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:
- Events venues
- 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
- 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.