Pixel

Commercial Property Inventory

August 19, 2020 By Pixel

What is Commercial Inventory?

Commercial Inventory is an inventory of any space or goods used for commercial purposes. Commercial Inventory Report qualify as a level of protection for all parties participating in a commercial lease.

The inventory captures the state of the premises including fixtures, fittings and other contents.

Similarly as in Rental Inventory, Commercial Inventory will present you with the list of itemised descriptions and comments regarding the condition of each item. It will also comment on level of cleanliness.

What types of Commercial Inventory are there?

They are 2 main types of commercial inventory:

1. Inventory of the Asset (space and equipment)

Inventory for commercial spaces to be leased
Inventory for commercial spaces to be sold
Inventory for commercial spaces for accounting

2. Inventory of Production and Stock

Production Inventory of finished goods, raw materials or goods in ‘Transit’
Manufacturers inventory for merchandisers
Inventory of goods for rescale

Stock inventory is used in the context of the business and is done usually in house by the company itself. Goods are tracked as they move around. Records must be up to date in order for healthy functioning of the business. Records for restock, fulfilment , orders, costs, sales etc. are managed often on a daily basis. There are numerous software products on the market assisting businesses with this tasks.

At least once a year businesses undertake also an Inventory for accounting purposes. This is a regular practice for businesses before the end of each financial reporting period. Such inventory is sometimes done in house and other times it may be outsourced.

Who benefits from commercial inventory?

Agreed commercial leases similarly to agreed rental tenancies require rent deposits and often the deposit includes the sum equal to service charge and insurance premium as well as added VAT.

When the deposit sum is required the current economic climate is considered. The deposit can be in value up to 12months of rent in harsh economic times.

The Asset itself as well as the large sum deposited to the landlord can be guarded by Commercial Inventory and offer a coat of protection.

Depending on the size of the rental and other liabilities under the lease, landlords will commonly require rent deposits, the physical holding of money being preferable to having to take legal action against a guarantor for payment under a guarantee where the tenant company defaults.

source: Keystone Law

List of Common Assets seeking Commercial Inventory when entering a lease:

Offices
Events venues
Warehouses
Student halls
Factories and production sites with machinery and hardware
Hospitality premises such as hotels or restaurants, bars or a clubs
Spas, gyms, clinics or any healthcare premises to be leased
Equipped leisure spaces and grounds such as mini golf
Small businesses where the inventory accounts all – the property, hardware, products and raw materials
Any retail premises to be leased

What does a Commercial Inventory Report contain?

The report will present you with the following:

The address of the premises
Date of the inspection
Disclaimer
Guiding notes useful at the end of the lease
Contents of the report
Areas – Front of the property, Entrance, Interiors on room to room bases, each room listing itemised contents, their description and condition respectively.
Photographs- Areas and their contents will be accompanied with dated photographs
It will usually capture and test for power smoke & Co Detectors if seen and reachable
If requested and instructed where to find utility meters, readings are also noted
If the purpose of the inventory is to account for products it will capture all details requested by the instructing party. This could be type of product with assorted label data , number of same type items, total summary of all items ready for sale. It may contain further data such as expiry dates, branding, colour as well as further categorised and accounted raw materials, products in transit, Safety stock, etc.

Who provides Commercial Inventories ?

In most cases companies providing Property Inventory Services for rental accommodation will also offer Commercial Property Inspections resulting in Reports.

Specialist providers may be able to extend their services and offer for example desk top valuations of moveable assets, etc.

What can you expect to find in a commercial inventory?

Descriptions of exterior front, doors, door frames, ceilings, lighting , walls, windows, window coverings, electrical fittings, heating, flooring, other fixtures, fittings furnishings and hardware.
Branded appliances, machinery and hardware will be noted according to the labels, if seen
Conditions noted in parallel to the described item specifying defects if any such as dents, chips, marks, ect.
Captured level of cleanliness

Commercial Inventory does NOT:

Value the asset or its contents
Test the machinery or hardware for its functions
Specify accurately colours and materials ( inspectors are not qualified specialists on materials, designs, etc)
Although the inventory will capture fire exit signs, fire blankets, fire labels, extinguishers, emergency lights, detectors etc. it does not declare the asset is compliant with UK relevant regulations. The landlord is fully responsible to ensure that the inventoried asset is compliant with the relevant regulations.
Test windows, taps , sockets and other electrical fittings other than lights
Move any furniture, machinery or hardware

The cost of Commercial Inventory

As listed above the scale of the premises and its contents may vary to such an extent that the cost can be estimated only on case to case basis.

The fees for an inventory of a small corner shop, nail salon or small private dentist will be incomparable to the cost of equipped gym, plastic surgery clinic or warehouse.

What specifications to list when requesting a quote?

Floor plan and the size in square meters of each building of the project
Indicate if there are any outside spaces needing to be inspected
Indicate to what extend is the property equipped, if it contains heavy machinery ect.
Indicate when you need the inventory to be ready
Indicate if the asset is furnished
Indicate if any stock need to be accounted and to what detail
Indicate if you wish to capture any paperwork, receipts, maintenance guides ect.

If you are selling your asset, buying one, starting a lease or arranging a let you can safeguard your contract by having a Commercial Inventory compiled.

Can my Inventory Report Be Amended?

July 16, 2020 By Pixel

Property Inventory Report always captures the state of the property & the state of its cleanliness as seen at the time of the inspection.

By the very definition above it is clear that making amendments to an Inventory is a controversial task.

Making amendments to the report is a rather unusual practice and defeats the purpose and value of the report, at least partially.

Life happens

Although you have done everything to secure a smooth start to the tenancy some things may not be in your control:

Cleaners cancelled on you or need to reschedule
An unforeseen maintenance issue occurred
Furniture item has not been delivered on time
Etc.

What is an inventory report amendment?

An amendment is a change made to the report after the property inspection has taken place. For example:

You are supplying new cooker for the starting tenancy and it will be delivered after the move in date.

https://s3-us-west-2.amazonaws.com/secure.notion-static.com/7d5f4fc3-f0a4-49a5-bd1e-51b3b0606f6c/EEBF8357-3AA5-4A48-947F-2DBFA902DDC4.jpeg

What is not an Inventory report amendment?

An amendment can not be considered any of the following:

Redecorations and other major changes

If you are repainting your property after the inspection took place this can not be amended in the report.

Painting works is a major change and requires revisiting and reinspecting the property. Such Updates to an inventory are usually priced as regular bookings.

Altering the report

Requests such as removing marks which has been additionally cleaned is not an acceptable amendment

Any changes such as additional cleaning would require reinspecting the property. What could be added though is an additional note in the schedule of condition stating that additional cleaning took places to rectify stated cleaning issues. A receipt for the service would be needed and attached as screen shot by the comment.

Requests such as removing a defect noted on the report is not an acceptable amendment

Defects can not be removed. Should you fix any defects on the premises the property would need to be re- inspected. If you employed relevant service providers to fix a particular defect you wish to be amended , you could provide the receipt of the services and an additional note could be added to the report.

Number of amendments

If there is one or two burning issues for a change- it may be classified as a reasonable request for amendments.

With Pixel Inventory we are able to accommodate you with up to 10 simple changes for a fee. Anything more requires a separate appointment in order to reinspect the property.

The ethics of the Amendments

Provide clear evidence of the changes you are requesting to be made
Ask your tenants in writing to inspect the item in question and confirm it’s state is as expected. This is only fair to the tenant . Simultaneously, once the tenant confirms the state of the item – you can refer to this in case of any issues occurred at the end of the tenancy. You should also check with your tenant if contracted workers did not cause any (accidental) damage.

The charges for making amendments to an inventory

Amending the report is not a standard service and it is not included in the inventory booking you make.

The clerks are employed or contracted to inspect the property and compile the report only.

Your Inventory Clerk or company may charge you a fee for amendments. Pixel Inventory currently charges £2 per 1 photo and comment.

How to deal with needed amendments?

Cover it yourself.

Store your receipts for any paid works that reflected upon the changes. Email them to your managing agent if suitable.

Make your own photographs of the changes and email them to your tenants and Letting agent if you have one.

If appropriate you can use an amendment sheet. Both you and your tenants need to be able to access, amend, sign & exchange such sheet. Printed, signed and scanned version may proof equally useful.

Query about amendments with your inventory provider.

Find out if your inventory provider is able to help you with any amendments. Find out what you will be charged for the amendments and what you need to provide in order for your report to be amended.

What about a Tenants Comments / Tenant Amendments?

Tenants have usually 7 days at the tenancy start to read through their inventory report and raise any issues or add any necessary observations to it. Such amendments to the report are generally accepted by the industry standards.

It is the tenants responsibility to review the report and agree It to be an accurate record of the state of the property. If no issues are raised with the initial days of the tenancy the report is usually considered to be accepted as accurate record by all parties.

The Tenancy Deposit scheme confirms the acceptance of tenants additions in their PDF guide To inventories, Check In & Check Out reports. The TDS states in their paper that any comments or amendments added by the tenant should be noted clearly and confirmed by the landlord/ agent as agreed.

Illustrations

The tenant is moving in and rearranges the the property furniture in order to fit some of their own. They discover a burn mark on the carpet where previously stood a bedside cabinet. Naturally, they wish this to be recorded in the report. They make a photograph and add a comment describing the defect found.
Another example could be a broken bed slat. Inventory inspections are more less visual inspections and lifting mattresses is not standard by most companies. The mattresses are often heavy, sometimes beds are fully dressed. Once tenants move in they have the benefit of examining the property contents and raise any discrepancies.

Not all letting agents are forwarding the inventory reports to the tenants to review. It is not rare that tenants make their own record of photographs and descriptions of defects noticed after move in. Such record should be emailed to the landlord or letting agent ASAP.

Although not included in the inventory report, this may represent efficient evidence in case of a tenancy deposit dispute.

Making amendments to a property inventory report is generally discouraged. You should always try to ensure that the property is in final and satisfying state when the inventory clerk arrives. But in case of the unavoidable we hope we provided you with answers and a good set of suggestions to handle the matter.

What is landlord insurance?

May 22, 2020 By Pixel

What is Landlord Insurance?

Landlord Insurance could be explained as home Insurance tailored to a buy to let investor or any landlord letting their property.

The most basic landlord insurance usually consists of a landlord buildings insurance and landlord liability insurance.

Buildings insurance normally represent cover in an instance of natural disaster, fire,

subsidence, vandalism or other deliberate damage.

Landlord liability insurance protects you in case of a claim against you due to injury or a damage to the tenant or a visitor.

When is Landlord insurance necessary?

When it is a requirement on your mortgage arrangement , often buy to let lenders make it mandatory
When it is part of your tenancy agreement

Legally you are not obliged to have a landlord insurance. It is entirely up to you to decide if you take the risk or the cover, unless your mortgage broker requires otherwise.

7 Important Points when considering landlord insurance

1. Switching from Home to Landlord Insurance

Some home insurance policies become invalid by renting the property as the risks are considered to be higher for rented accommodation.

2. HMO Insurance

HMO landlord insurance is specifically designed for properties with multiple occupation. If you run a HMO business or Airbnb this is tailored to your needs.

You can usually insure multiple properties in one policy. Loss of rent and alternative accommodation cover should be included.

3 . The rental arrears statistics

Approximately 9% of tenants In private renting sector end up in rental arrears (Lettingaproperty.com, 2017). Evicting a tenant takes on average 42 weeks.

4. The household injury research

RoSPA ( Royal Society for the Prevention of accidents) reported in 2019 that 6000 people die yearly due injury at home in the UK and 2.7 million end up in their local A&E unit. Children under 5 and elderly people over 65 are more likely to be affected. While elderly citizens are less likely to belong to the tenant category, families with young children do.

5. The Tenant

The majority of tenants in private sector are between the age of 25- 50. These are the most active years for persuading a career but also for nesting and procreation. A significant number of tenants are so families with dependent children or separated parents with shared custody of their offsprings.

This category of tenants are in theory a higher risk group when it comes to potential home injury.

6. The Property location

Naturally, the higher risk of flooding or higher crime rates relevant to your asset location may prompt you to get a reassuring cover. Such factors will be be reflected in the insurance cost.

7. The Policy Specifics and its Cost

Choosing the type of cover and customising the policy depend on your needs, type of accommodation you provide and property specifics. There is numerous extras available across insurance providers for additional fees. Researching what may potentially invalidate your cover should be part of the decision making process. In some circumstances tenants themselves may invalidate your landlord insurance.

Which landlords in particular should consider landlord insurance?

Further from the above listed points it appears that certain set ups and certain tenant

categories represent higher risk to getting injured at home.

You are at slightly higher risk If you own a property which:

Has stairs
Has lofts which tenants have access to
Has a garden
Is built on a riverside, near water streams or sea
Is built in an area with higher levels of criminal activity
Has rugs in use
You are also at higher risk if your tenant is a family with dependent children, or if you have a tenant with special needs such as use of wheelchair, ect
HMO settings

What are most common household injuries in the UK?

Falls, trips and falling objects are according to multiple sources very common household injuries.

Falling from stairs, tripping on rugs, mats or uneven thresholds can cause a significant injury.

Falling objects are often endangering children but in some cases also adults. Falling tree in the garden, falling items when accessing lofts ect.

7 Most Common claims in House Insurance in the UK

House Insurance and Landlord insurance are like cousins if not sisters. We have found several statistics on most common house insurance claims in the Uk in the last decade.

This is currently the closest insight of what claims may be landlords needing to make against their landlord insurance policies.

Water damage appears to be the most common reason for a home insurance claim in the 2017 and 2018.

Water damage up to 30% of claims
Accidental damage approx 17% claims
Weather damage between 12-19% claims
Fire and explosion between 10-17%
Theft between 12-14%
Subsidence approx 12%
Other approx 12%

Landlord Building Insurance

A building insurance protects the structure of the building against damage, repair and cost of re-build.

Often items secured to the structure of the building are part of the policy ( bathroom or kitchen units).

Flats and appartments as they are parts of structures of a block or development are usually already insured. The cost is then often included in the service charge.

It is very important not to undervalue the sum insured as this may invalidate or affect the cover when you are in need of a claim.

Landlord Contents Insurance

If you are letting your property furnished a Landlord contents insurance may be of your interest. This add on to your basic landlord insurance will cover your furnishings and appliances against theft or damage. A landlord contents insurance usually covers also carpets and curtains.

The tenants contents are normally not included in the landlord contents insurance. There are options for tenants to insure their contents should they wish to do.

What is considered high risk on content insurance?

Specific valuable items may bring your insurance cost higher. If your property takes pride in any of the below listed categories you can decide if you wish them to be specified on your cover. Unspecified items may fail to be protected.

Antique furniture or items
Paintings, statues or any Artwork
Rare books
Watches and clocks
Garden equipment
Furs and valuable clothing
China porcelain
Musical instruments
Sporting equipment
Anything considered rare or collectable
Electric wheelchairs/ Mobility scooters
Items from precious metals ( e.g. golden candle stands)
Software stored or electric devices

Landlord insurance claims are as any other insurance claim supported with necessary evidence, which in many cases includes Comprehensive Check Out Report. Such report normally compares directly the state of the property at the start and the end on the tenancy. Containing photographs which are time stamped, Check Out Report represent valuable evidence in case of a claim.

What to do when tenants leave possessions behind

April 21, 2020 By Pixel

A quality check out report will not only present comparisons between the property items at the start and the end of the tenancy but will also highlight items that were not present at the Check In. In some cases these may be even items the landlord provided additionally, in other cases tenants leave some of their possessions behind.

From 100 Check Out reports in 52 cases there were found items at property that were not present at Check In.

This shows that tenants may be leaving belongings behind in approximately 50% of the cases.

While we can’t be sure that some of the items were additionally provided by the landlords, it is very unlikely to be in the majority of cases.

We discovered that electrical items were left behind in most cases closely followed by various furnishings. The most commonly left electricals were heaters, fans and microwaves. In the case of furnishings, tables, chairs and cloths rails were often left.

How Often Tenants leave possessions behind — In 52 cases out of 100 there were found items at property that were not present at Check In.

8 Commonly seen tenants belonging after the move out

Furniture

Tenants sometimes invest into additional cloth rack, Shelving unit, shoe rack, bathroom wire rack or second hand purchased bedside but fail to take with them

Upholstery

Most comply scatter cushions & throws, blankets but sometimes also mattress, sofa, armchair, swivel chair etc.

Electricals

Cables, rooters, chargers, but also heaters, fans, kettles, toasters, blenders, microwaves, fans, rice cookers, speakers etc.

Fittings

Installed racks, hooks, shelving.

General use items

Such as PVC bins, cutlery, mugs, utensils, mirrors, soap dispensers, hangers, worn crookery etc,

Clutter

Plastic bags, take away containers, cardboard boxes, opened letters, pens, nails

Pieces of clothing

Wardrobe organisers, linen and bedding

Redundant items

Yoga mats, rugs, bath mats, towels, pins & pin boards, canvases, small decorative items

Steps to take

Study your tenancy agreement closely. Most of the tenancy agreements will contain a clause aiding the issue regarding the left possessions.

Such clauses needs to be well written and fair from the laws perspective. If you are adding such clause to your tenancy agreement, it is best to have it checked by a qualified professional. You may not be able to prevent this from happening completely but you may be able to reduce the time you are expected to store tenants belongings left after the move out.

No clause? What next?

A rental property should be returned to the owner in the same state as received.

Landlords losses created by the tenants failure to return the property back in a state matching the start of the tenancy ( with consideration of wear & tear) could be claimed against the deposit.

This may sound as a relief but do not underestimate the situation.

Understanding the law

According to UK law you have now become an “Involuntary bailer” and you are obliged to take care of the possessions.

What it means to take care of the possessions?

Contact the owner and discuss how and when will be the items collected / removed. If the tenant wishes you to dispose the items, you should request this in writing. Inform the tenant that you will claim the cost for the disposal of the items from the deposit. When arranging the way of collecting the items be wary of letting the tenant to access the property again. It is advisory that you accompany the tenant. Should the tenant arrange for third party collection of the items you need to make sure that the party has appropriate authority to do so.
You must prevent the items from being damaged or devalued. It is advised to make photographs and a reasonably detailed record of the possessions at your soonest opportunity after the move out so the state of the items is adequately described. You will need the list anyway when giving the notice to your tenant. It is worth mentioning that the higher the value of the items the more care should the landlord apply.

How long do I need to look after the possessions?

You are obliged to care for the possessions for a ‘reasonable’ amount of time. This can vary in dependence of the situation, but usually 21 days since your given written notice to the tenant should be enough. Some of the resources are stating that the belongings must be kept for 3 months. It is the best to discuss each specific case.

If there in no response from the tenant within the 21 days you may try and sell the items or dispose them. If you decide to sell the items you must sell them at reasonable price and the funds gained from the sale belong to the tenant up to 6 years from the sale. You can however deduct any costs regarding the storage, removal or sale.

The notice to dispose or sale of the belongings

You must give a written notice to the tenant explaining your intention to sell or dispose of their items. Write and deliver the notice To the tenant ASAP after realising they left possessions behind.

You are legally obliged to return the deposit within 30 days from the move out date. Giving a notice of 21 days for the collection of the items gives you up to a week to claim your loses.

Legally the document to refer to is the Torts (Interference with Goods) Act 1977. The notice must contain the following:

Date of the notice
The Bailor’s (Tenants )name and other details if you have any
The Bailee’s (Landlords) name and address
Your intention to dispose or sell the items if the tenant fails to collect them within the notice period
The list and reasonable level of description of the items in question
Instruction about how they can collect the belongings
If you intend to sell, you must include the date and place of the sale. Also include that if items are sold cost for storage and selling fees will be deducted.
Specify the amount, if any, which is payable by the bailor to the bailee in respect of the goods, and which became due before the giving of the notice.

Is there anything else I can do?

Large items or large amounts of items left behind could potentially mean that you could claim a sum of the agreed rent until the items will be collected.

Ending up in this scenario can be an absolute disaster. If you have a new tenancy starting at the premises within days or even sooner you have a lot on your plate.

Although more likely to apply in commercial cases, the presence of items left behind can mean the tenant has not given ‘vacant possession’, meaning the tenant remains liable to pay a sum equivalent to the current rent until they are removed.

Source: blbsolicitors.co.uk

Negotiate or store the possessions

If there is multiple items of value and significant size you may need to negotiate a deal with your new tenants. Consider reducing the rent however claiming the amount from the deposit of the previous tenant most likely won’t be possible. You can always reach out to TDS or MyDeposits for advice.

If you end up with items representing risk of fire, or other harm it is worth reaching out to a lawyer or a Citizen Bureau Advice.

You could consider moving the items to self storage and claim charges for removal and storage from the deposit. Nevertheless be aware that most self storage services capture your details , you are the client and you will be liable for outstanding bills if items are not collected by the end of the rental period. You may end up picking up the bill for the final removal as well.

This may be useful if you want to rent the property fast again and clear the space for viewings and new occupants. It could be potentially better option than lowering the new tenants rent, if you have back to back tenancies.

Duty of care

Having a new tenant at the premises with items which have no Fire label, unstable furnishings or no PAT test label is a concern. It is worth investigating if your duty of care for the new tenant comes before the duty of care for the left belongings or how to act in this predicament.

Make reasonable efforts to contact the tenant and find an agreement. If the tenant does not respond and the value of the items is questionable due to its state/ functionality you may be able to reduce the time to 14 days before the disposal. In every case be very mindful of making assumptions as the item could be of sentimental value for instance (although common sense says that such thing would be not be left behind).

Can I suggest deposit deductions for the clearance?

A good Check Out Report will note items that were not present at the Check In and allocate responsibility. Items may be marked as needing attention or needing clearance by the tenant.

After the expiry of your notice you can arrange the disposal of the items. You should be able claim the cost for the storage and disposal given the property was not returned to the expected state.

The Tenant confirmed in writing they won’t seek to recover the items, should I keep them?

Deciding to keep the items may just look like the best option here. Indeed your new tenant may even benefit from some of the items left behind. But are there any risks? As suggested earlier as a landlord you have responsibility for the contents at your property.

PAT testing

UK law expects the landlords to ensure that all electrical appliances provided are safe to use and will not cause harm to the tenant. A portable appliance is anything that can be unplugged and moved. So not just a iron or a hair dryer, but goods such as a freestanding fridge as well.

PAT (Portable Appliance Testing) is not obligatory , but should you keep at your rented premises electric appliances not provided by you it is highly recommend you inspect the appliance and make a record of this.

Furniture Fire safety

Any items such as divan beds, mattresses, any upholstered pieces, scatter cushions, furniture covers, pillows or garden furniture that can be used indoors should have a “FIRE RESISTANT” labelling or be labelled “CARELESSNESS CAUSES FIRE”.

Fire labels marked with “COVERS ARE NOT MATCH RESISTANT‟ or “CAUTION Careless use of matches could set fire to this furniture” do not comply with the regulations .

If your tenant left any items that falls into the above category search for relevant labels.

If you can’t find a label, seriously reconsider keeping the item at the premises.

Items you don’t need to worry about fire labels are: Curtains, carpets, pillow cases, antique furniture, furniture manufactured before 1950, bed clothes & duvets, loose covers for mattresses and sleeping bags.

Fitness of Item

If the item you ended up with appears unstable, risky or other way unfit for purpose you are probably best to remove it from the reach of your new tenants.

Think twice especially if your tenants are a family with dependent children.

How to prevent the tenant leaving valuable stuff or clutter behind?

Referencing your tenants

Referencing the tenants should reduce any risks Lettings represent

Tenancy Agreement Clauses

It is vital to include a clause in tenancy agreement aiding the matter of left possessions.

Midterm inspection

Houses converted to flat units often benefit from front communal garden. Sometimes tenant discard lots of rubbish and redundant items in communal areas before they leave. Communal areas are usually not included in the inventory given the space is shared and responsibility can’t be allocated.

What happens is that you may end up with clutter in front of your property that can not be identified from the Check In report.

A high quality midterm inspection will capture overview pictures of rooms. This may provide you with some evidence when identifying the clutter left behind.

Communication

Once you accept or give notice to your tenant, you can follow up with a kind request to review their inventory and tenancy agreement and hand the property in expected state.

What can a landlord deduct from your deposit in the UK ?

April 6, 2020 By Pixel

What is tenancy deposit deduction?

Tenancy deposit is usually a 5 weeks worth of rent secured via a deposit scheme on behalf of the tenant , paid prior to her move in date.

The landlord is able to claim deductions against this lump sum at the tenancy end if there is evidence for tenancy agreement breach.

Deposit deduction is the amount of the money claimed from the deposited sum.

Who suggests & negotiates tenancy deposit deductions?

Usually deposit deductions are suggested by the landlord or letting / managing agent on behalf of the landlord.

These are than negotiated between the landlord / agent and the tenant.

The extent of the tenancy deposit deductions

Rent and bills arrears are the number one grounds for deposit deductions.
The second most relevant base for the deductions is a comprehensive tenancy Check Out Report. The report is a direct comparison between the state of the property at the beginning of the tenancy and at the tenancy end.

Changes noted in the report which don’t qualify as fair wear & tear (expected depreciation via normal use over time) will become the ground for suggested compensation charge.

The total of tenancy deposit deductions can not be higher than the deposit itself. If the arrears and the damages / excessive wear exceeds the total of the deposit amount, the landlord is advised to open a litigation process.

Who can deduct from the tenancy deposit?

After a successful deduction negotiation between the parties, landlord or the letting / managing agent deducts the agreed amounts from the deposit and returns the remaining amount to the tenant.

If the deduction negotiation fails and parties are unwilling to reach an agreement, one of them raises a tenancy deposit dispute with the deposit scheme guarding the deposit.

An appointed adjudicator will review the case and decide how the deposit is apportioned to the parties in dispute.

The role of the Property Inventory in claiming deposit deductions.

Any deposit claim needs to be presented with satisfactory evidence for the deduction to take place. A detailed and fair inventory reports compiled by an independent party present the evidence of the changes in the tenancy duration.

All parties are presented with the photographs and comments capturing the changes which often leads to reaching an agreement in contrast to raising a dispute.

The types of Check Out Reports and responsibility appointment

Property inventory providers are presenting clients with various styles of Check Out reports:

Some will produce simply a list of new issues accompanied by photographs

Others will capture changes more comprehensively, indicating wear & tear as well as other inconsistencies.

While some companies will appoint responsibility for the reported changes , others will not.

How to recognise a robust Check Out Report?

Side by side written comparisons of the condition at check In with the condition at Check Out on item per item basis

Photographs demonstrating the changes
Appointment of responsibilities
Check out Checklist identifying length & type of tenancy, indicating if signs odours or pets were detected during the inspection

A good Check Out report will also bring into landlords attention maintenance issues

Types of deposit deductions

Deductions for rental and utility arrears
Deductions for cleaning
Deductions for damages
Deductions for items removals ( redundant items left behind by tenants)
Deductions for item replacement (missing item)
Deductions for removal ( & made good) of unauthorised instalments
Deductions for maintenance if caused by ill treating property goods (e.g clogged dishwasher)
Deductions for neglected garden maintenance

Types of damages

Damage due negligence ( e.g. neglected leak, burn marks to carpet )
Excessive wear & tear ( e.g. grubby walls)
Aesthetic damage (e.g. light chips, light dents)
Functional damage (e.g. broken drawer, broken lock)
Damage caused by a pet ( e.g. pulled threats to carpet, tear to curtain)
Damage caused by using inappropriate cleaning products ( e.g. stained chrome fittings, bleach marks)
Damage caused by inappropriate life style (e.g mildew caused by lack of ventilation)
Accidental damage cause by other party ( e.g. leak from other property, damage by maintenance works). When damage is discovered, photos should be taken and the landlord or managing agent should be informed ASAP.
Damage due a crime ( this type of damage should by not by charged to the tenant )

What is a reasonable compensation charge?

The compensation charge should be concluded with respect to the following:

What can be cleaned should be cleaned ( including upholstery)
What can be repaired should be repaired
What is irreparably damaged or missing should be replaced or compensated for by an amount reflecting the remaining life span of the item
The quality of the replacement item should match the quality of item being replaced

Cleaning charges

Deductions for light or deep cleaning if property wasn’t returned as clean as received.
Deductions for stained upholstery steam clean or dry clean. This could be curtains, furnishings, mattresses, carpets, rugs or linen, cushions, throws etc.
Deductions for a cleaning of an appliance such as professional oven clean.

Gardening charges

Deductions for maintenance of areas such as lawn, shrubs, patios – issues such as mowing, weeding, overgrown drainpipes, blocked drainpipes to be made good. Tenancy agreement should contain a clause on tenant responsibility for the garden maintenance.

Redecoration charges

Deductions for plastering & redecorating of a wall where damage has occurred

Damage charges

Deductions for damage are calculated according to the following formula considering multiple factors:

Example: Heavily stained natural fibre rug placed in lounge.

The rug was purchased for £400 ( the cost of the item as new, reflecting its quality)
The life span of the rug is 8 years ( expected use)
The rug was in use for past 4 years ( age of the carpet)
The tenancy lasted 3 years ( length of the tenancy )
Number of tenants and type of tenancy should be considered, family with dependent children will present higher wear & tear
Area of damage – high traffic areas such as hallway or kitchen show higher wear & tear

The property was occupied by a couple over the period of 3 years. . The compensation charge is £200.

The Grey Area of Aesthetic Damage

Property inventory professionals are trained that any dents, chips or unremovable stains are classified as damage.

The compensation charge formula suggest that the damage occurred is rather extensive as the deduction amount compensates for all the remaining years of the expected use of the item.

But most of damages inventory clerks encounter are not that severe. What about dents to appliance doors, chips to kitchen worktop, scratches to furniture, light chips to basin etc? The functionality of the item is not impaired but the aesthetic injury is obvious.

What is fair to deduct for aesthetic damage?

It seem that this is left to the negotiation between the landlords and tenants themselves. Tenancy deposit disputes raised on this ground are treated on a case by case basis and there is currently no calculation formula targeting this kind of compensation.

We recognise that such damage is frustrating for landlords and deserves attention. We also recognise that charges calculated from the damage compensation formula may be in many cases misproportionate.

A good Check Out Report will note such changes and suggest that they should be “made good” by the tenant . Most of the tenants accept the responsibility if the evidence is there and suggestions for compensation are reasonable. Therefore it is up to the landlord to make a fair judgment and communicate well her suggestion for the deduction to the tenant. An objective approach and fair negotiation will likely prevent a deposit dispute.

Life span of items

Life span of an item is the expected time for the item to serve its functions to a satisfactory standard.

It is important to keep receipts of newly purchased items as this is the one reliable way to prove the age of your item.

If you purchased an item some time ago and you are putting it in use to your tenant later, make sure you exchange up to date written briefing about this with your tenant and agent. Asking the tenant to inspect the item for any scratches or bruises after the installation and requesting them to make few pictures of it before it’s been used can provide you with important evidence in case of need later in the future.

There are many life span guides online and they are not fully consistent in data they present.

You can find below the life span guide by the Tenancy Deposit Scheme, who handles a significant proportion of UK tenancy deposit disputes.

Manufacturers are another reliable source of confirming the life spans of their products.

PDF resources:

Tenancy Deposit Scheme (TDS) Product Life Span Guide

MyDeposits Rules for claiming for a Deposit Deductions Guide

Deposit Protection Guide to Deposits Disputes and Damages

MyDeposits Landlord Lifecycle Handbook

Shelter Challenging Deposit Deductions – template letter

Deposit dispute Case studies:

MyDeposits Case Studies

TDS Case Studies

Deposit Protection Service (DPS) Case Studies