Who covers relocation costs – the tenant or landlord?

If your rental is badly damaged and becomes uninhabitable, you may need to relocate your tenants.

But who covers the relocation costs?

Fire, flood, violent weather, and vandalism…

Sometimes, there are circumstances when, through no fault of the tenant or landlord, a rental property becomes uninhabitable.

When that occurs, there are two main options.

The first is to terminate the lease

Most state and territory residential tenancy legislation allows a lease to be broken, usually immediately and without penalty, in the event the property becomes uninhabitable.

This sees the lease agreement ended and the tenant returning vacant possession to the landlord.

The landlord then re-lets the property once the repairs have been made.

Under the legislation, the landlord is usually not legally obliged to relocate their tenants – their responsibilities end with the termination of the tenancy.

However, a landlord may choose to provide assistance.

The second option is to continue the lease and temporarily relocate tenants

There are times when this is preferable for both tenant and landlord.

This option is usually only considered when the repairs to the property are not expected to take too long.

In this scenario, the lease continues and the tenants move out temporarily.

Once the repairs have been made, the tenants move back in.

Rights and obligations under this scenario are often set out in the legislation under the repairs section.

At EBM RentCover we believe in being open, honest, and transparent.

And the fact is, relocation costs are typically not covered by our landlord insurance policies.

In general, tenancy legislation does not make the landlord responsible for finding or paying for tenant relocation.

In legal speak, the landlord is not liable.

As the landlord has no liability, the insurer also assumes no liability.

If a landlord chooses to help a tenant relocate, it is considered an act of goodwill, not a legal obligation.

That’s why relocation costs are not covered by insurance.

However, it is important to note that if a property is damaged due to an insurable event, and the property is deemed uninhabitable, EBM RentCover may pay out for the loss of rent while the property is vacant and being fixed.

So, while the costs of repairs and potentially loss of rent may be covered by insurance, depending on the policy in place and the terms and conditions of that policy, if a landlord chooses to help tenants to relocate after ending the tenancy or to temporarily relocate, those costs are not.

And, while our policies do not cover relocation, some tenant insurance policies do.

So, it is a good idea to chat with tenants about insurance and encourage them to have a policy in place that protects them from the risks they may face.

With all this being said, we want to offer a few tips for landlords who may choose to help tenants relocate…

Landlords who decide to help tenants relocate as an act of goodwill after the tenancy agreement has ended should consider how they can assist and the limits to this assistance.

Tips: As any costs incurred by the landlord are not covered under insurance, landlords should carefully consider the implications of any financial assistance provided such as refunding rent or paying moving expenses.

When it comes to temporarily relocate tenants, there are questions to answer, things to consider and negotiations to be made with tenants.

Relocating and moving tenants

• Do all the tenants’ possessions need to be moved off the premises?
• If some possessions are staying on-site, does the tenants’ contents insurance still offer cover?
  
  

  Note: Landlord insurance does not cover a tenant’s possessions. Landlords are not liable for the costs to repair or replace tenant possessions unless the damage was caused by the landlord’s negligence.

• Who will be responsible for packing up and transporting the tenants’ possessions?
• Who will pay the moving costs?
• If possessions need to be put into storage, who will pay those costs?

Temporary accommodation

• How long will the tenants need to move out?
• What options are there for accommodation (e.g. hotel, motel, serviced apartment, caravan, holiday house)?
• Who is responsible for finding temporary accommodation?
• Who will pay for the accommodation?
• Who is responsible for paying other related expenses such as meals, transport, and pet accommodation?
• Is the landlord going to waive or reduce the rent while the tenants are not on their property?
  
  

  Note: If a landlord agrees to waive or reduce the rent, any loss in rent is not able to be claimed against their landlord insurance.
  This is not considered a “loss” by insurers – it is simply a business decision made by the landlord for which insurance does not apply.

• What does the legislation say about tenant and landlord rights with respect to rent payments and compensation when tenants need to move out temporarily so that repairs can be carried out? For example, do tenants have the right to stop paying rent from the date they vacate? Or is the landlord is required to compensate the tenant?

Once the landlord and tenant agree on costs and rent payments, they should record what they decide in writing.

If an agreement can’t be reached, it may be possible to seek a ruling from a court or tribunal (subject to state/territory arrangements).

Before terminating a lease due to the property being uninhabitable or temporarily relocating tenants while repairs are carried out, landlords are encouraged to check the applicable residential tenancy legislation to understand the requirements and their obligations.

And, landlords should always check what the financial implications are in assisting tenants to relocate, as there may also be insurance repercussions.

Guest Author: This article was written by the team at EBM RentCover and was originally published here. EBM RentCover is one of Australia’s leading landlord insurance providers, protecting more than 150,000 rental properties across Australia.

About Guest Expert Apart from our regular team of experts, we frequently publish commentary from guest contributors who are authorities in their field.