Over the past 24 hours in Toronto, nature has thrown a full set of metric wrenches at your nice, safe rental revenue stream. The messages from your tenants are filtering in as they’re discovering the extent of the flood damage, and you’re lying awake imagining your savings spiraling down the drain with the last of the water. This article will lay out the basics of what you’re on the hook for as the landlord, and what the tenant has to fix themselves.
The simplest explanation is that you are responsible to fix what you provided to the tenant, while the tenant is responsible for what they put in the space. The tenant can’t sue you for their losses if the cause of the flood was beyond your control, so long as you fulfill your duties as a landlord. There are some exceptions, which I’ll discuss later on. Your damages – the repair costs you pay out – may be covered, in whole or in part, by the insurance you carry on the building.
The law is designed to protect tenants, and gives pretty heavy incentives to landlords to get the repairs done quickly and effectively.
Responding to a Flooding Complaint
Ontario’s Residential Tenancies Act requires you, as the landlord, to maintain your buildings and rental units in a state of good repair, and fit for habitation. This includes complying with health, safety, housing, and maintenance standards. Obviously a flooded or water-damaged unit is not in a good state of repair, and may even be unfit for habitation. You need to act quickly to assess the damage, and start taking corrective action – not only legally, but to minimize your financial cost of flood damage.
In an emergency, you don’t have to give the standard 24 hours written notice to the tenant that you’re entering the unit. Checking to make sure that the flooding has stopped and is receding could be such an emergency. If you’re going in later to inspect the unit to see if it’s in a state of good repair or fit for habitation, you’ll need to give them 24 hours notice, or get their consent to go in right away.
What if It’s Unfit to Live In?
If the unit is not habitable, it’s up to you to provide them with a place to live while it’s repaired. This could be a vacant unit that you own, or a hotel – which can get expensive – so you’ve got incentive to get the repairs done quickly. If you’re not planning on restoring the unit immediately, you and your tenants could agree to terminate the lease as of the date of the flooding. You must then give them an abatement of rent from the flood day forward. The discount on rent could be total, if the whole unit is uninhabitable, or partial if only part of the unit can’t be used. The tenant must agree to the termination of the tenancy. If they don’t agree, you would have to go to the Landlord-Tenant Board to plead your case that the lease should be ended.
What Do You Have to Fix?
If you decide to repair the unit, you’re responsible to return the unit, fixtures, and building, to a habitable state. This includes the common areas, though your priority for the repairs should be the units. You must repair or replace the walls, floors and floor coverings, ceilings, windows, doors, fixtures, heating, lighting, ventilation, plumbing, wiring, garages, patios, walkways, appliances, and anything else that you provided to the tenant. If you’re renting it furnished, you’ll need to replace or repair any damaged furniture as well. If you’re replacing appliances or furniture, you don’t have to provide “same or better” quality – only ones in good, working condition.
Keep receipts for all of the costs you incur in the repair process, including the cost of housing the tenants if it comes to that. It’s all deductible business expenses.
If you’re not anywhere near the property, you can authorize your tenant to organize the repairs to the unit, and have the invoices sent to you. Make sure they provide you with multiple quotes for the repairs, and keep records of all the costs. If you take unreasonably long to respond, or to get the work done, your tenant may be entitled to bring in contractors and you’ll still have to pay for them. What counts as “unreasonably long” depends on a lot of factors, and is a legal grey area – if you find yourself in this situation as a landlord or a tenant, give me a call. The moral of the story is, get the work done quickly, and you’ll have more control over who does it and how it’s done.
You should also report the flood to your insurer right away. Most insurance companies insure floods separately from other risks to property, so if you’re not paying for flood coverage separately, you may be out of luck. Most home insurance policies will not cover floods caused by storm surge, although depending on how the flood occurred, it may be fall under sewer backup insurance. If you have building or contents insurance. those policies may include floods coverage as well. Read the policy that they provided to you carefully to see what is covered. Many insurance companies will automatically reject all claims after a widespread event like a flood as a cost-saving measure, so if you think your policy has you covered, you may have to fight it. Consider consulting a lawyer for an opinion on what your policy includes.
You should also advise your tenants to report the flood to their own insurer. Their tenant insurance may help them minimize their losses, though flood coverage is usually separate for tenants as well.
If the flooding was caused or contributed to by a faulty design or poor workmanship in the building, you may have grounds for a lawsuit against the designers or craftsmen who built the property. This could include the failure to grade the land around the building so that water drains away from the foundation.
You may also have grounds for a lawsuit against the tenant if they did something that caused or contributed to the damage – such as blocking drains, leaving basement windows open and so forth.
If the flooding was caused or contributed to by your own actions – such as failing to maintain the building or unit properly – your tenant may have grounds for a lawsuit against you for their damages.
If any of the above apply, you should consult a lawyer as soon as possible to discuss the merits of your case.
A Responsible Landlord Will…
Deal with your tenant
- Respond quickly to the tenant’s report of flooding – inspect the damage, and do what you can to contain or stop the flooding.
- Take immediate steps to minimize health risks – removing the water, drying out the unit.
- Explain that you will repair the unit, but their possessions are their own responsibility.
- If the unit is uninhabitable, provide them with a place to stay and an abatement of rent.
- If you’re not repairing the unit right away, provide them with a rent abatement.
- Keep them up to date on the repair plans.
- Encourage them to report the damage to their insurer.
Deal with your property
- Start repairs as soon as possible – if you’re acting responsibly to make major repairs, you don’t need to give a rent abatement.
- Ensure that vital services still work – hot and cold water, fuel, electricity, gas, and heat in wintertime.
- Determine the cause of the flooding, and make repairs or improvements to prevent it from reoccurring.
- Repair the units first, then common areas that the tenant has use of – garage, laundry, stairways, walkways, gym, etc.
Deal with your insurance company:
- Review your policy to see if you have coverage for floods or sewer backup.
- Notify them of a claim as soon as possible.
- Be available for adjuster to come and inspect the property, and coordinate entry to the unit with your tenant.
- Keep receipts for all expenses related to flood – housing the tenant, heaters to dry things out, materials, labour, etc.
- Be prepared for insurer to deny claim initially – don’t give up if you think it’s covered by your policy.
- Consult with a lawyer if there is a dispute about coverage.
Obviously not every case will be caught by what I’ve discussed here, but now you know the broad strokes of what’s expected of you. Good luck with your repairs – hopefully they’re as painless as possible, and you leave a trail of satisfied tenants in your wake. When in doubt about landlord-tenant law, ask a lawyer. I happen to know a guy…