Picture this: you're helping a tenant move out and you notice there are some nasty scratches on the kitchen floor. Your tenant says, "That was there when I moved in," but you're not sure if that's true. So, who will foot the bill to fix the floor?

This situation is not unfamiliar for investment property owners all across Australia - that's why the Entry Condition Report exists, to counter the uncertainty when the property goes from one tenant to the next.

In this article, Danielle Bunton from the :Different Operations Team shares exactly why it’s important to have an Entry Condition Report. We've also provided a complete checklist with all the items that need to go into an Entry Condition Report, the process of using one, and how good property managers help.

What's the solution to the earlier scenario we described? It's about being proactive. If you or your property manager filled out an Entry Condition Report while your tenant moved in, you could simply refer to that document to verify if the scratch was in fact there or not.

If the scratches were there, the property owner is liable. If it was not, then the tenant is liable. Problem solved!

This is why the Entry Condition Report is important.

The Entry Condition Report is how you agree with the tenant on the condition of the property and its contents when the tenant moves in. That way, everyone knows who is to blame for damages to the property down the line. Less finger-pointing, more fixing!

The key thing here is that the Entry Condition Report takes the guesswork out of repair and maintenance disputes. Since everyone gets a chance to agree on the condition of the property first, there's no arguments about when the damage happened.

There are three steps to completing an Entry Condition Report: 

1. You or your property manager will fill out the Entry Condition Report (here’s a sample Entry Condition Report PDF). This includes the working condition of appliances, electronics, water and electricity connections, doors, windows and every part of the house. It will also record any damages, marks, dents, or stains on the walls, carpets, and any other surfaces. There will also be a note on the status of the furniture, fittings, and external sections of the property. The property manager attaches photos and videos for proof. They’ll then sign it and send a copy to the tenant.
   
2. Now it's the tenant's turn! The tenant has to inspect the house and either agree or disagree with the comments on the entry report. If they have any more comments to add, they can do that. If there's any damages the tenant knows of which the property owner didn't pick up on, now is the time to report them. Photos and videos help with correspondence. The tenant signs and returns the Entry Condition Report to the property manager within 3 days. This is especially important if they disagree with the original comments. If the tenant doesn't take this step, then the property owner's original Entry Condition Report is treated as final.
   
3. The property manager then verifies whether they accept the comments left by the tenants. If they do, they will send a completed report to the tenant within 14 days.
   
   If not:

• They will arrange a convenient time to meet the tenant.
• Any conflicts must be resolved where the tenant and the property owner come to an agreement.

Once this is done, the final Entry Condition Report needs to get distributed to all parties via email.

The difference between the Exit and Entry Condition Report is that while the Entry Condition Report is filled out when the tenant moves in, the Exit Condition Report is filled out when the tenant is leaving the rental property. The two are then compared. Any disparities in property damage is damage that has occurred during the most recent tenancy. On paper it's almost the exact same document. This is how you identify who is liable for what.

How can you be sure you haven’t missed any scratches or dents in the property? Here’s a complete list of all the areas your Entry Condition Report should cover:

• Entry - doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floor, floor coverings, and power points.
• Lounge / living room / dining room - same as above. Additionally, look out for TV points, and air conditioners.
• Kitchen - same as the entry. Besides those, check the cupboards, drawers, benchtops, tiling, sinks, disposal units, taps, stove tops, oven, griller, exhaust fan, rangehood, dishwasher, and power points.
• Bedrooms - for each bedroom in the property, inspect its doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floor, floor coverings, power points, wardrobe, drawers, shelves, and air conditioners.
• Ensuite bathrooms - check the state of the bath, shower, shower screen, wash basin, vanity, mirror, cabinet, towel rails, toilet, exhaust fan and power points. Also inspect the doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floor,  and floor coverings. 
• Toilet - doors, walls, ceilings, cistern, light fittings, and exhaust fan.
• Laundry - doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floor, floor coverings, wash tubs, washing machine, dryer, and power points. 
• General - smoke alarms, security devices, electrical safety switches, hot water system, keys, locks, remotes, staircases, railings, wheelie and recycle bins or hire recycling services, pool and equipment, street number, letter box, external walls, porch, balconies, decks, awnings, gutters, paving, pergola, garage, carport, storeroom, garden shed, gate, fences, gardens, external taps, hoses, clothes line, solar panels (if any), and paths and driveways.

Use the following questions to help you fill in the descriptions of each item on the Entry Condition Report:

• Are electrical appliances functioning properly? How old are they?
• What is the condition of the furniture, flooring, carpets, and walls? Are they clean?
• What is the status of the water supply and plumbing system? Look out for leaks, the flow of water, water heating, and whether the taps are working.
• Is the electrical work in the property safe and reliable? Are there any faulty connections? Are the sockets in good working order?
• Are the garden, lawn, garage, fence, and outdoor areas well maintained?
• Are there any marks, burns, holes, scribbles, mould, or cracks in any of the walls, surfaces, carpets, or furniture?
• Are the floorboards, doorknobs, curtain railings, and locks secure?
• Do the smoke and burglar alarm systems, water sprinkler systems, and roller doors work well?
• Is the pool filter and heating in order?
•  Are the lights working well?

A professional property manager has done hundreds of property inspections and Entry Condition Reports over the course of their career. They've mastered the art of spotting out scratches and dents, and help fill out the Entry and Exit Condition Report with a higher level of detail.

A good property manager helps keep your investment property running smoothly. As is always the case, bringing in an expert takes your mind off the property.

If the whole process of filling out an Exit Condition Report, comparing it with an Entry Condition Report, handling disputes and disagreements sounds like a tedious chore, you're not alone.

Property maintenance and transitions are a good reason why 80% of Australian investment property owners choose to take a property manager on board to handle these issues for them.

Next to each item in the Entry Condition Report there will be a description box. It's there to let whoever filled it out give descriptions and context for the damage. Examples of comments you'll see are:

• White walls, clean and free of any marks, scuffs, dents, or damages.
• 2x picture hooks on right-hand side wall near light switch.
• Great carpet, steam cleaned and in good condition.
• 1x yellow stain in the corner near kitchen cupboards.

There's a few things we do :Differently during transitions:

• At the end of the tenancy, we give the tenant 24 hours to rectify any issues we find. Often, these are small issues such as an unclean oven or a lightbulb that needs changing. In these cases, :Different will hand over the job to a tradesperson if the tenant refuses or is unable to address it by themselves. Then, we will deduct the cost from the tenant’s bond.
• For bigger jobs, we will source quotes from our network of service providers/tradies. When there’s any grey area between who’s responsible for the cost, we’ll step in to negotiate an agreement between the owner and tenant. 
• We also account for certain factors during negotiations. One of these is the age of the item. For instance, for an item with a 10-year life value that has passed half of its life, then we only claim 50% of its replacement cost from tenants. This is fair for both the tenant and the landlord. 
• Finally, as a last resort, we will take the matter to the tribunal if an agreement can’t be reached. In these situations, we recommend that the property owner pay for the repairs, then seek reimbursement at the tribunal.

:Different's technology helps make the transition period smoother, and gives you 24/7 insight into your property. All the information you need and any recent Entry Condition Reports can be found in the Owner App.

Just as the colour of the curtains will slowly fade in your own home, the same applies to your rental property. Fair wear and tear is a natural part of maintaining a rental property, but it can be hard to distinguish between actual damage and fair wear and tear, and to decide who is liable for what.

Here’s a list of examples for what’s considered fair wear and tear, and what constitutes property damage:

As you can see, the distinction is subtle but it's there. This is why the Entry Condition Report and its process is so important. When all parties are on the same page and in agreement about liabilities and responsibilities, you prevent a lifetime of conflict and disputes.

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