Many of us may have bought a place of a few hundred thousand ringgit and rented it out for a few thousand ringgit every month. Ever wondered what happens if the unit was damaged by fire? I was also wondering about this topic when my good friend who’s a down-to-earth and knowledgeable lawyer Alfred Chong said he will write an easy to understand article for everyone’s benefit. There’s no need to have super high proficiency with English to understand his article below. Enjoy reading and learning!
What happens to your rental property damaged by fire?
Fire breakouts can occur unexpectedly due to many reasons including but not limited to spark, gas leakages, appliance or wiring failure, overloading electrical outlets/extension cords, faulty electrical outlets and devices.
The student hostel damaged by fire in Penang on 31 January 2018 and the fire outbreak at the Employees Provident Fund building along the Federal Highway at Petaling Jaya, Selangor on 14 February 2018 respectively were local incidents which were reported earlier this year.
Property owners may be overwhelmed after the fire and be unclear of the steps involved to restore the property damaged by fire and/or to reclaim their expenses and losses. Before any such of a fire breakout, the author have listed out an action plan below:-
i. Determine the cause of the fire.
After the breakout, it is necessary to have a frank and honest discussion with the tenant to determine the details leading to the fire and/or anything peculiar occurrence before the fire. After hearing the tenant’s version of the fire breakout, it is advisable to fact- check the same later with the fire department. The fire department will produce their own report after conducting an investigation for the cause of the fire breakout. It may be possible that the tenant deliberately withold or try to cover-up the cause of the fire breakout to escape liabilities later on.
ii. Inspect the extent of damages and destruction to the fire-damaged property
It is necessary to obtain clearance from the fire department to enter and inspect the property. If clearance is obtained, it is time to record the damages and destruction caused by the fire breakout through taking pictures and inventory for the structural damages to the property together with the fixtures and fittings damaged (especially if the property was partially or fully furnished before being let out). It is prudent to specify the makes and models of the appliances, equipment and other fixtures and fittings damaged by the fire breakout for insurance purpose and subsequent legal actions (if any).
iii. Restricting access to the fire-damaged property
Before the repair and restoration of the property, it may be necessary to board up or seal any point of access or entry to the fire-damaged property to prevent trespassers from entering the property and further damaging the property or end up being injured leading to legal claims by third party later on. If the property is landed, the owner may consider building up a temporary fence to restrict access.
iv. Make appointments for inspection of the fire-damaged property
it is important to get the property back to habitable condition immediately. As such, it is prudent to set up appointments with fire-restoration companies to get quotations for the costs of repair and restoration. Confirm whether the fire-restoration companies have
been approved by the insurance company at this stage for the purpose of the insurance claim. Damage caused by fire is different from normal property damage as it involves structural damage that affects the entire building. As such, it is advisable to engage a professional after a fire outbreak.
v. Proceed to apply for Insurance (if applicable)
The owner should contact the insurance agent immediately to start processing the claim with the insurance company which can take some time. The owner should provide as much details as possible and cooperate fully to shorten the insurance claim process.
The insurance companies will conduct their own investigation as to the cause of the fire and the extent of the damage and destruction to the Property. The costs of repairing and restoring the fire damaged property up to the insured amount would normally be approved by the insurance company provided that owner and/or its tenants have not done anything or failed to take certain actions which may result in the insurance against loss or damage by fire becoming void or voidable.
vi. Legal liabilities
During the period after the fire breakout, the property owner is responsible to restore and rebuild the property to habitable condition. After the discussion with the tenant and obtaining the fire department’s report, the cause of the fire will be determined. If the fire is caused by the tenant or a third party, the owner should consult a lawyer to advise on the following:- a. whether the tenant or party responsible is obligated to reimburse the owner for
the restoration of the property; b. whether the tenant or party responsible is obligated to pay for increase in the the
rates of premium payable by the owner to the insurance company; c. whether the subtenant and/or the tenant’s assignee caused the fire. If so, it is necessary to determine whether any clause in the tenancy agreement restrict the tenants from subletting and/or assigning their rights for the use of the fire damaged property (if any); d. whether the tenant is required to pay rental after the fire breakout and the time frame for the completion of the repair and restoration of the fire damaged property (if any). e. Whether the tenant have the rights to terminate the tenancy agreement upon the occurrence of a fire breakout and/or if the fire damaged property is not repaired and restored within a certain time frame.
Property owners also need to determine the following:-
i. Whether the property is still under mortgage. If so, the borrower is obligated to
notify and update the Bank of the occurrence of the fire breakout and the restoration steps taken to restore the property; ii. Whether the fire damaged property is rented out for residential and/or commercial purposes. If the tenant had used the property to do business outside the knowledge of the owner in breach of the tenancy agreement which subsequently led to the fire breakout, the landlord will be entitled to claim from the tenant; iii. Whether the tenant is liable for reimbursing the owner for the repairs and restoration if the tenant or its assignee or its sub-tenants or its workers or agents or permitted third party was directily or indirectly responsible for the fire breakout? iv. Whether there was any loss of life? This will also legal claims by third party as
well. v. Whether the fire spread to the neighbouring property or units. In such scenario,
there may arise a legal claim against the owner and the tenant depending on the cause of the fire.
vi. Commence repair and restoration work and obtain certification
It is important to begin repairing and restoring the property to habitable condition as soon as possible. Once done, it will take time to apply for certificate for purpose of fitness for occupancy from the relevant authorities
Dealing with the aftermath of rental property damaged by fire will take up a lot of your time, effort and expenses. The longer the property stay unrepaired, the longer the property is not making profit for you. Hopefully, no readers would require to use the aforesaid action plan.
Disclaimer : The views and opinions of the article above are those of the author, Alfred Chong from Messrs A. Chong & Co.,and does not neccesarily reflect the position and policy of the publisher.
Feel free to engage him at his FB page here. He speaks in property events too. Catch him one of these days and I am sure you will learn a lot!
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