Many landlords did not bother carrying out a property inventory before the introduction of the Tenancy Deposit Scheme. If they did, it was just a basic inventory that was carried out, more like a list of contents they were leaving behind. This led to one issue – the Landlord effectively had more control in deciding what to do with a deposit at the end of the agreement. The rental deposit was held by the Landlord and if there was a disagreement then the tenant had to go to the Landlord and come to an agreement. The power was in the Landlords hands.
This didn't necessarily mean that a tenant had no power at all. If a tenant felt like a Landlord was ripping them off they could take the Landlord to court and fight their decision. The judge could then look at the case and decide if the tenant had a case. However, the hassle and inconvenience this caused to a tenant meant that not many of them were willing to take this action, especially if the disputed amount was relatively small.
The Tenancy Deposit Scheme and the Effect of Property Inventories
The TDS changed the way that property inventories were prepared:
- the Landlord was no longer in charge of the deposit
- tenants have more courage when taking on a Landlord if they feel that they have a case to win or feel that they have been wronged (there has been a jump in the number of tenant claims since the introduction of the TDS)
- the property inventory is the only evidence used to prove the condition of a property before a tenant moves in
- the way disputes are now resolved has changed from using the court system to now using dispute resolution services
The TDS has taken the power from Landlords and given the tenants some rights and comebacks. The importance of having a detailed and thorough inventory carried out has never been greater. A well-prepared inventory carried out by an AIIC registered clerk should ideally have lots of colour photographs and be independent in its conclusions. Both a 'check in' and 'check out' of a tenancy should be compared.
Can a Landlord Prepare their own Property Inventory?
Preparing an inventory isn't too difficult. There are some obstacles you will come across such as the requirement of a template to organise the report. You'll also need to be able to take clear photos of the property and also be able to describe all the bits and pieces of a property accurately.
The main problem, however, is that a property inventory prepared by you will not be independent. Having an independent property inventory conducted by a 3rd party shows that a Landlord has been fair and honest.
The Cost of a Property Inventory
The cost of a check in or check out can vary from £80 – £150 depending on how furnished it is and the size of the property. Additional rooms such as an en-suite or conservatory can occur some additional cost.
Using a professional to carry out your inventory gives you piece of mind that the report is of a high enough standard if images of descriptions were going to be used in court. When a dispute cannot be resolved amicably between the Landlord and the tenant then a dispute resolution service can be used to 'adjudicate' on the decision. If an agreement is disagreed with then either party has the option to have to matter decided in court.
It is possible to pass on the costs of an inventory to the tenant. Where an agent is used it is common practice for the Landlord to pay the check-in fee and for the agent to arrange the check-out and pay the fee. It is always a good idea for both parties to use an independent inventory company clerk. As a landlord, you should be clear on who will be bearing the cost of the inventory.
Preparing a Property Inventory
An inventory should be ordered, comprehensive, verifiable and written in plain English. Ordering an inventory is the best way to ensure that nothing is missed. It should be comprehensive and detailed and be able to stand up to scrutiny as a reference for the state of the property at handover. It should be verifiable in regards to its accuracy being agreeable to anybody with only a few additions or alterations.
The best way to order a property inventory is to go in a certain order and then ensure nothing is missed while covering these points:
Once the above has been detailed you have to move on to items that are not part of the fixtures and fittings, i.e. when a property is furnished. Where a property is heavily furnished it becomes even more important and of course, time-consuming.
The next step is to complete the schedule of condition which can be carried out at the same time as the inventory. The idea is to note down the condition of each item. An example would be having a lounge and in that lounge, you have double doors opening to the garden. You would note down that there are two double doors and these are PVC plastic, with chrome handles and in good working order. Most disputes occur when a tenant thinks that there has been fair wear and tear whilst the Landlord thinks damage has occurred for which there should be compensation. It is not easy to prove either way unless a Landlord has conclusive proof that the item in question was either new or in good condition. Therefore, it is imperative that receipts should be retained not only for tax purposes but also in case of a disagreement with your tenant. A disagreement could lead to arbitration or further down the line, to court action.
A Landlord should always avoid language such as spotlessly clean or emotive language such as a lovely fireplace. Descriptions should be brief and accurate and not ambiguous.
Photos Versus Written Property Inventory Report
It might appear that the popularity of camera phones and digital cameras would put an end to the written inventory. Surely now it's just a matter of photographing the property at the beginning of the tenancy. However, things are not that simple. From the outset photographs for evidential purposes will have to be conclusively proved and agreed by all parties. Two reports are produced, Landlord and tenant sign a copy each (all pages are initialed) and then each party keeps a copy.
This does not sound too problematic but if you consider the number of photos that would need to be taken for an average 2 bedroom flat, then the tenant would be the one tasked with going through every photo and checking the veracity of it. On top of that, there are other difficulties such as the photos being sufficiently high resolution to clearly show any marks or scuffs. The lighting would have to be good enough to display any imperfections accurately. There are of course advantages in using photographic evidence and our advice is to use it in conjunction with a well-written inventory to support and highlight its contents.
What is an Inventory Check In?
The check-in happens after both tenant and Landlord are happy and the tenancy has been agreed. It is the stage where the Landlord is ready to hand over the keys and has a property inventory ready to be signed by all parties wishing to move into the property. The details need to be confirmed and agreed by the tenant. The Landlord or the inventory clerk will show the tenant around the property. Once the tenant has agreed that the inventory is accurate both they and the Landlord must sign it to say it is a fair representation of the property condition. If photos have been used all pages should still be signed or initialed as appropriate.
What is an Interim Property Inspection?
An inspection can be carried out mid-way through a tenancy. It is usually a short visit to assess the conditions and to check no damage to the property has occurred. It can also be used to identify any smaller issues that the tenant has failed to report, such as a leaky tap or mould to a wall. Aaron J Barclay is the only agent in London to carry out two-monthly property inspections on all Landlord properties.
What is an Inventory Check Out?
This is the point in time where the benefits of a detailed and well-prepared inventory become apparent. Many months may have passed since the beginning of the tenancy and it will be hard to remember all the damage, marks, scuffs and scratches that were present when the tenant first moved in. The tenant can organise the check out by themselves or we can do that on their behalf. Our inventory clerk will walk through the property with the tenant and go through any damage or uncleanliness likely to affect the amount of money that might be deducted from the tenant's deposit. A copy of the original inventory report should be available at the time of the check out to make a fair comparison.
Fair Wear & Tear in a Property Inventory
Most agreements at the time of a check out occur around what constitutes fair wear and tear. It is easy to decide if a sofa is missing or if the cooker is still working but what is more difficult and subjective is if marks on a bedroom carpet are from fair wear and tear or if the tenant has been somewhat negligent. There is nothing in law which defines what fair wear and tear is exactly, the concept is too wide-ranging and subjective for it to be defined in law.
ARLA have produced some guidelines on what to consider when making a decision:
- the original condition and age of an item
- depreciation of an item depending on how old it is
- the reasonable expected lifetime of an item
- the number of occupants in the property
- the length of the tenancy
Legally a Landlord should not gain financially and not end up in a better position than before the commencement of the tenancy. This would be considered betterment. The Landlord is not allowed to charge the tenant full cost for putting a property back into the original condition.
The Landlords options could be:
- replacing the damaged item where it is damaged
- repair or cleaning of the item
- compensation for shortening the lifespan of an item
Disagreements Over a Tenancy Deposit
Before the Tenant Deposit Scheme (TDS) came about the Landlord or agent would hold onto the tenant’s deposit, make deductions according to the check-in report and refund the remaining deposit back to the tenant within 10 working days. The tenant would then accept the Landlords decision or take the matter to court if a more favourable agreement could not be reached. Since 6th April 2007, the TDS has changed all of this and not only holds the tenant's deposit but can also act as an arbitrator when a dispute over the deposit does occur.