Investment properties are not immune to natural disasters, which impact tenants, landlords and property managers alike. If your rental is damaged by a disaster, it’s important that you know your obligations, because arguing over who is responsible won’t help anybody, and falling foul of legal requirements is an extra problem no one needs.
Australia has experienced another devastating disaster season over the past six months, with cyclones battering the north (seven of them to date) and bushfires rife in southern states.
In the past three weeks alone, properties in the NT have felt the wrath of category 2 Tropical Cyclone Marcus, while fires have ravaged parts of the NSW Far South Coast and south-western Victoria. Properties in Northern Queensland were also inundated by storms and flooding caused by Tropical Cyclone Nora.
The Insurance Council of Australia, which has declared these events “catastrophes”, expects these disasters to generate hundreds of insurance claims equating to millions of dollars in losses.
Sadly, natural disasters are part and parcel of our “wide brown land” with “droughts and flooding rains”, with natural catastrophes costing the Australian economy an estimated $9 billion each year. This is expected to more than triple by 2050 to $33 billion per year, according to the Australian Business Roundtable for Disaster Resilience and Safer Communities.
Legal requirements in each state or territory regarding extreme weather events can vary, so make sure you are up to date with your jurisdiction’s requirements. As a general guide, here are a few things to take note of:
You (as landlord) or your property manager can inspect a destroyed or damaged property at any time so long as the local authority or emergency services agree. The usual arrangements apply if the property is still leased (i.e. you need to give tenants notice before an inspection).
You (the owner) are responsible for maintenance and repairs needed to bring the property back to a liveable condition. Your tenant is responsible for cleaning or disposing of their damaged possessions.
If the property has been destroyed, or is unsafe, the tenancy agreement needs to be dissolved. If the property is liveable but your tenant no longer wishes to live there, a negotiation to end the lease is required. If your tenant believes the premises are liveable and wants to stay but is asked to leave by you or your PM, they can dispute the request.
As a landlord, you are not generally required to provide alternative accommodation if the property has been destroyed. If the property is deemed unliveable and your tenant needs to live elsewhere while repairs are carried out, rental payments during the repair period can be negotiated.
Your tenant continues to be responsible for paying the rent so long as there is a valid lease, even if they are forced to evacuate. If the property is damaged, rent payments during the period can be negotiated.
As a landlord, you are not required to compensate your tenant for any possessions damaged or destroyed in the disaster (unless you are shown to have been negligent). Tenants need to claim on their own contents insurance.
As the policyholder, you need to be aware of your obligations under the cover. For example, it is likely that you will be required to “act to prevent further loss or damage” and failure to do so could void cover or result in all or some of the claim being denied. It is also important that you know the procedure with respect to repairs, as some insurers need to authorise all forms of repair beforehand while others allow emergency repairs to be undertaken prior to seeking authorisation.
In the event you need to make a claim, you should contact your insurer or broker immediately and seek their guidance on the claims process and also check what assistance you may be entitled to.