What Landlords Should Do After a Flood
After a disaster, you are often able to start repairing the property and rebuilding lives as soon as the insurance is settled. Floods differ because of how slow moving the disaster itself and the cleanup afterward are. What should you do after a flood? And what should you do, as a landlord, after your rental property floods? The procedures are similar but not quite the same.
Assess the Damage – Once It Is Safe
The first thing you should do upon arrival is turn off power at the breaker box. This prevents anyone from being electrocuted by a downed powerline or electrical cord in contact with the water. Keep the power off until an electrician says it is safe to do so. Turn off the gas, too.
Next is assessing the situation. The amount of work that needs to be done depends on how deep the flood water is or how high it reached. Take lots of pictures of the condition of the exterior and interior of the property. You want photographic evidence that shows how deep the water is or was. Draw a line on the wall, and verify its depth with a tape measure.
Water an inch or so deep means you need to replace the carpet at a minimum. Once the water is more than an inch deep, you’ll have to replace carpets and baseboards at a minimum.
At six inches deep, the appliances are certainly affected. The risers of your cabinets are likely wet but not all the cabinets themselves will be wet. If you’re going to remove the risers, just make sure you don’t put the cabinets down on the wet floor.
At 18 inches deep, the electrical outlets are affected. HVAC systems may be damaged at this point as well. Mud and debris that has floated in will need to be removed.
Water that is two to four feet deep from the floor will require replacing at least the lower level of the sheetrock. The labor costs are lower if you simply replace the bottom sheet of sheetrock instead of trying to cut out and replace the sheet to the level that it was flooded.
When water that is more than four feet deep floods a home, it requires extensive work. Expect to be replacing nearly everything from sheetrock to electrical wiring.
Start Dealing With the Insurance Company
While the flood may be on the news, your insurer doesn’t know your property has flooded—you’ll have to call them. File flood insurance claim as soon as possible; don’t wait because this insurance is first come, first serve. And it will take a while for claims to be processed. The sheer number of people involved in a flood tends to be much larger than if your rental property burns down, slowing the process of getting inspectors out and insurance claims resolved. And that’s aside from the glacial speed of the National Flood Insurance Program when it is involved. It can take months for them to release funds.
Note that while the standard property insurance policy doesn’t cover flooding for a rental property, there may still be damage they cover like wind damage and the literal impact of falling trees.
If you’re struggling with the insurance company, consider hiring a public adjuster. They are particularly useful in assessing damage that isn’t immediately evident after a flood like HVAC equipment that has a shortened life because of exposure to flood damage.
Go ahead and file the insurance claim now even if there is a chance you may not be allowed to rebuild. They could get you an advance to start paying for the costs of drying out the property.
Don’t ask your renters to file a renter’s insurance claim—it doesn’t cover the damage due to flooding. The only exception is if they have flood insurance, but that’s rare. Most renters assume the landlord has flood insurance and that it covers them, too.
If you moved out of a former primary residence and turn it into a rental property and it was legally required to have flood insurance because you previously claimed FEMA aid, you’re obligated to keep up flood insurance. However, the policy has to be updated when you move out and renters move in. And that can change the terms. Talk to the insurance agent to understand the current terms so you don’t assume you have replacement value when you actually have a cash value insurance policy due to it no longer being your primary residence. Information like this is reason enough to consult with an insurance agent, since it may mean you don’t have as much money for the repairs/reconstruction as you thought you would.
Start Drying Things Out
At this point, the goal is to dry out the unit as quickly as possible. Get as much furniture and possessions out of the unit as possible, so that you can start drying things out. Mold starts growing within two days, so time is of the essence. Start the process of drying things out even if you can’t reach your insurance company right now.
This process may be started by your tenants, or they may be waiting for your go-ahead. Avoid throwing out a tenant’s possessions, though it would be wise to provide them with a dumpster or trash bags to do so themselves.
Your insurance company may require you to take action as quickly as possible to mitigate damage. That’s aside from the fact you’ll want to stop the water damage as soon as possible simply to protect the property. The national flood insurance program suggests you to start drying the property out ASAP, as well, because they don’t cover mold damage. But what should you do to start drying out the property?
It begins by removing wet carpet and the underlying pad as soon as possible. Wet-vac the concrete slab to suck up as much water as possible. Cut the sheet rock at the 4’ line if the water went above the baseboards. Move the appliances to allow the baseboards behind the appliances to dry. If you’ve removed the cabinet base, put the cabinets on bricks so that they aren’t left on the still-wet floor. Bring in fans and turn them on. Turn on all the ceiling fans.
Generate Documentation as You Work
Take detailed notes of what you did, such as turning off the power and moving fans into room. Ask the tenant what they’ve done so far and write it down to create a legal record.
Take pictures of what was in the building to prove that it was there before the adjustor arrived. Don’t forget to take pictures of the roof, since a storm that caused massive flooding probably damaged the roof.
Save your receipts. You want receipts whether you have insurance or not, since these costs are a business expense. You can start with the cost of renting fans to dry out the building and renting a dumpster to contain the debris.
Collect samples of the carpets, the carpet pad, the sheetrock and the cabinets to demonstrate the level of damage. You’ll need this evidence for when an insurance adjuster finally reaches the property to look at it.
Determine If You Can Do the Work With Tenants in the Property
Determine if your tenants can remain in the unit. There are benefits of not having them there. If the property is vacant, you can do whatever is necessary to restore the property to rentable condition as quickly as possible. This is likely necessary if the water was more than two feet deep.
If you terminate the lease, then you don’t have to work around the tenant or their belongings to make the repairs. Nor do they have to pay the rent while they’re forced out of the unit while you’re making repairs.
If a tenant needs to move out, terminate the lease per the lease agreement. You have to give them necessary notice; in the state of Texas, necessary notice is five days. You have to return their security deposit and return their rent to the date the property was rendered uninhabitable. Landlords are not legally required to pay for the tenants’ stay in a hotel if they’ve been evacuated due to a flood. Rules regarding paying for them to stay somewhere while you repair/rehab the property depend on your lease. Property insurance probably won’t pay for a landlord paying the tenants’ hotel costs as they stay somewhere else, and it may or may not cover the loss of rental revenue because of the natural disaster.
If someone truly loves the property, you can offer them the first right of refusal once the property is habitable. However, you need to be honest in that you may not know when that will be. And in severe cases, it may not be possible at all.
Gather All the Information Before You Start Major Repairs
Before you start to rebuild, find out if the property has flooded previously (if you don’t already know). If it has flooded repeatedly, you may not be able to insure it after rebuilding yet again—but you may be eligible for a buyout. Or you may be legally required to buy flood insurance as a condition of rebuilding.
Another piece of information to learn before you start rebuilding is whether you have to take steps to protect the property from flooding another time. This could range from modifying grading around a home to installing barriers to altering the plumbing and electrical connections. Or it could mean an order to elevate the home.
You will have to get a permit to replace electrical systems, whether they’re damaged in the flood or being modified to avoid needing to be replaced in the next one. Fortunately, many jurisdictions speed up approval for repairs like this. However, you’ll want to find out what other permissions and reviews are necessary before you start pouring money into repairing the property.
Get initial estimates as to what needs to be repaired or replaced. If repairs are worth more than half the tax appraised value of the property, you may be required to bring the building up to code. That fact alone radically alters how you’d approach the renovation project. If the renovation costs too much, you may want to sell the property as-is to another investor. Or you could rebuild with all the upscale amenities it wasn’t worth putting in the first time.
You’ve documented the severity of the damage. You’ve the taken initial steps to dry out the property. You’ve determined whether or not it is worthwhile to start making repairs, such as whether or not you’d be allowed to repair the property or it costs too much to renovate. Now you need to bring in help to do the actual work. Only hire contractors who have experience (and the expertise) to deal with flood damage. Verify that this same expertise extends down to subcontractors who’ve been brought in to help.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2018 Tamara Wilhite