Taking stock

Like any business, there comes a time to stocktake. If you’re using a computer, so much the better. These make the business of inventory production a piece of cake. If you don’t have these documents on a PC do make sure that, having typed everything out once, you don’t give all the copies out to tenants, or you’ll have nothing to photocopy for the next let.

It is time to begin yet another of the numerous small tasks that are part and parcel of being a flourishing private landlord. Don’t feel daunted. This is extremely simple stuff – once you’ve learned how to do it, you’ll wonder why you ever paid anyone else. These tasks constitute the nitty-gritty that help to keep your property well cared for – your tenants safe and your own finances protected.

What paperwork are you suggesting landlords use to complement their leases?

I (and everyone sensible) use three simple but different documents. It’s a belt and braces approach, which should not only protect your property and its contents – but also help cut down management time with new tenants learning the unit’s idiosyncrasies.

The first of these protections–the inventory–is best known and understood. Most agents don’t even bother with the second as a separate document – a Schedule of Condition–despite the fabric of the building being far more valuable than most of the contents will ever be. And most won’t even have heard of the third, a Property Profile. However, that’s a problem for agency clients, not my readers. Here, you’re strongly advised to use all three components. Additionally, using all three makes you look competent and that’s important psychology too. Tenants don’t want to deal with amateurs.

An accurate record of the unit’s condition at the start of new tenancies helps landlords and tenants negotiate what can sometimes be tricky waters at the end of the tenancy. It’s your protection and the tenant’s protection in black and white – and it matters!

How digital images help both parties

These days, I always take digital pictures of units prior to tenants signing leases and ask tenants to initial and date them as they move in. That way there’s little room for debate about how things were when they accepted the unit. And again, if this sounds like a ‘faff’, remember that you’re handing over a property here, not a second-hand bike and it’s got to be worth those ten extra minutes.

Using your documents as a carrot and stick

Landlords need to learn to use these documents. An inventory isn’t only a way to prevent damage – it’s an opportunity for a tenant to get their deposit back. Far too many landlords don’t appreciate the level of sheer antipathy that’s developing out there in our marketplace as tenants learn over and over that their hard-earned deposit will evaporate however well they behave. This is bad property management; encouraged by amateurs and crooks. What’s more, their behaviour is creating a dreadful climate, where tenants feel justified in refusing to pay the final few weeks rent on the assumption they’ll never see their deposit again anyway. Which actually means that the process of taking deposits becomes utterly useless.

Good landlords do good business because they behave in a reasonable manner. Strangely, they often get the pick of the tenants as word spreads. So, compile your Inventory. Draw up your Schedule of Condition. Put together a Property Profile then use them from the first day you accept a tenant as a means of explaining exactly how you want the property returned in order to facilitate a full deposit return. It won’t work every time – but it does work most of the time.

The inventory

This can be drawn up by the landlord (or agent, for a fee) or, by a wholly independent third party Inventory Service. This is an excellent idea for expensive units, however, it is pricey. Landlords wanting to consider this should find a service (usually the Yellow Pages) and discuss terms. Landlords often share these costs on a 50–50 basis with tenants, as a binding inventory is a shared benefit.

The independent inventory service

Independent inventories are by no means necessary on most units; they can, however, prevent the awful arguments in complex, pricey units with high specification finishes. Each party agrees to be bound by decisions taken by the independent compiler right from the start. Independent inventory clerks will draw up a comprehensive inventory before tenants move in – agreed by both landlord and tenant as accurate – then revisit when the property is empty at the end of the tenancy and examine the property and contents for damage, then estimate realistic costs of restitution (if any). It’s a worthwhile option for landlords to consider for units with costly finishes which are unlikely to be covered by a tenant’s (even six weeks’) deposit. Floor finishes are particularly prone to steel stiletto heels and black granite worktops don’t look so dandy when no one used a chopping board. Restitution on both cost a fortune. When items like these are in place, I’d always use an independent service.

Inventories for the vast majority of rentals

In most cases, a straightforward landlord-typed inventory works perfectly well given that tenants don’t have to sign anything they don’t agree with. It needs to be clear, concise, easy to understand and accurate.

A personal preference is for a few strategic snaps on a digital camera taken on moving in day with the landlord’s and tenant’s signatures and the date on the back (you may even have these witnessed too) and retained by the landlord in case of dispute. These can prove very useful in the parental guarantor scenario, where the defensive parent turns up full of rage that little Suzie’s deposit has gone walkabouts.

Most of the time in this business, you’ll be challenged. Again – don’t take it personally. Usually all it takes to diffuse an awkward situation is something tangible to prove that your conduct was reasonable (which will always be the last thing anyone’s expecting). Likewise, taking photographs of all damage when it does arise can be very useful especially when placed alongside the previous photographs you took before the tenant took possession. Most people when confronted with something irrefutable will accept fair costs and so will any new deposit system.

How to manage an inventory process

Landlords need to walk their newly accepted tenants through the inventory, allowing comment by the tenant to be inserted – if for example, you’ve forgotten to note a problem or missed something. This is a shared value document.

Both landlord and tenant need to be happy with its accuracy when the inventory comes to be signed. Make certain the unit is very clean – stale smelling units give a sloppy impression and encourage poor standards in return.

Provide everything sensible but tenants should bring their own linen, cooking utensils, towels and small items like kettles and toasters – mainly because it’s too tricky to keep to a high standard (and will often go walkies). Secondly, because tenants prefer to be able to customise units into homes. Thirdly, because most tenants don’t want to use someone else’s toaster or bedding. And fourthly, because everything electrical for example that you supply as a landlord comes with a safety liability (see Lesson 12: The serious responsibilities).

Set your units up realistically before letting them out.

Always include essentials like bathroom and bedroom mirrors – because not doing so will give the tenant few alternatives but to try to fix something up themselves and all tenants should be actively discouraged from DIY.

Protect your interests by providing a reasonably equipped unit that a tenant can move into and live in realistically, simply because most deposits won’t be anything like sufficient to cover the re-plastering of walls – and large bills are inevitably disputed.

How to compile an inventory

• 1.Start the inventory with the full address of the unit:
  Inventory of contents
  for Flat 6, 47 Howard Road, Teddington, MX2 4HP
• 2.Add the following rider about cleanliness at the beginning:
  All contents are clean, undamaged and in good condition (except where otherwise noted on this inventory). Internal windows clean on acceptance.
• 3.Then list – room by room, the entire contents and the condition of them as follows, reinforcing at every opportunity the initial cleanliness and presentation, as in the couple of room by room examples given here:

Bedroom

Sleepeze double bed – good condition, mattress clean
Mattress cover, freshly laundered (please wash and refit before vacating)
Carpet, blue cord, in perfect condition (except one small cigarette burn to LHS of bedside cabinet)
Curtains, grey blue – pair of (clean)
Curtain track and gliders
Blind – matching above curtains. Working mechanics
2 bedside cabinets – grey/blue – a small coffee ring to rear RH corner of LHS cabinet
Light fitting – working with three working bulbs.
2 double fitted wardrobes, unmarked and in excellent condition
2 coat racks, complete and packed (if required) in fitted wardrobe
(please re-pack and return to boxes on vacation of premises)
1 small dressing table (no marks)
1 full length mirror, fixed to wall
2 picture hooks (please don’t fit more)
1 smoke alarm (battery working)

Kitchen

All fitted units and cupboards clean
Cooker – clean on acceptance
Refrigerator – cleaned and defrosted on acceptance
Microwave – clean
1 pair small chequered curtains plus curtain pole and rings (clean)
1 small net curtain (please wash and re-hang on vacation)
Vinyl floor covering (in good condition)
Service Automatic washing machine/dryer (service contract details in top drawer)
C/H boiler (Landlord’s Gas Safety Certificate (tenant copy) plus
service contract details in top drawer)
Fitted chrome towel rail
Light fittings (three halogen bulbs fitted and working)
1 smoke detector (batteries working)
1 carbon monoxide detector (batteries working)
1 domestic sized fire extinguisher and fire blanket

Go through each room in a similar manner

Make issues like defrosting refrigerators and cleaning out ovens thoroughly clear from the outset. They take hours for the landlord’s cleaner to do – and tenants always baulk at the true cost of cleaning.

Continue in this way, itemising everything as you go and making small comments about condition. Encourage incoming tenants to check through the inventory to avoid misunderstandings later. The order of the rooms is irrelevant but remember – anything not on the inventory is not safeguarded by the document.

When the inventory is complete, add the following, which ought to safeguard you for fire insurance purposes:

ABSOLUTELY NO FREE STANDING FIRES OR HEATERS OF ANY TYPE TO BE BROUGHT INTO THE BUILDING UNDER ANY CIRCUMSTANCES. They invalidate the Fire Insurance and may constitute Grounds for Possession.

Using the inventory as a reminder board

If you’ve any other reminders you wish to make, this is a good place to insert them. For example, where flats are concerned, it’s usually a good idea to mention that tenants bringing in TVs and stereos should use them in a manner that won’t disturb other residents. You may have a car park agreement you wish to insert here. ‘No decorating without the landlord’s written consent’ is useful. ‘No furniture to be removed without the landlord’s written consent’ is another you should consider. ‘Unauthorised repairs will not be reimbursed – please contact landlord first’. Most landlords can think of a few bits and pieces to add here.

Finally add something along the lines of:

This statement of condition of the contents (otherwise known as the inventory) is an accurate account of the condition of all items offered for use as part of the furnished tenancy at…………… [insert property address] and agreed by both landlord and tenant as accurate on……………[insert date here] and witnessed by [witness signature and date]…………….
Tenants are reminded of the requirement to return the contents in the same condition (wear and tear excepted), when they vacate the premises. Please replace light bulbs if required and clean interior windows. All tenants leaving the property and contents in an equivalent condition to today’s date will receive a full deposit return to an accurate forwarding address in cheque form. Tenants will be responsible for all damage and cleaning required to return the property to the condition of the day of acceptance of these terms.
Signed [tenant]………	Signed [landlord]……….
Date……….
Witnessed by………	[date)]……….

(Wherever possible use someone you, as landlord, know as a witness. Using the tenant’s friend can understandably lead to problems where disputes arise.)

Two final notes.

• 1.As with all legally binding documents, where the inventory can run to several pages add page 1 of 4, page 2 of 4, page 3 of 4 to the bottom right-hand side of each page. Both the tenant and you should initial each page.
• 2.These documents will probably need to form part of the information about which organisation will be safeguarding your tenant’s deposits soon. Keep an eye on the legislation via www.communities.gov.uk and make sure that the appropriate information is given to tenants at the same time as their inventories and leases (as soon as the government releases that ‘appropriate’ wording) see Lesson 10: Deposits).

Schedules of Condition

Next we have a shorter – though sometimes more valuable document which landlords should try to keep to one or two pages. It’s a document that will be of immense value should tenants damage the decorative features or the actual fabric of the building – a much more valuable beast than a sofa.

Here’s where being an independent gives you back genuine control. Make a detailed list of the building’s decorative standard and fixtures here, rather than the contents and keep the two documents separate. As with the inventory, here are a few ideas for you to keep in mind when formulating your own schedule. Head it up with your property’s address and off you go. (Remember the page numbering rule.)

Honesty’s the best policy

Make everything crystal clear from the outset. It’s always better to get these matters ironed out before a tenancy begins rather than mid-way through acrimonious deposit negotiations.

When tenants leave

Simply reverse the entire process after your tenants have vacated.

Note: Always conclude this Schedule of Condition document with the following statement: Nothing whatsoever to be fixed to the walls. No shelves, picture hooks, drawing pins or blutac as these may spoil the decorative finish and render the tenant liable for substantial repair costs.

Example of a Schedule of Condition.

Don’t carry out end of tenancy audits until the tenants have vacated entirely and handed back the keys. You can’t do it effectively when the tenant is breathing down your neck – or between cardboard boxes. Check your copies, noting any discrepancies between when tenants moved in and when they moved out. That discrepancy (which must be some way beyond normal wear and tear) constitutes what you can legitimately make reasonable charges for. From April 2007, the tenancy deposit scheme will make these decisions on our behalf in cases of dispute – see Lesson 10: Deposits.

Property Profile

And finally we have a document aimed entirely at making our new tenants feel welcome plus, and rather more importantly, saving a myriad of phone calls when tenants first move in. Pro-active management saves time and numerous phone calls.

The Property Profile’s purpose is self-explanatory and needs no signatures. It’s a simple, effective way to help tenants settle in rather than a legal document.

This is where to incorporate all those little quirks that could generate a concerned phone call. The dimmer switch that’s perfectly safe but no longer dims. The loo handle you need to hold down for two or three seconds to make a perfectly good toilet flush. Not many of us manage to get everything absolutely spot on in our own homes, let alone chase up every single idiosyncrasy in, say, a three bedroomed Victorian terrace we’re renting out for our pensions.

Here’s a perfect example. This Property Profile was compiled by a very conscientious landlord who successfully ran a single tenancy throughout a two-year volunteer programme in Albania. Something like this will be appreciated by your tenants and save you hassle. A good place to leave them is on a dining room table – in plain sight for moving in day.

Example of a Property Profile (continued).

And that’s a welcome and a half! Her informal yet helpful style encouraged her tenants to enjoy their home, whilst simultaneously pointing up their own liabilities. Two young tenants lived there happily, paid their rent each month and, on hearing Samantha would be returning via a letter of notice, moved out leaving the place just as they’d found it. What’s called a win-win arrangement. What’s more, her outgoing tenants bought her half a ton of coal and a stack of logs as a thank you. In return, they received a full deposit refund and an invaluable glowing reference from their former landlord.

Customer care is cost effective

Landlords sell the single most expensive commodity in the marketplace, yet many spend hardly any time on customer care – while Tesco goes to some lengths to sell you a tube of Smarties. Give it a shot – I find it usually pays dividends.

Whys and wherefores

This lesson is filled with perfectly straightforward tools, none of which takes long. In total, it shouldn’t have taken more than 15 minutes to read. However, compiling inventories, Schedules and a Property Profile can take a while the first time you make one.

Every landlord needs to have a good written picture of their properties. Deposit returns are one of the most contentious areas for landlords, tenants and agents. Even when using agencies, ensure that you have agreed their inventory yourself, and have a copy of it prior to any letting.

CHECKLIST/SUMMARY

• Always compile your own inventory or get a copy of the agent’s and agree it. It’s the only record that counts at the conclusion of tenancies.
• If your property is a high-end unit, most large cities have companies who offer an independent inventory service.
• Take tenants through the inventory – between both of you, you shouldn’t miss much.
• Draw up (or insist that your agent does) a Schedule of Condition, content inventories alone are incomplete.
• Make sure both parties have a copy of each document and that both are signed, witnessed and dated to make them legally binding.
• Anything you’ve contracted to provide, for example a washing machine or fridge needs to be kept in working order by you, unless tenants have broken them by abuse.
• Service contracts can be cheaper and more convenient for everyone. Providing the tenant with service contracts means that you won’t get bothered so much.
• Damage of any kind is chargeable to the tenant. For example, a failed washing machine pump is a landlord liability – that same pump blocked by the tenant (say, by hairpins) makes this the tenant’s liability.
• Try to design a Property Profile to help your tenants settle in. It will help avoid a stream of trivial phone calls and it’s a nice welcoming style.
• Remember – everything mentioned on the inventory is provided by the landlord and should be insured by them.
• Read the whole of this lesson – it’s in your interests to protect your own possessions.