Andrew Coulson: Welcome, Andrew Coulson's my name from Think Real Estate with me today is Julie Farah one of our expert trainers. Welcome Julie.
Julie Farah: Pleasure to be here Andrew.
Andrew: Excellent we are going to talk a little bit around natural disasters today so can you tell me, how would you define a natural disaster?
Julie: A natural disaster is traditionally bushfire or flooding, but it can branch off that so you can have hail damage we can have sinkholes and all sorts of things.
Andrew: Okay so anything where the property is damaged by a natural element?
Julie: Yes where it's not the landlord or the tenant's fault.
Andrew: Okay, so who is responsible for the cleanup after a natural disaster?
Julie: It's the landlord's responsibility to clean up debris and cleaning after a natural disaster. The tenant's only responsible for cleaning up anything that derives out of their normal use of living in the property nothing to do with our to get to clean up after a flood or bushfire.
Andrew: So that would include extracting water out of carpets, removing debris?
Andrew: What if a tenant's garage got flooded? Firstly who's responsible for the for the good damaged there?
Julie: Sadly for the tenant the tenant is responsible so they need to make sure that they have contents insurance just like you would for your own house that you live in and then their insurance will cover them for whatever damage or loss they sustain as a result of a natural disaster. The landlord is responsible though for the building and the property.
Andrew: Okay, so once that any damaged goods are removed, then the landlord's responsible for removing and restoring the property to its original condition?
Julie: Back to whatever the insurance company's going to do.
Andrew: Okay alright so what if the property was substantially damaged by a natural disaster? Let's say a tree fell on the property what would determine whether it is habitable or uninhabitable?
Julie: Okay well that's a good question because it's not maybe is straightforward as what people might think. So there's a lot of things that you need to take into account when you're trying to determine whether our property is going to be habitable or inhabitable. Obviously the tenant's health and safety is one.
Julie: But another one is we act in the Owner's best interest and we also take on their responsibility to mitigate any loss.
Julie: So we also need to make sure that the property isn't going to sustain any further damage or loss for us by the tenant remaining in there.
Julie: But some basic things to consider are whether or not further damage is likely to occur.
Julie: Whether you think the property is safe for the tenant to continue to live in. If any utilities like water, gas, electricity are going to be disconnected for any period of time which will make the property unusable. If the tenant is still going to be at a bathe and sleep and cook in the premises which is essentially what makes it into a residential premises.
Julie: There's some of the main ones. The other things that we need to consider of course the like flexible access for the assesses for the builders, for the tradespeople, how it's going to impact on the tenant and of course if the tenant is going to possibly sustain any further damage to anything that they have or their health by remaining in the premises.
Andrew: So if we determine that the property was uninhabitable what would our next process be?
Julie: Our next process unfortunately it might not be the popular choice to make it determined that it is uninhabitable because from the tenant's point of view that that's their home so you can imagine if I said to you "Now Andrew, when you left the house this morning that was the last time you're going to be allowed back in. You can just go in and grab a few essential items. We can't tell you when you would be able to occupy that premises again." You imagine the impact that would have on your life!
Andrew: They're not going to be happy!
Julie: Yeah and often you'll have a tenant that is more than happy to inconvenience themselves and want to stay in a property even though you know it's partially unusable.
Andrew: So do we have to take that into account feeling sorry for the tenants or do we have other responsibilities?
Julie: We have other responsibilities, I mean ultimately we're responsible for there willbeing and their safety. Yes it could be a huge inconvenience to have to move out.
Andrew: So what we do?
Julie: So if the property were deemed uninhabitable then we would issue a section 109 agreement frustrated termination notice, which is effective immediately. Now either party, the landlord or the tenant, can issue and serve that notice. It's just very very rarely ever done by the tenant, because they're the ones who are so adversely affected by it.
Andrew: Wanting to stay there.
Andrew: So, obviously our tenant's not going to be very happy with this situation, but the landlord does he have obligations to pay for accommodation?
Julie: No, so if the reason that the property has become uninhabitable is because of a natural disaster it's nothing to do with the landlord's breach of the agreement or the terms so the landlord is not responsible to pay for alternate accommodation. When you issue the 109 agreement frustrated termination notice, all liability to each other between the landlord and the tenant ceases there on the spot.
Andrew: Ok, so the landlord's going to make a claim on his own insurances for perhaps loss of rent, repairs to the property and those sorts of things so he'll be covered by that but the tenants unfortunately does need to find their own accommodation.
Julie: Correct. So any rent in advance that the tenant has paid already to the landlord past the date that the agreement is being terminated will need to be refunded back to them very quickly and of course their bond dealt with quickly and refunded back to them as well because they need to go and find other accommodation and your landlord might be a little reluctant to do it because it does mean no further rent for who knows how long could be weeks could be months.
Andrew: Yes, so basically it's our responsibility, we have a duty of care and we have to act in both parties best interest and make the tough decisions sometimes and fix it as economically as we can.
Julie: That's our job.
Andrew: What insurances should be taken out by by our landlords and by our tenants.
Julie: Insurance Andrew is really really important. A typical Sydney property is half a million dollar on average at least and you certainly wouldn't drive a half-a-million-dollar vehicle and not have it insured. Not because are you expect to have an accident, it's totally unexpected, so landlords need to have building insurance obviously and that also means that if it's a strata property, they need to make sure that they take out strata contents insurance or otherwise the strata insurance does not cover everything.
Andrew: Right, that's so that if there was a fire in the kitchen in a unit their contents insurance would pay for the kitchen and pay for the paint any damage blinds that sort of thing is covered within the contents.
Andrew: The building insurance is covered by strata.
Andrew: What about a homeowner?
Julie: Now a homeowner will need to have their full building insurance and then regardless whether it's a homeowner or strata title property owner they need to have really good landlord's insurance.
Andrew: Good, good so we need to differentiate between the different things that are available in different policies. We don't just get the cheapest do we?
Julie: It's rarely the cheaper although really good landlords insurance is not expensive in most cases at less than one week's rent for the whole year's insurance and it covers the typical things like rent arrears and you know lots of rent and that sort of thing but it also covers so much more, you only need to open up the newspaper and have a look at events and you can say well what if that was my tenant or what if that was my tenant, or what if that was my tenant so many situations.
Andrew: We need that building insurance, landlord insurance that will cover contents as well as malicious damage, loss of rent.
Andrew: And also I guess we also need to take into account public liability?
Julie: Public liability is almost always included in landlord insurance policy, so they're killing two birds with one stone.
Andrew: And the tenant needs to have their own insurances as well?
Julie: The tenant needs to take out contents insurance.You'd probably think that everyone has it but not everyone does and the other thing is of course I need to make sure that they don't under insure. So they need to insure their content for their current replaceable value.
Andrew: It needs to become a conversation that we have with our tenant at lease signing and our landlord when we sign the managing agency agreement, what insurance they will have in place.
Andrew: Excellent. Thanks Julie
Julie: Thanks Andrew.