Property inventory is a legal document that describes written record of the property (condition, content) at the beginning of a tenancy. It is important that property inventory is accurate, otherwise it will have no legal meaning. The document protects landlord in case of damage caused by tenant. This document is used for tax or insurance purposes.
Usually every property inventory contains:
- interior condition,
- decorations present,
- doors, windows, ceilings, walls state,
- drapes, carpets, furniture.
Some expendable goods, like journals, living plants are usually excluded, while gardens are described generally. Garden sculptures or facilities can be described in detail. Lofts or cellars if they have no special meaning are not included (K. Otsuka, Y. Hayami 1988, p. 31-68).
Property inventory is a written tally of taxpayer's personal property. This inventory will also be used for the current market value. Property inventories are generally used by taxpayers to calculate the value of insurance companies.
Property Inventory Procedures
Insurers require that new companies submit a complete inventory before releasing the initial insurance policy. Therefore, an annual inventory is required, both to update the company's insurance and to evaluate the effectiveness of internal business controls. Although the process may vary insensibly depending on the business, property inventory generally comply standard inventory procedures (J. Lohrey 2019).
Tax and insurance - property inventory can be used as basis for taxation on insurance. In that case all elements that increase value of the property should be included in the document, as well as e.g. price of the property.
Example of Property Inventory
As part of the property inventory or RPI, real estate may include land and everything permanently attached to the site, such as buildings, installed systems within the building, all systems within the land itself, such as irrigation or ducts and construction equipment. Inventory of real estate may also include roads, parking lots, fences, utility systems or constructions.
If the property inventory is managed by an external organization or asset management team, they will track the property information as part of the database and include identification data such as property name, address, book value, relevant rating codes and descriptions along with forecasts for future forecasts, such as estimates for the replacement of buildings, the expected costs of updating, and a list of any critical repairs to be made according to the level of priority. If the property inventory contains federal ownership, it must also comply with the General Services Administration codes of use (Property Inventory 2008, p. 2-9).
Why Are Property Inventories So Important?
5 Key reasons why to have a property inventory (Jones C. 2013, p.557-579):
- Inventory will determine the condition of the property at the beginning of the lease, as agreed by the tenant.
- This will help in the responsibility for maintenance during the occupancy period. For example, if during the inspection the entry to the broiler was interrupted, but eventually it breaks down, the landlord will have to repair it.
- Inventory serves as a comprehensive guide to the most efficient methods of restoring property until the end of the term.
- This reduces the potential differences in who is responsible for the repairs and damage to finishing the flat, and will help in making a reasonable use.
- It protects tenants' deposits, as long as they give away a property in a similar condition, if the difference causes a formal debate.
- A literature review on models of inventory management under uncertainty, (2015), "Verslo sistemos ir ekonomika business systems and economics", vol. 5 (1), p. 26-33.
- Inventory Checklist, (2019).
- Jones C., Tuzel S., (2013), Inventory investment and the cost of capital, "Journal of Financial Economics", Los Angeles, vol. 107, Issue 3, p. 557-579.
- Lohrey J., (2019), Property Inventory Procedures, "Property Management and Inventory Control Procedures", Smallbusiness, Green Bay (Wisconsin), p.1.
- Otsuka K., Hayami Y., (1988), Theories of share tenancy: A critical survey, Economic Development and Cultural Change, 37(1), p.31-68.
- Policy 7450 Property Inventory, (2012), "Caldwell-West Caldwell board of education", p.1.
- Pott H., (2018), Inventory Report, England.
- Property Inventory, (2008), Lawpack Publishing Limited, London, p. 2-9.
Author: Joanna Krygowska