When a Natural Disaster Causes Rental Property Damage
Difficult to predict in timing, severity, and duration, a natural disaster can cause major damage to, even destruction of a landlord’s real property. The damage and destruction to a property can cause business interruption to and even failure of the business. A landlord should be prepared with contingency plans to address a natural disaster situation including: tenant evacuations, tenant relocations, property safety and security measures, habitability issues, lease termination, eviction, surrender and abandonment issues, insurance claims, and repair, restoration and rebuilding plans.
The following information may be of benefit to a landlord in developing a contingency plan to address events during and after a natural disaster.
Most states have adopted the Uniform Landlord Tenant Act (URLTA) in whole or in part as the basis for their landlord-tenant statutes. URLTA provisions address various rental terms and conditions, and policies and procedures including casualty damage to a dwelling unit. As noted in the URLTA, “If the dwelling unit or premises are damaged or destroyed by fire or casualty to an extent that enjoyment of the dwelling unit is substantially impaired, the tenant may (1) immediately vacate the premises and notify the landlord in writing within [XX] days thereafter of his intention to terminate the rental agreement, in which case the rental agreement terminates as of the date of vacating; or (2) if continued occupancy is lawful, vacate any part of the dwelling unit rendered unusable by the fire or casualty, in which case the tenant’s liability for rent is reduced in proportion to the diminution in the fair rental value of the dwelling unit.”
Some states’ landlord-tenant statutes may be silent on the obligations and duties of landlord and tenant following a natural disaster. If so, a landlord can include language in his lease agreement to add detail and clarity to his rental policies and practices related to what happens in the event that a natural disaster destroys or otherwise damages a rental unit.
Lease Agreement
The lease agreement is the governing document in the landlord-tenant relationship. In the aftermath of storm, flood, or other weather-related damage to a rental unit, a strong lease agreement is important in helping to protect the rental property, secure tenant safety, and ensure business continuity. Advance preparation and planning are key elements to quickly address and resolve issues during the return to business. Of concern to both landlord and tenant is what needs to be done when (1) when a rental unit has been destroyed and is not habitable, and (2) a rental unit has been damaged but is habitable.
Implied Warranty of Habitability
The implied warranty of habitability is a legal doctrine in most states that requires landlords to offer and maintain leased premises in a safe and sanitary condition fit for human habitation for the duration of the lease.
A lease agreement is a legal contract between landlord and tenant that does not end even if the rental premises is destroyed by a natural disaster. If the rental unit is deemed uninhabitable, the landlord must take steps to formally, legally terminate the lease agreement and release the tenant from his contract obligations.
If the rental unit is damaged but considered still habitable, the lease agreement is still in effect, binding landlord and tenant to original lease terms and conditions.
Habitability issues raise concerns with tenants regarding where they are going to live, when repairs will be done, and, for most tenants, what is their rent responsibility. Landlord communication with tenants is important to keep tenants informed and working together with the landlord to continue the tenancy or move forward to lease termination.
Rent
The lease agreement should cover all rent obligations of the tenant during his tenancy. The landlord’s obligation to provide habitable housing is tied to the tenant’s obligation to pay rent as agreed during the lease terms. If the rental unit is not habitable, a landlord cannot collect rent per the lease terms. Until the lease agreement expires at end of contract term, or is legally terminated, the tenant is responsible for rent. When the lease agreement has been legally terminated and the tenant has surrendered the rental premises, the tenant’s obligation for rent is ended.
Rent Abatement
A lease agreement may include a clause that in the event the rental property is damaged, a landlord agrees to reduce the tenant’s rent proportional to the amount of damage incurred, or if the rental property is destroyed, to suspend rent until the rental property returned to habitable condition or is rebuilt.
Rent Withholding
A tenant may withhold rent in an attempt to force the landlord to comply with landlord obligations to keep and maintain a habitable rental unit. In the case of a natural disaster, damage may be beyond the landlord’s control. Rent withholding serves no purpose in a casualty event. In some states rent withholding is prohibited by statute for such an event.
Security Deposit
The issue of the tenant’s security deposit must be addressed in the lease agreement regarding what happens in the event of lease termination due to habitability issues. A tenant cannot be held responsible for damages caused by a natural disaster. A landlord can recover funds from a tenant’s security deposit if the tenant has defaulted on his obligation to pay rent and owes past due rents. If the rental unit has been destroyed, a proration of the security deposit as of the date of the casualty should be made and the prorated amount refunded to the tenant. If the rental unit is damaged but still habitable, the security deposit can in some cases be retained by the landlord.
Lease Clauses
The following sample lease clauses addressing property damage or destruction, and as allowed by statute, may be of help to provide clarity for casualty issues. Landlords may want to consider incorporating such language in their lease agreements.
- Landlord’s responsibility to repair or replace damaged rental property is determined by the terms of the lease or as required by law.
- Landlord is not liable for damage to or loss of Tenant’s personal property caused by a natural disaster. Landlord does not provide insurance coverage for loss or damage to Tenant’s property. It is Tenant’s responsibility to timely acquire insurance as required by the lease or as Tenant desires to cover loss or damage to his personal property or personal injury.
- The occurrence of any natural disaster does not relieve Tenant from his obligation to timely pay rent and other owed monies. If evacuation or other storm preparation might prevent Tenant from paying rent on the first of the month, Tenant must make arrangements to pay rent in advance to avoid late payment and associated penalties.
- Neither Landlord nor Tenant shall be required to perform any covenant or obligation in this Lease, or be liable in damages to the other party, so long as the performance or non-performance of the covenant or obligation is delayed, caused by or prevented by an act of God.
- No party shall be liable or responsible to the other party, nor be deemed to have defaulted under or breached the agreement, for the delay in performance of this agreement when and to the extent such failure or delay is caused by acts beyond the party’s control (force majeure).
Due to many variables including state landlord-tenant statutes and unique lease agreements for individual properties, it may be advisable for a landlord to consult with an experienced attorney knowledgeable in landlord-tenant matters to ensure understanding and compliance of applicable law.