Who is responsible to repair damage following a natural disaster?

Untitled design

The recent floods in South-East QLD and NSW have caused devastation to homes and businesses. For Landlords and Tenants, thoughts will turn to what obligations are required by the parties if the building has been damaged with a view to have tenants back up and running as soon as possible. The answer will largely depend on the terms of the lease, however, in our experience there are some common clauses that can be used as a guide to help determine who is responsible for the reinstatement of the premises following a significant damage event where neither party is technically at fault.

1. Rent Abatement

In most cases, a lease will contain a clause whereby the tenant’s obligation to pay rent and other money under the lease (such as outgoings) is abated (either partially or completely) while the Premises are inaccessible or incapable of being occupied.

2. Reinstatement

The Lease may contain specific obligations on the Landlord to reinstate the Premises within a certain timeframe, failing which the Tenant may terminate the Lease. Typically, however, the Landlord will not be obliged to return the premises to its previous state and they may be permitted to make changes to the premises as may be necessary. This means that there is no promise that the reinstated product is identical to the Premises that the tenant initially signed up for.

3. Termination

In circumstances where the damage is so severe that reinstatement is not viable, some leases allow the Landlord to terminate the Lease. Generally, there will not be damages for either party should they elect to terminate as a result of a damage event.

What to do if your premises has been damaged?

Not all leases will contain provisions addressing damage and destruction and some may vary from the general comments we have made in this article. If your premises has been damaged it is important to review the terms and conditions of your lease to determine your rights under the lease and the respective parties’ obligations with respect to insurance and repair.

Our property team can help guide you through this process and provide advice about your rights in these situations. It is important that this review is conducted relatively quickly after an event as some clauses may contain strict notice periods.

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