Every now and then the question arises as to what is the position if a rented house is destroyed or damaged by fire. The question will usually apply to damage by flooding or other disaster. An entry on our members ask a question part of the website has prompted us to finally get on with producing an article.

Alternative Accommodation

One of the first questions that gets asked is whether a landlord is under a duty to re-house a tenant after a disaster such as fire or flood. The answer to this question is “no” but there is a further question that requires asking namely must the landlord “pay” for alternative accommodation? This is a totally different question but first let’s consider the duty to re-house.

Duty to provide alternative accommodation

As discussed above, there is no rule, act of Parliament or case law which provides in the event of a property rendered uninhabitable by some disaster that the landlord must start ringing round accommodation providers or hotels, arranging alternative accommodation and providing the details or keys to the tenant. It is submitted 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 regarded as homeless if they have no accommodation available to occupy [s.175 Housing Act 1996]. A person is in priority need for accommodation if a person is homeless (or threatened with homelessness) as a result of an emergency such as flood, fire or other 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”, then, there is an interim duty to accommodate and 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].

 

Cost of alternative accommodation

Whether the landlord must pay for the costs of re-housing a tenant albeit temporary will depend on whether the landlord is in breach of his repairing obligations or not and whether the fire was the landlords 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). Therefore, if the fault was for example due to the electrics in the property but the landlord was not aware of any problem nor had the landlord received any notice of a defect, then, the landlord is unlikely to be liable for any damages to the tenant and therefore the landlord will not be liable to contribute towards the alternative accommodation.

If it is found the landlord was liable for the defect (perhaps by receiving notice of the defect and failing to act) and the tenant has found the defective condition of the premises to be intolerable and has reasonably taken alternative accommodation at reasonable cost, then the cost of this alternative accommodation will normally 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 be down to the individual case in question and no strict set of rules will be able to answer that question.

 

Rent

Where rent is payable on a tenancy and there is no exception in the case of fire, then, 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 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 has received the insurance money from insures [Lofft v Dennis (1859) 1 E. & E. 474] (authors note: I wouldn’t like to take this to the Supreme Court given the modern law!)

 

Insurance

In the vast majority of cases, there will be buildings insurance on the property and that will normally cover both the alternative accommodation and rent points. However, it again depends on the situation and terms of the tenancy as to what the insurance will pay out.

Where, as in most cases, the tenancy remains silent, then it is up to the tenant in essence what should happen. If the tenant wishes to have alternative accommodation paid for by the landlords insurer, that will normally 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 normally be paid to the landlord because of the tenants responsibility to continue to pay.

Alternatively, the tenant may wish to offer a surrender of the premises altogether and simply hand the keys back. The landlord is perfectly free to accept this surrender if they wish, in which case, the tenancy will end immediately and if the insurance has rent loss cover (something that often has to be specifically asked for) the insurers will pay 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, instead 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 is all dependant on the terms of the individual insurance policy and the terms of the tenancy but the key point is that rarely will insurance pay both alternative accommodation and rent loss. It will be for the landlord and tenant to agree which is to work best for them and in particular 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 he will have to cover any costs that the insurance would have paid had he not breached the tenancy and failed to insure.

 

Must the house be reinstated or rebuilt?

Again the question will often be answered by the lease. In particular long leases (greater than 21 years) will often have specific clauses in relation to rebuilding. For example a local authority right to buy 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 7 years) that the landlord shall repair the structure and exterior, installations for water, gas and electricity and sanitation, and the space heating [s.11(1) Landlord and Tenant Act 1985].

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” [s.11(2)(b) Landlord and Tenant Act 1985].

 

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 continuing to pay the rent should offer to surrender the tenancy or assuming the timing is appropriate (periodic tenancy) give a 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.

The appropriate notice would normally be a section 21 notice (or section 8 if the rent has not been paid). However assuming the tenant is not residing at the property due to it being destroyed or damaged, there is potential argument that the tenancy of the destroyed house has ceased to be an assured shorthold tenancy because it has ceased to be the tenants home. It is submitted as long as there is an intention to return that this won’t be the case because the condition is that the property is occupied as the tenants only or principle home. It is submitted that if they intend to return, although the alternative accommodation would be the home, it wouldn’t be the “principle” home and therefore even if no one is residing it is submitted it remains an AST. The type of notice and whether a notice to quit would be appropriate will depend on the individual circumstances though.

 

Frustration

“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)]

The reason it will hardly ever apply is because as we have discussed above, it is the “land” that is being rented not just the house that sits on the land therefore, whilst the land remains, so too in most cases will the contract which rented the land. 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 have the result of being frustrated. [para 7.143 Woodfall Landlord and Tenant].

It is also worth remembering that most tenants have some form of 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 loose this statutory protection at a time when this may not be suitable or in their interests.

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