With California in a perpetual state of emergency, are rental housing providers prepared if disaster strikes?
With California in a perpetual state of emergency from power outages, severe weather events, and other unforeseen crises, being a landlord is more than collecting rent and maintaining the property. Housing providers need to anticipate and plan for disasters to ensure the safety of tenants and protect their real estate investments. Developing effective emergency plans requires a comprehensive approach and an understanding of the law, including bans on price gouging. We lay the groundwork here.
What, exactly, is an emergency anyway?
Identifying risks such as an earthquake, a flood, a raging wildfire, or an impending storm is often easy. In other cases, a declared state of emergency may be unknown to rental housing providers. An oil spill in the Pacific Ocean, a bird flu, an infection spreading throughout the cattle population, or a bridge collapse, for example. These events can nonetheless trigger price-gouging bans that cap rent increases at no more than 10% above pre-emergency levels, and this includes rent at unit turnover.
The Governor’s Office of Emergency Services lists active emergency proclamations. Additionally, housing providers can sign up for emergency alerts through CalAlerts.org.
While tenants should be encouraged to keep abreast of current and future disasters through various apps, landlords need to be the eyes and ears of their property. Rather than relying on renters to anticipate disasters, we strongly recommend that housing providers maintain an updated list of contact information of all tenants and establish a method for emergency alerts via email, text, “robo calls,” notice boards, etc.
Accessing building vulnerabilities
With a rash of lawsuits alleging substandard conditions and tenants using habitability issues as a defense to an eviction action, we have always advised housing providers to have a consistent maintenance and inspection routine to identify any potential hazards and vulnerabilities in their properties. This is also critically important in emergency preparedness.
If there are any complaints or concerns that the building is out of compliance with local building and fire codes, landlords should respond to them without delay.
Reviewing insurance coverage for disasters, liability, and loss of rental income
This goes hand and hand with the need for preventative maintenance, proactive inspections, and addressing habitability issues in the building. Insurance companies have left California in droves because of the risks attendant to doing business in a state with so many calamities.
There are still insurance carriers out there that will write policies for multifamily properties, but they are very cautious about which policies they write, with a hyper-focus on the condition of the property. It used to be that insurance companies had to win over consumers and earn their business. This balance of power has changed. Consumers now have to make a sales pitch to the insurance company and convince the insurance company to insure their property. In other words, the insurance company does not have to “sell” the consumer; the consumer has to sell the insurance company.
Housing providers should pay special attention to roofing and electrical systems and remediate any issues to make the case that there are no potential weaknesses or vulnerabilities.
Our go-to insurance professional, Jude Winterhalter of Jackson Square Insurance Associates says that many property owners are amiss in believing that “extended replacement” coverage will save their bacon. These add-ons extend coverage from 25-50% of the cost to repair or rebuild a structure in a covered loss when the damage exceeds the homeowner's policy, but this may not be adequate given the rising costs of materials and labor. He says that many property owners do the math incorrectly and mistakenly think that the extended replacement coverage will make them whole.
Better to increase the main policy than to rely on this extra cushion that does not factor in skyrocketing costs.
Identifying escape routes
Tenants should be aware of all methods of egress. By walking through the unit, the landlord can point out at least two escape routes from each room. Consider installing emergency signage and a diagram to guide tenants during evacuations. It may also be prudent to designate someone who can assume greater responsibilities in the event of an emergency such a shutting off water, gas, and electricity to the property.
Once safely out of the building, there may be an ideal meeting place for tenants to assemble and consider establishing a post-disaster check-in process to access tenant safety, with a heightened concern for elderly, disabled, and other vulnerable tenants with a plan to address their specific needs.
Preserving important information
Housing providers should understand the importance of essential documents and information to get their business up and running if disaster strikes. Back these up in the cloud.
Post-emergency plans
Once everyone is safe and accounted for, landlords have a host of responsibilities that include assessing and documenting damage for insurance claims and notifying tenants of expected repairs and timelines. If units become uninhabitable, housing providers are tasked with coordinating temporary housing.
If there is a power outage, backup electrical generators can be a valuable component of your emergency preparedness plan. Be aware that while generators can turn the lights back on, keep appliances running, and power essential equipment and devices, they can also be extremely dangerous if used incorrectly and can put tenants and the property at further risk. Some precautionary advice can be found in this PDF.
