Hurricane Sandy, labeled as the biggest storm to hit the United States, has long come ashore leaving a path of destruction and ruin. Many homes are destroyed or rendered unusable. Given the widespread path of destruction it is a safe assumption that many of those destroyed homes are rental properties, leaving many tenants with nowhere to go and their possessions destroyed.
The tedious process of rebuilding begins with Sandy teaching us some lessons and reinforcing some in others with preparedness being chief among them. Preparedness in the US and abroad is at an all time high with numerous sites on the web not only teaching how to prepare but what we should use in our preparedness kits too. Somewhere along the lines of keeping your family safe from disasters you, as a landlord, need to be prepared to act accordingly if one or more of your rentals suffer a disaster.
If your rental is destroyed, who pays for it?
The biggest question a landlord and tenant needs to ask if the rental property is destroyed is "Who is responsible for repairs?" Without a doubt, it is the landlord. Whether in a disaster or just plain wear and tear, landlords are responsible for providing a sound and habitable structure which includes roofing, super structure, plumbing, etc. If disaster renders your unit unsafe or unfit to live in you may find the municipal health department declaring it unsafe, allowing the renter a means to discontinue payment and break the lease.
Timing is a concern to when your rental property is destroyed as well as when a tenant can break the lease. If you find that it will take an exorbitant amount of time to repair a tenant can most likely cancel the lease. In some areas of the country if the cost of repairs exceeds the total remaining amount a tenant would pay, it is automatic grounds for a tenant breaking the lease. Almost certainly, if the destroyed rental cannot be repaired a tenant can break the lease. This is all assuming the disaster was not caused by the tenant (fire, water, etc)
If your rental is destroyed, it may cost you more than repair costs!
Prepare to return a portion of the unpaid rent if your rental property is destroyed. In many states if the property cannot be lived in or repaired in a timely manner, you are responsible for returning the unused portion of any rents paid. A portion of the deposit if not all of it may have to be returned as well. Finally, who is responsible for the tenant's personal property and how will the repair costs be paid?
Unless outlined in a lease, the tenant is fully responsible for their damaged or destroyed property just as the landlord is responsible for a functioning structure. Rental insurance is very reasonably priced. All tenants should carry this vital insurance just as all landlords should carry "fire and wind" insurance on their properties to mitigate the risk of destruction. If no insurance is available landlords should be aware that their units may be considered business instruments and low-cost loans may be available via various sources for their repairs.
No one wants to think about these type of situations. However, it's better to at least consider these scenarios and be prepared rather than have your rental property destroyed and not know what to do or expect.