is very likely that the paintwork will have deteriorated and will need repainting before you can let your property again. 

Equally, if a tenant has caused damage to your property it is only right that the tenant pays for any necessary repairs. All of which is why regular inventory reports are so critical.

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Some Of The Different Ways To Carry Out Inventory Reports

If you are a managing agent with many landlords as clients, or even if you are a landlord with a lot of properties, one of the things that you have to do is to carry out inventory reports on each of the properties involved. These obviously have to be carried out when the tenant moves in and when he or she moves out, but you also need to do intermediate inventory reports on a regular basis.

Managing agents vary in how they tackle inventory reports. Some use outside inventory clerks to do it for them, reasoning that they have better things to do with their time. Of course, inventory clerks need paying for their time too, but this can be included in the fees charged to the landlord.

Other agents who have a lot of properties on their books will employ their own inventory clerk full time, while those with fewer properties to manage will have one of their staff undertake inventories perhaps a half day or one day a week. 

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Some Notes For Landlords On Carrying Out Inventory Reports

Landlord inventory templates are available for free online, but if you are a landlord it is an easy enough matter to create your own. When you have a new tenant moving in, it is best if you carry out an inventory check on the day, or just before your tenant is to move in. Ideally, you will have the tenant there when you create the report because you can both agree on things. For instance, if there is a scratch on the kitchen worksurface it can be noted. You should also take photographs so that you can both see what everything looked like on the check-in date and then it is easy to compare with another inventory on the check-out date.

As a landlord, you don’t have to carry out the inventory yourself, as you can get an inventory clerk to do this for you. Some landlords do ask if it is possible to get a free condition report, but of course an inventory clerk is going to charge for his services. The nearest you can get to a free condition report is to carry it out yourself, but even then, it is not “free” because you have to allow for your time undertaking the report. One of the advantages of using an inventory clerk is that he or she would be independent and for that reason it puts some space between you and the tenant. Then when the end of tenancy report is carried out, if there is any damage the tenant is less likely to argue about it.

The initial inventory should be carried out before your tenant has moved in and before he has used anything in the property. Once you have completed the report it should be signed by both you and the tenant.

Of course, you should carry out intermediate inspections, and managing agents and landlords have varying views about how often. Some say every six months, some once a year, while others say as often as every three months.

When you carry out the final report this should be done on the day your tenant moves out and after his possessions have been removed. The tenant should always be present for the final inventory.

What’s The Point Of An Inventory From A Tenant’s Point Of View?

That may seem like a fair question, but in fact if you are a tenant moving into a new home, the inventory is all-important. When you move in, you are required to pay a fairly hefty deposit. That is YOUR money and either the landlord or his agents are required to look after it and return it to you when you vacate the property.

That is, unless you have caused any damage during your tenancy which has to be repaired before the property can be let to another tenant. If this is the case, the landlord is entitled to make a claim against the deposit you paid in order to pay for any repairs. All of which seems fair enough.

But this assumes that it was you who caused the damage. What happens if the damage had already been caused by a previous tenant and had not been noticed? What happens if the landlord claims for something that is actually fair wear and tear? This is why an inventory report is so important to you as a tenant.

There is no legal requirement for the landlord or his agents to provide you with an inventory report when you move in, but it is in both your interests to have one. The report should be provided to you when you move in and should detail whether an item is in good condition, fair condition, or has some damage. This is more important in furnished properties because there are a lot more chances for things to go wrong.

However, what is important when you move in is that you take the inventory report and go through the property very carefully in the first few days of your tenancy to note anything that differs from the inventory report. Take photographs if possible. You should then go back to the landlord or his agent pointing out any damage that is not contained in the report.

This means that when you leave the property – provided you have not caused any damage in the meantime – you should be able to recover all of your initial deposit.

The Rise In the Use Of Free Inventory Report Apps

TDS stats have shown that there has been an increase in tenant deposit disputes, with around a third of all agents making a claim. The escalation seems to be in part because it has dawned on people that the process is free of charge so there have been some of them just trying their luck.

The most important thing about taking inventory is that it should be accurate. Today you can download a free property inventory app which will help considerably with ensuring that inventory is correct. Some of these apps have predictive algorithms which suggest items to check and their condition as you go from room to room. Certainly, there is at least one free property inventory app which can be used in either audio or text mode as you choose, and which makes suggestions as you go.

One estate agent that covers Kent and Essex has reported that it has been able to buck the trend of disputes by using an app and by increasing the quality of inventory reports. Instead of outsourcing inventory work, it has brought it in-house and employed its’ own clerks too. It also takes more photographs. This has helped considerably with landlords who it says are more likely to accept wear and tear when they can see it for themselves in the mid-term reports that they receive as time passes.

Another thing that they have done is to introduce a pre-checkout visit three weeks before the checkout. This enables them to show the tenant the original inventory and as a result they have found that there are very few issues when they actually undertake the final inspection.

Many agents do, of course, use a third party to prepare reports on the basis that there are less likely to be any issues over conflict of interest. However, it is interesting to note that this can still arise if the agent is accused of paying their favourite third party to produce the report.

What is most important is that reports are as accurate as they can be and that plenty of photographs are taken, because, as the old saying goes, a picture is worth a thousand words.