Property reports are one of the most important protections against disputes and financial loss. Seen as an integral part of an efficient property management process, their importance applies equally to tenants just as much as they do for landlords and letting agents.
But not all tenancies are difficult or end in tears, most run quite smoothly resulting in happy tenants and landlords so why should you bother with property reports?
The main answer is that they prevent disputes and help minimise the possibility of issues occurring.
Without them it’s more likely that there will be discourse and raised costs through lack of foresight and action. So how do they factor into the management process and what types of reports and information should you be looking for?
Landlords and tenants
The relationship between the landlord and tenant is quite unique amongst commercial arrangements because it involves handing possession of an extremely valuable and complex collection of assets (the house, furniture and any other amenities listed as part of the AST) to what is effectively a stranger, while retaining all the rights and protections of ownership.
The nearest comparisons to this type of arrangement would be car leases and holiday stays, but these are much more limited in time and scope, while any disputes that may arise are usually much more straightforward than those currently experienced in the rental sector.
The tenancy agreement
When you, as a landlord, hand the keys of your property to a tenant, a relationship of trust is formed.
However, as this is a commercial transaction, it would be madness to not underpin it.
An AST (assured shorthand tenancy) or contract is concerned with the payment of rent, termination clauses, timescales and other fundamental issues such as conduct of the tenancy, pets and those allowed, by law, to occupy the property during the term.
By engaging in a contractual provision, in which the tenant is obliged to sign a tenancy agreement, you are protecting your asset and ensuring that should the unthinkable happen you have the protections afforded by law to fall back on.
Some landlords see and or accept this as a guarantee of their rights, and in the broadest terms you are correct. However, what no tenancy agreement can do is to provide for each and every eventuality and all the possibilities of damage, loss, accident or dispute.
There is another document which is arguably as important, and which should be treated as a schedule to the head agreement, covering all the specifics that the contract cannot.
This of course is the inventory report.
Widely available through third party providers, companies or delivered in house by the agent; landlords also conduct these themselves but do you know what is meant to be in the report, what is actually shown and what happens at check out?
If not, are unsure or its just not a good use of your time you should engage an experienced professional who can deliver a timely and fact based report.
What should you be asking from your inventory report?
An inspection and report at the time the tenant checks in and checks out are the bare minimum reports you should be commissioning.
Conducted no more than a few days before the tenant is due to move in; you should be requesting a report that details the property and associated areas (gardens, garages, outbuildings), describes all the components (doors, walls, carpets) and more importantly records the condition of all items and areas so that when the tenant moves in they know exactly what they are responsible for.
Commissioned at least once a year, interim inspections or property visits help understand how the property is being managed and looked after. Ideally an interim visit should occur every six months, and possibly every 3 months depending on the type of tenancy such as student lets which tend to be more problematic.
One of the key property reports in the tenancy process; the check out should highlight the material differences between those noted at the start of the tenancy and the condition and issues at the end.
These include levels of cleanliness, changes in the fabric of the property such as repainted walls, condition of appliances and carpets or missing items. Recording and evidencing those changes will then allow the clerk, landlord or agent to apportion liability and make a successful claim against the deposit if warranted.
Paying attention to the detail
It has to be said that there are a fair number of landlords who treat the property inspection and the report of its findings as a formality, an administrative task that, once done, can be filed away until it is needed to settle a dispute, which all parties hope will not arise.
This can become a huge problem if not taken as seriously as the tenancy agreement. A report, no matter how detailed, is only as effective as the action it precipitates.
There is likely to be extremely important information in any report, especially if it has been conducted by a professional inventory clerk who knows exactly what to look for and how much significance to attach to even the smallest detail.
If you as the landlord or your agent fail to take notice of a maintenance issue, a problematic boiler or lack of health & safety at the property then you are at risk of tacitly approving the fault or weakness and equally accepting of liability, not just for the feature or issue itself but potentially for more serious consequences than may springboard from it.
Each and every report conducted should demand your attention as soon as it is delivered and issues or risks that they may have discovered.
Equally, if items have not been covered by the inventory report, then you as the landlord cannot rely on the document as evidence of any rights or harm.
For example, if the report makes no mention of the condition and contents of a garden at the property then, should the tenants break, lose or remove items or cause damage to the lawn, beds, trees or paved areas, you have no proof that the tenants have done anything wrong because there is no record of the garden’s condition before they moved in.
It would be virtually impossible to enforce any kind of penalty or establish legal justification for forfeiture of the deposit if both the inventory and check out are not conducted and any lack of attention to the report, including its omissions, is not picked up quickly.
What about tenants?
All this advice applies equally to tenants, who, when spoken to, often consider themselves to be the weaker party in the relationship because you, as the landlord, are the owner and commissioner of the property report.
Where tenants can put themselves at a disadvantage is in failing to take the inventory report seriously.
It really does work both ways – if a problem pre-exists the tenancy or develops during it, the inventory, interim and check out reports are the clearest way of establishing liability. If the tenant is not at fault they will face no financial consequences.
It is worth bearing in mind too that while the vast majority of landlords are fair and reasonable, interested only in running a professional business with happy, contented customers, a few will be unscrupulous enough to take advantage of the power given to them by a tenant who is prepared to sign off on an inventory without question.
While not having a legally binding effect in itself, It is a document which is essential as evidentiary material in any deposit dispute or court proceeding.
Why should landlords bother with reports?
Evidence – it’s as simple as that.
Without evidence you will have no way to prove conclusively any damages or issues that have occurred during the tenancy as a result of the tenants lack of care or malicious behaviour.
Equally, if the inventory report or check out is incomplete or inaccurate you may have limited recourse in the event of any dispute.
For this reason it is in your interest to commission a reliable provider and read the reports carefully and if necessary query the information. If any disagreement arises and a third-party is called in to adjudicate, the evidential burden will fall heavily on all the documentation.
Also remember; the deposit adjudicator will only rule on the evidence presented so if it is inaccurate, misleading or missing then you’re unlikely to win your case and your costs will increase if you havent been able to access the deposit.
On the whole, most landlords and letting agents understand this. But tenants are fully aware of this too and will rightly challenge any proposed deductions from their deposit so accuracy of information is vital.
So in the long run, the savings you made at the beginning of the tenancy when you didn’t bother getting a report done have now been superseded by the costs that you may now have to bear because you didn’t have the evidence you needed to prove your claim.
At Inventory Base we have come across many cases where a failure to take the preparation and verification of a report seriously has led to avoidable loss and worry.
Put simply, property reports must be commissioned and then read carefully in their entirety, so that all parties are fully aware, informed and in agreement about the contents as well as any possible consequences if issues are not addressed.
The easiest way to ensure reports are put to good effect are to:
- utilise the commenting tools and upload pictures of any differences
- ask for amendments or clarification
- revise or update the report where needed
- use date and timed picture or video evidence
- use professional, impartial and experienced inventory clerks and providers
Our property management software solutions equip inventory clerks with the most comprehensive and customisable tool for carrying out this vital task so take inventory property management seriously and secure your assets.