Why Create An Inventory?
The best way to understand the need for a full Inventory/Schedule of Condition at the beginning of a tenancy is with a practical example:
Let's have a look at a typical scenario. Every letting agent will have seen this type of thing before:
Lorraine is a landlord and she lets her property out to John. When John moves out 6 months later there are a number of issues.
The oven and cooker hood are filthy, even though both of them were brand new when John moved in. The garden is overgrown. There is a hole in the bathroom door and a stain on the carpet in the living room.
John claims that all of these things were in that state when he moved in to the property. Lorraine claims this was not the case and wants to keep all of the deposit John originally paid to put things right.
The deposit was lodged via an approved deposit scheme and so Lorraine prepares to present the evidence to the Dispute Resolution Service(DPS).
The adjudicator can not award in favour of Lorraine in this case because she has nothing stating the condition of any of the items in dispute at the beginning of the tenancy. Lorraine may get some money back for cleaning if she can prove the oven and cooker hood were brand new(with a receipt of purchase) and hence clean at the start of the tenancy.
The outcome of the dispute is that the deposit is returned in full to John. Next time Lorraine will ensureshe has a full Inventory/Schedule of Condition for the property.
ANYTHING NOT DESCRIBED IN AN ORIGINAL INVENTORY CANNOT BE REFERENCED AT THE CHECK OUT.
The remainder of this section contains definitions of concepts which are important backgroundknowledge for every Inventory Clerk.
Inventory and Schedule of Condition
An ‘Inventory’ is a catalogue of the property and its contents. A ‘Schedule of Condition’ is a record of the
condition of those contents. Most commonly the two are combined into one report, and this is the title
commonly seen on the front of the document you will learn how to produce. Throughout the course,however, we will generally refer to the whole document as just the 'Inventory'.
Tenancy Deposit Protection
It is common practice for landlords and letting agents to take a deposit as a safeguard against a Tenant’s breach of contract e.g. damage to property. Tenancy Deposit Protection (TDP), as set out in the Housing Act 2004, requires that all deposits paid under an Assured Shorthold Tenancy (AST) are protected under a government-authorized tenancy deposit scheme within 14 days of receipt. As of 2007, the Tenancy Deposit Scheme came into action.
The AST is an agreement made under the Housing Act 1988 that provides the Tenant with security against the landlord ending the contract early without a Court Order.
The landlord is responsible for protecting the deposit, whether or not an agent has been instructed. The deposit remains at all times the property of the Tenant. If the deposit remains unprotected, there is a possibility that the landlord may be fined. The law is intended to ensure that Tenants, who are entitled,receive all or part of their deposit back at the end of the tenancy.
Alternative Dispute Resolution
Inventories are not compulsory, but in practice they are essential. In the event of a dispute over entitlement to the return of a deposit, the burden of proof lies with the landlord. This evidence must be submitted promptly. To avoid disputes going to court, each tenancy deposit scheme is supported by an
Alternative Dispute Resolution service (ADR); whose aim is to make disputes faster and cheaper to resolve. In the event of a dispute which the parties are unable to resolve by themselves, the adjudicator from the ADR needs good quality evidence to carry out the role effectively – a well prepared Inventory
which has been checked at the start and end of a tenancy is a key part of the process.
The landlord is liable for all repairs or works which are due to fair wear and tear, statutory obligation oras undertaken in the Tenancy Agreement. The landlord is also responsible for the Tenants deposit.
FAIR WEAR AND TEAR
A Tenant cannot be held responsible at the end of the tenancy for changes in a property’s condition caused by what the House of Lords has called ‘reasonable use of the premises by the Tenant and the ordinary operation of natural forces (i.e. a passage of time), which is known as “fair wear and tear”'.
This is distinct from careless damage or cleaning issues caused by the Tenant.
When compensation for damages or replacement is being assessed, it is vital to have an understanding of fair wear and tear. A careful judgement needs to be made by an experienced person, based on a range of criteria, which requires up-to-date knowledge about the property and the tenancy, including:
1. Length of tenancy
2. Number/ages of Tenants
3. Whether smokers/pets were allowed
4. Condition/age of items at start of tenancy
5. Useful lifespans of items6. Work/repairs carried out during tenancy
As an inventory clerk you will provide detailed information in your inventories and check out reports; but this role does not oblige you to make a judgement as to whether changes listed are due to fair wear and tear, and what share of the replacement or repair should be taken from the tenant’s deposit – which is called apportionment. However once you have acquired a good deal of experience this may be an enhancement to the service you offer.
If anything in the property needs to be replaced or repaired then it is assumed it will be on a like for like basis. A tenant cannot expect an upgrade on a washing machine if it has broken down. Likewise, if the tenant has left an iron burn on a carpet that was already worn at the start of the tenancy the landlord cannot use the tenant’s deposit to pay for the whole cost of a new carpet – only a portion of the cost may be deducted as compensation, which would also take into account the age of the carpet.