Why are property inventory reports important?
May 24, 2017 by Richard Abbots on RLA website july 2017
Property inventory reports are no longer just about preventing disputes about condition and cleanliness. As the in-vogue term ‘Generation Rent’ suggests, house purchases are edging further and further from reality for much of the population. The result? A wiser, more assertive market place of renters that know their rights.
In turn, rental legislation and taxation is becoming more onerous. In the last 12 months we have seen the introduction of:
Smoke and Carbon Monoxide Alarm Regulations (1st October 2015)
DCLG ‘How to Rent’ prescribed information (1st February 2016).
Seeking possession under Section 21 of the Housing Act 1988 (updated 11th February 2016).
Immigration Act 2016 ‘Right to Rent’ legislation (12th May 2016)
10% ‘Fair wear and tear’ allowance abolished (1st April 2016).
Changes to ‘buy-to-let’ landlord taxation (1st April 2016)
Of course, the above also sits alongside existing agent/landlord responsibilities. Such as: Gas safety; Electrical safety; EPC requirements; Legionella safety; HMO licensing and; Housing Health & Safety Rating System.
There’s no letup expected anytime soon either:
EPC certificates must show a minimum rating of E by 1st April 2018.
Possibility of mandatory electrical safety requirements in England & Wales.
Possibility of new tax for student landlords.
Some of the core reasons for the increasing complexities in the private rented sector are aimed:
- To professionalise ALL landlords to make renting safer.
- To curb buy-to-let market demand and thus ease pressure on house price inflation…whilst also generating more tax revenue.
You may be thinking I’ve gone off-track a little bit. What does this have to do with property inventory reports? The answer, put simply, is quite a lot! Creating a property inventory report covering compliance check-lists, as well as detailing the cleanliness and condition achieves a number of goals when signed and accepted/approved by the tenant.
It evidences that mandatory compliance requirements were in place before the tenancy commenced. For example, confirming smoke alarms were present and the test function was working is crucial. Without having signed confirmation from both the agent/landlord and tenant, it becomes difficult to prove otherwise in a worst case scenario – like the tenant taking the batteries out for their TV remote. The DCLG advocates an inventory specifically in this scenario:
“The local authority must decide whether the evidence provided proves that the landlord has met the requirements of the regulations. One possible means, if the landlord goes through the inventory on the first day of the tenancy, is that the landlord makes provision for the tenant to sign the inventory to record that the required alarms have been tested by the landlord and the tenant is satisfied they are in working order.”
Smoke alarms of course are just one element of mandatory safety compliance. Again, having signed confirmation by the landlord/agent and tenant with a quick photo of the gas and electrical certificates is a great way of confirming that compliance has been fulfilled and perhaps more importantly the relevant documents were provided on or prior to check-in.
Evidencing a safer environment
In addition to the Housing Act 2004, council licensing schemes are also steadily increasing. Of course, this shifts even more responsibility and increased costs upon landlords and agents to ensure they not only provide a safe environment for their respective tenants, but also are able to provide evidence upon request. For example, Liverpool’s Selective Licensing Scheme’ came into effect on the 1st April 2015. Contained within the conditions are host of issues relating to the maintenance, condition and safety of properties. Below is just a small snippet of the kinds of expectations placed upon landlords and agents:
“5.8. The licence holder must ensure that, as far as is reasonably practicable:
a) The exterior of the property is maintained in a reasonable decorative order, and in a good state of repair.
b) The exterior of the property and boundary walls, fences and gates etc. are kept free from graffiti.
c) Gardens, yards and other external areas within the curtilage of the property are kept in reasonably clean and tidy condition.”
Evidencing the above prior to tenants moving into the property is crucial in demonstrating how ‘reasonably practicable’ it has been for the landlord/agent to ensure these points. However, a comprehensive property inventory report can easily identify that prior to the tenant moving-in:
- Security of the property was adequate. g locks in working order and window keys recorded (where present).
- Entrances and exits were clear and free of obstructions.
- Bathrooms and other wet areas were free of mold and damp (common cause for tenant compensation claims).
- Exterior areas were in a good seasonal order and cleanliness.
- Blind cord safety devices were present where applicable.
- Furniture and furnishings were compliant with the current fire safety legislation.
Of course, the above can then also be referred to when performing mid-term/interim visits at the property.
Evidencing replacement purchases to HMRC
From 6th April 2016, the wear and tear allowance has been abolished. Given you may not claim for the initial cost, and only the replacement cost, rigorous and controlled inventory systems are essential. As well as being a benefit to you generally and complying with regulations, this will also ensure claims will stand up to HMRC scrutiny, should they enquire into self-assessment records. For example, a washing machine can be described by type and brand with a supporting photo (date stamped); a property inventory app can help with this.
Build a trusting relationship with tenant(s)
Communicating effectively with tenants and being pro-active about their safety, such as having a property inventory report that protects both parties can help to build a relationship. In turn, a positive relationship seems to have an impact on the length of tenancy too.
How can I complete a property inventory report?
There’s a few different approaches to performing a property inventory report. Each of which have their own pros and cons. We’ve summarised all such pros and cons – some of which you may not have thought of.
Using an inventory app
- Saves time printing photos and transcribing. Many property inventory apps can be complicated to use.
- Cheaper than outsourcing to a third party (if you do not factor in the time spent compiling the inventory)
- You keep control of the data – ready for inspections & check-outs. App pricing is often confusing with contract periods.
- Suggested library of words can provide helpful description prompts.
- Creates one document with appended photos – avoiding the need for multiple signatures.
- Can be VERY time consuming, your time could be better spent
- Picture quality on some property inventory apps can be poor.
- There can be a tendency for a bias opinion when not outsourced to a third party, and can carry less weight in the event of a dispute.
Using a third party property inventory clerk
- Offers impartiality and helps prevent bias opinion.
- Can be expensive (Abbey Independent Inventories offer very competative pricing)
- There can be a tendency for a bias opinion when not outsourced to a third party.
- If the property inventory clerk is experienced they will focus on common areas of dispute.
- If registered with a governing body the inventory clerk will be insured and trained
How can I find an outsourced inventory clerk?
It’s wise to ensure you have sourced an insured, qualified inventory clerk.
For professional, detailed and unbiased reporting at competitive prices. Ask for a sample inventory to demonstrate the quality of our reports which use the latest automated electronic approval process that allows tenants to sign and comment on their report electronically, without the need to print 50-100 colour pages!
Call Julie or Larissa on 01235 797250 to talk through your inventory requirements or visit www.abbeyindependentinventories.co.uk