The change over of tenancy for many landlords produces a very long To Do List for a landlord. They need to make sure they can select the right tenant, set up the tenancy and most importantly start collecting their valuable rental income. Want to now the ten basic steps to letting a residential investment property?
One of the most important steps and one that is often neglected because it comes at the end of the letting process is the compilation of the inventory. Many landlords stretch to scribbling a few notes on a piece of paper. However, since the introduction of the Tenancy Deposit Scheme in April of 2007 the inventory has taken on a much greater importance for landlords. If there is a dispute at the end of the tenancy then this document will be crucial in resolving any disagreement between you the landlord and your tenant. A correctly compiled and accurate inventory could save you literally thousands of pounds should a dispute a rise and the matter go to arbitration or court.
Taking a tenancy deposit remember that you need one of these.
What is an inventory?
The inventory is a catalogue of the property and its’ contents. A schedule of condition is a record of condition. Most commonly the two are combined into one report and are called either the inventory or schedule of condition.
The inventory/schedule of condition has several functions:
* it is a catalogue of the property being let
* it records the condition of the property and any items that are included in the tenancy
* it forms part of the legally binding contract that is set out in the tenancy agreement between the tenant and the landlord.
How to prepare an inventory
The most essential thing about preparing an inventory is to adopt a system that is simple so that it is easily remembered and replicated. This will ensure that you achieve consistent results. In developing your system ensure that the inventory it produces is:
* Ordered - this way when preparing it you are less likely to miss things and also that anyone reading it can easily follow the contents.
* Comprehensive - remember this will be the document of reference should a dispute a rise and could potentially end up in front of the judge
* Verifiable - its accuracy can be agreed by anyone with few or nil additions or alterations.
* Written in Plain English - so it is easy to read and understand. This will help should the case go to court when a clearly written unambiguous report will have more credibility than one where a tenant could claim that they were unsure what they were signing. This shouldn’t be a defence but judges are only human.
The best way of producing inventories that achieve the key points given above is to divide any property into a series of rooms. This is largely straight forward; for instance most properties will have a kitchen, lounge, bedrooms, etc. However you will also have to categorise some parts of the property as a room such as hallways, a conservatory, gardens, garages, etc. Once you have established a list of these rooms; it is then a case of subdividing them into a series of component parts. These component parts once categorised will build up an overall framework.
The standard component parts used in the Property Hawk inventory are as follows:
* Doors
* Floor
* Walls
* Ceiling
* Light fittings
* Wood work
* Appliances
* Windows
* Heating
* Electricals
* Furnishings
As well as the standard component parts each room may have individual parts specific to that room; these must also be noted down. Once all these parts have been recorded, the next stage is to record items that are not fixtures or fittings. This is particularly important and time consuming where a property is furnished. In this case it will be necessary to note down every item supplied. Once this is done; you will have a complete inventory.
The next stage is to complete what is known as the schedule of condition. This can be carried out concurrently with the inventory. The object of the process is to note down the condition of each component part.
For example, in the case of the lounge under the component part of doors you would record the fact that there are two doors, newly white painted with chrome handles. This part of the process is particularly important because disputes over the condition of items and what is ‘fair wear and tear’ that are the most common.
This aspect is far more difficult to prove than the removal of an item and it is fair to say that judges will often side with the tenant unless the landlord can prove conclusively that it was new or in good condition. This highlights the importance of retaining receipts not only for tax purposes but also in case of a disagreement with your tenant resulting in arbitration or court action where you will then have to prove the condition of your property at ‘handover’.
Many inventory clerks use a series of abbreviations to speed up the process of compiling an inventory. This is fine providing that a full list of terms accompanying the inventory. Whilst abbreviations are useful they can also be confusing for the tenant who will need to verify the report once it is completed.
The important things to ensure are:
* That there is an adequate description of each item so that they can be verified
* That an accurate statement of condition accompanies each component item
Landlords should avoid at all costs ambiguous language such as ‘spotlessly clean’ or emotive language so as ‘lovely fireplace’. Keep descriptions brief and factual.
If landlords follow these guidelines then they should end up with a comprehensive written inventory and schedule of condition that will then cover them for all eventualities.
