Once again, flooding has affected large parts of the country this winter, devastating homes and businesses, ruining the festive period for many and leaving a large clean-up bill. As the flood waters recede the key question for those who own or occupy affected properties is who is responsible for fixing the damage?
For leased properties the starting point should be the lease document and in particular the insurance clause. Landlords and tenants will need to ascertain whether flood damage was an insured risk and, if so, who was responsible for maintaining insurance cover. That party should claim under the policy and use the proceeds to repair the damage. Where flood damage is not an insured risk the traditional starting position has been that the tenant is responsible for reinstating the property.
However, it is now becoming increasingly common for landlords to take the risk of damage to property by an uninsured cause and for such damage to be treated in the same way as damage by insured risks. Where uninsured damage occurs, the parties may have agreed an automatic rent suspension for a fixed period, allowing time for the reinstatement of the property and reflecting the interruption caused to a tenant’s business and income. Alternatively or additionally, the parties may have agreed a mutual break clause if, following uninsured damage, the property is not reinstated within a fixed period. This position is supported by the 2007 Lease Code and is becoming increasingly commonplace.