The number one source of resident/landlord disputes is the disposition of the resident’s security deposit. Many of these potential problems can be resolved with proper procedures even before the resident takes possession of the rental by using a move-in / move-out inspection checklist. This form is an excellent tool to protect you and your resident when the resident moves out and wants the security deposit returned.
Let’s say you have a move-in / move-out inspection checklist with three columns labeled, “Condition on Arrival / Move-in, Condition on Departure and Estimated Cost of Repair/Replacement.” The first column of the checklist is where you can note the condition of the rental home before the resident actually moves in. The last two columns are for use when the resident moves out and you inspect the rental with the resident again. Often, you won’t immediately know the estimated cost of repair or replacement, so you can complete that portion of the checklist later and then include a copy when you send your resident his or her security deposit disposition form.
When properly completed, the inspection form clearly documents the condition of the rental upon acceptance and move-in by the residents and serves as a baseline for the entire residency.
If the resident withholds rent or tries to break the lease claiming the rental home needs substantial repairs, you may need to be able to prove the condition of the rental upon move-in. When the resident moves out, you’ll be able to clearly note the items that were damaged or were not left clean by the vacating residents so you can charge them the maximum allowed under your state or local laws.
The move-in / move-out inspection checklist is just as important as your lease or rental agreement. The purpose of the inspection is not to find all the items that you or your maintenance person forgot to check, because you should have already been through the rental home looking carefully to ensure that it met your high standards. The purpose of the inspection is to clearly demonstrate to the resident’s satisfaction that the rental home is in good condition except for any noted items.
The checklist is unique in that you will use the form throughout the entire residency – upon initial move-in, during the residency (if there are any repairs or upgrades to the rental home), and when the resident finally vacates the rental. Be sure to give your residents a copy of the completed and signed form for their records.
You need to physically walk through the rental with your new residents and guide them through the inspection form. Let the residents tell you the conditions they observe and make sure that your wording of the noted conditions and comments are detailed and that they accurately describe them.
Print legibly and be as detailed and specific as possible noting the condition of each item. Be sure to indicate which items are in new, excellent or very good condition as well as noting any items that are dirty, scratched, broken or in poor condition.
For example – rather than generally indicate that the oven is “broken,” be specific and note that the “built-in timer doesn’t work.” The oven works fine but the residents know that they need to use a separate timer and that they will not be held responsible for this specific item upon move-out. Be particularly careful to note the property condition regarding any mildew, mold, pest or rodent problems, because these are health issues that must be addressed immediately before the resident takes possession.
Although a good checklist clearly documents all damaged or sub-standard items, you should not overlook the importance of noting a detailed description of the things that are in good condition.
If the flooring in the kitchen is new, be sure to indicate that on the form. Many disputes can be resolved if the inspection checklist specifically notes the condition. If you only comment on damaged items, the court may conclude that you didn’t inspect or you forgot to record the condition of a component of the home that you are now claiming was damaged by the resident. You may think that everyone knows and agrees that all items without any notation are in “average or okay” condition, but the resident will likely tell the court that the item was at least somewhat dirty or damaged and that you should not be able to collect for that item.
You and the resident should complete the inspection form together prior to or at the time of move-in. If it is impossible for you to do this walk-through with your resident then you should complete the checklist and ask that all adults review and sign the form as soon as possible upon move-in. Inform the residents that you will be glad to deliver the mailbox key after you have the approved form in hand. I never seem to get anything but bills and junk mail, but I have learned that the mailbox key is very important to residents and is a useful tool to motivate the resident to promptly review and approve the inspection form.
When used properly, your move-in / move-out inspection checklist will not only prove the existence of damage in the rental home, but it can pinpoint when the damage occurred. Don’t fall for one of the oldest resident ploys in the book. Residents often try to avoid walking the rental home with you upon move-in because they want to wait and be able to avoid charges for damage that occurs during their actual move-in.
You must require the residents to walk through the rental premises and all agree that all items are in undamaged condition BEFORE they start moving in their boxes and furnishings.
If you discover any problems during your walk-through, note them on the inspection form and take steps to have them corrected unless it is not economically feasible. For example, you may have a hairline crack along the edge of the bathroom counter top. If you have determined that it would be too costly to refinish or replace the countertop, just note the condition on the inspection form so that your resident is not charged in error upon move-out.
List Repairs Made After the Walk-Through
Be sure that your inspection checklist reflects any repairs or improvements made after the initial walk-through inspection. For example, if you and your resident noted on the form that the bathroom door didn’t lock properly, you would have item repaired and you would need to update the inspection form and have your resident initial the change. Or you may install new carpeting or make other improvements that should be reflected on the inspection form.
Carpets and Flooring
Always be sure to note the condition of the carpets and floor coverings because this is one of the most common areas of dispute with residents upon move-out. Although residents should not be charged for ordinary wear and tear, if they destroy the carpet, they should pay for the damage. Indicate the age of the carpet and whether it has been professionally cleaned as part of your rental turnover process. When a resident leaves after only six months and has destroyed the carpet, you can be sure that his or her memory will be that the carpet was old, dirty and threadbare. The resident’s selective memory will not recall that the carpet was actually brand new or at least in very good condition and professionally cleaned upon move-in.
Pictures Worth a Thousand Words
Another excellent way to avoid disputes over security deposits is for you to take photos or videotape at the rental home before the resident moves in. In addition to your inspection form, you will have some photos to help refresh the resident’s memory or to show the court, if necessary.
Robert Griswold is President of Griswold Real Estate Management, Inc., a Southern California and Southern Nevada-based Accredited Management Organization (AMO®) and has actively managed over 50,000 residential units and several million square feet of commercial, industrial, self-storage and retail properties nationally in the last 25+ years. He is also the author of the book Property Management Kit for Dummies. To purchase the book or for more information, visit www.griswoldremgmt.com.