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Now and then, the question arises as to what position it is if a rented house is destroyed or damaged by fire, flood, or another disaster.
One of the first questions is whether a landlord must re-house a tenant after a disaster such as a fire or a flood.
The answer to this question is "no," but a further question must be asked: Must the landlord "pay" for alternative accommodation?
This is a different question, but first, let's consider the duty to re-house.
As discussed above, there is no rule, act of Parliament, or case law stating that if a property is rendered uninhabitable by some disaster, the landlord must start ringing around accommodation providers or hotels, arranging alternative accommodation, and providing the details or keys to the tenant.
This is the case even if the landlord was at fault and somehow caused the fire. However, the local authority does have such a duty.
A person is considered homeless if they have no accommodation available to occupy [s.175 Housing Act 1996].
A person is in priority need of accommodation if a person is homeless (or threatened with homelessness) due to an emergency such as a flood, fire or another disaster [s.189(1)(d) Housing Act 1996].
Where a local authority has reason to believe a person is "homeless" and "in priority need for accommodation, " there is a temporary duty to accommodate. As such, they "… shall secure that accommodation is available for his occupation pending a decision as to the duty (if any)" [s.188(1) Housing Act 1996].
Whether the landlord must pay for the costs of re-housing a tenant, albeit temporarily, will depend on whether the landlord is in breach of his repairing obligations and whether the fire was the landlord's fault.
The landlord is not in breach of his covenant to repair until he has notice of the disrepair and a reasonable time has elapsed in which the repair could have been carried out (see O'Brien v Robinson [1973] A.C. 912) (England).
Therefore, if the fault was, for example, due to the property's electrics, the landlord was unaware of any problem and had not received any notice of a defect. The landlord is unlikely liable for any damages to the tenant; therefore, the landlord will not be responsible for contributing to the alternative accommodation.
Suppose it is found the landlord was liable for the defect (perhaps by receiving notice of the fault and failing to act). The tenant has found the defective condition of the premises to be intolerable and has reasonably taken alternative accommodation at a reasonable cost. In that case, the cost of this alternative accommodation will generally be recoverable from the landlord [Calabar Properties v Stitcher [1984] 1 W.L.R. 287, CA].
How badly the property has been damaged and whether alternative accommodation was reasonable and necessary will depend on the individual case. No strict set of rules can answer that question.
Where rent is payable on a tenancy, the tenancy has no exception in the case of fire. The tenant remains bound to pay the rent even though the house is burnt down because the land remains, and the parties were free to agree on a contrary stipulation in the tenancy had the parties intended [Matthey v Curling [1922] 2 A.C. 180].
This rule applies even if the landlord receives insurance from insures [Lofft v Dennis (1859) 1 E. & E. 474].
In most cases, the property will have building insurance, which typically covers both the alternative accommodation and rent points.
However, the insurance's payout again depends on the situation and terms of the tenancy.
Where, as in most cases, the tenancy remains silent, it is up to the tenant, in essence, what should happen. If the tenant wishes to have alternative accommodation paid for by the landlord's insurer, that will typically be available under the policy. However, in this case, the tenant must continue to pay the rent for the destroyed house because that is (a) what the law provides (see above) and (b) it would be unfair if they didn't because otherwise, they would be living for a period entirely free of charge. Where alternative accommodation is paid in this manner, any loss of rent will not usually be paid to the landlord because it is the tenant's responsibility to continue to pay.
Alternatively, the tenant may wish to offer a surrender of the premises altogether and hand the keys back. The landlord is perfectly free to accept this surrender if they want. In this case, the tenancy will end immediately. If the insurance has rent loss cover (which often has to be specifically asked for), the insurers will pay the loss of rent whilst the building is reinstated.
A further alternative is that the tenant may agree with the landlord that instead of paying the rent for the destroyed house, they will pay for the alternative accommodation themselves. In this situation, the insurers (again assuming cover) would pay the loss of rent and not the alternative accommodation costs.
This is not definitive because it depends on the terms of the individual insurance policy and the tenancy terms. Still, the critical point is that insurance rarely pays for alternative accommodation and rent loss.
The landlord and tenant will need to agree on what works best for them, particularly whether the tenant intends to return after the property is reinstated.
If the tenancy agreement provides that the landlord will insure the property but fails to do so, presumably, they will have to cover any costs the insurance would have paid had they not breached the tenancy and could not insure.
Again, the lease will often answer the question. In particular, long leases (greater than 21 years) will often have specific clauses about rebuilding.
For example, a local authority's right to buy a lease on a flat within a building will have an implied term that the landlord will rebuild or reinstate the premises.
"There is an implied covenant that the landlord shall rebuild or reinstate the dwelling-house and the building in which it is situated in the case of destruction or damage by fire, tempest, flood or any other cause against the risk of which it is normal practice to insure." [para 14(3) Schedule 6, Housing Act 1985]
For landlords in the private rented sector and most commonly assured shorthold tenancies, there is an implied covenant in every lease (less than seven years) that the landlord shall repair the structure and exterior, water, gas and electricity installations and sanitation, and the space heating. However, these repairing obligations do not require a landlord:
“to rebuild or reinstate the premises in the case of destruction or damage by fire, or by tempest, flood or other inevitable accident”.
Therefore, subject to there not being a term of the tenancy to the contrary, there is no requirement to rebuild. In such a case, and because the tenancy continues and normally rent continues to be payable, a tenant wishing to cease paying the rent should offer to surrender the tenancy or, assuming the timing is appropriate (periodic tenancy), give notice to quit.
A landlord wishing to end the tenancy would also need to serve an appropriate notice and, if necessary, obtain a possession order through the court if the tenant is unwilling to accept the tenancy at an end.
Assuming the tenant is not residing at the property due to it being destroyed or damaged, there is a potential argument that the tenancy of the destroyed house has ceased to be an assured shorthold (England) or occupation contract (Wales) because it has ceased to be the tenant's home.
As long as there is an intention to return, this won't be the case because the condition is that the property is occupied as the tenant's only or principal home. It is submitted that if they intend to return, although the alternative accommodation would be the home, it wouldn't be the "principal" home, even if no one is residing.
The type of notice and whether a notice to quit would be appropriate will depend on the circumstances.
"Frustration of a contract takes place where there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance" [National Carriers v Panalpina (Northern) [1981] A.C. 675]
It is well established that frustration can apply to a licence (as opposed to a tenancy) [Krell v Henry [1903] 2 K.B. 740.]
It is also settled that frustration may apply to a tenancy that has taken effect, although it will hardly ever do so [National Carriers v Panalpina (Northern)]
It will hardly ever apply because, as we have discussed above, it is the "land" that is being rented, not just the house that sits on it. Therefore, while the land remains, so too will the contract that rented it, in most cases.
Therefore, where the demised property consists of part of a building only (e.g. a flat within a block of flats), with no underlying land, destruction of the building may result in frustration—[para 7.143 Woodfall Landlord and Tenant].
It is also worth remembering that most tenants have statutory protection when dealing with tenancies. If a contract were to be frustrated as a matter of course, every time something unexpected happened, the tenant would lose this statutory protection at a time when this may not be suitable or in their interests.