What is good inventory management and do I need it?

In this latest blog, PropHome’s CEO Paul Harrison looks at creating an inventory, why landlords and tenants need one and how it can help to reduce the risk of disputes.

What is good inventory management and do I need it?
What is an inventory?
A properly prepared inventory should set out in writing what is provided by the landlord in a property at the beginning of the tenancy. An inventory should also be a comprehensive report of the condition of the property, with written notes, photographic evidence and full details, which would be helpful in supporting a claim on a deposit. This is also often referred to as a “schedule of condition”.

Why is an inventory needed?
It is crucial to have a good inventory report otherwise this could lead to disputes with tenants at the end of the tenancy. If the tenant has signed the inventory, then it reduces the potential for a dispute to arise.

If a dispute does occur then the burden of proof would be on the landlord to provide enough evidence to establish the tenant’s liability. One of the biggest omissions that landlords make is skipping past the process of compiling a thorough property inventory at the start of a tenancy.

Benefits of an inventory:

They help remind both tenant and landlord what the condition of the property was at the beginning of the tenancy.
They avoid or help reduce disputes, because inventories help determine who is liable for any damages.
If there is a dispute over any damages and the matter escalates to adjudication, an inventory will play a vital role in reaching a solution.
Without an inventory, landlords will have difficulty recovering any costs from the deposit if the tenant disputes the claims.
In the case of a dispute over return of deposits, an independent adjudicator would require inventory documents as evidence of the property’s original condition. This gives the landlord greater peace of mind.

Advice on creating an inventory
PropHome is experienced in carrying out professional property inventories on behalf of landlords for their tenants. However, if you are carrying out the inventory yourself, you need to prepare the inventory on the move-in day (or just before) to ensure the home is in the exact condition the tenant is going to receive it.

The inventory should list each item and also document the condition of every item, grading each item from “excellent” to “poor”, with notes, photos and videos to back this up, if possible.

After the inventory is complete, every item should be agreed on by both landlord and tenant and signed off by both. The landlord should keep a copy and one should also be issued to the tenant.

When should the inventory be reviewed?
It is advisable for landlords or agents to make regular inspections of a property – often these are done quarterly to compare the inventory with the current condition. Tenants should be given 24 hours’ notice in writing before an inspection is made.

Any obvious signs of damage should be flagged and discussed with the tenant.

On the day tenants move out the landlord should complete a final inspection to assess the condition of the property, referencing the inventory.

Final inspection
The final inspection should be completed with the tenant present and only after all their possessions have been removed from the premises.

What happens if items have been damaged?
Damage to furnishings and the need for deep cleaning and redecoration are some of the most common reasons for a dispute between landlords and tenants, which can sometimes end up in adjudication. It’s important to note that tenants cannot be held liable for “fair wear and tear”, and it would only be in cases where the landlord could prove the wear and tear was excessive that they may be permitted to take this out of the deposit.

“Fair wear and tear” refers to the “reasonable” use of the premises by the tenant during their occupation and the ordinary operation of natural forces.

If there is general agreement between the parties about what has been damaged, the estimates should be drawn up for repairs and replacements. The tenant should be informed of all the costs in writing and the amount to be deducted from the deposit.

A tenancy deposit scheme should be holding the deposit, so they should be made aware of what has been agreed, so they can distribute the deposit accordingly.

If the deposit doesn’t cover the amount needed to carry out the repairs, an invoice itemising all costs involved for additional payments should be sent to the tenant.

What if the landlord and/or tenant cannot agree on damages?
If there is a dispute over which items have been damaged, the severity of the damage, or any associated costs to repair damages etc, then the landlord needs to ensure they have

recorded the state and condition with photographs
obtained estimates and repair or replacement costs
informed the tenant/landlord in writing
All disputes should be handled by an independent and free Alternative Dispute Resolution (ADR) service provided by the scheme the deposit is secured with, which will aim to resolve any disputes quickly and without the need for court action.

Each scheme will contain an alternative dispute resolution (ADR) service, so both tenant and landlord will need to contact the appointed scheme. If both landlord and tenant agree to use the service, they will have to agree to accept its decision and will not be able to apply to the courts.

What if damages exceed the deposit amount?
If there’s an excessive amount of damage to the property and the cost for repair exceeds the value of the deposit, the tenant should cover the over-spill if they are liable. However, in the event that the tenant refuses to pay the extra, your only option might be to apply to a court for a claim to cover the costs.

Is it worth having an inventory for an unfurnished property?
Yes, it is. If your property is unfurnished, there are still likely to be items that can be damaged and therefore expensive to replace. For example, carpets, sinks, condition of walls etc. A detailed inventory of all this at the start will give the landlord greater protection if the property is damaged.

Prop Home is a professional online lettings and property management agency. We offer competitive rates and a transparent service that landlords trust. We provide a highly personalised and unique landlord experience; this includes everything from an initial free consultation through to full management and all Landlords services in between. The business is owned by Paul Harrison and David Wright, who collectively have over 40 years’ experience in the property management and lettings business.

For more information, call 0345 8686868 or email info@prophome.co.uk.