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Renters' Tips for Displaced Homeowners After a Natural Disaster

It is common for displaced homeowners to rent property while awaiting repairs to their home when a natural disaster like an earthquake, a fire, or a hurricane forces them into the rental market. There are only a few differences between the rental procedure for displaced homeowners and the process followed by other renters. The following tips will guide a homeowner through the process of becoming a temporary renter.

1. Use "Loss of Use" Coverage to Pay for a Rental

One of the most important renters' tips for a displaced homeowner is to take advantage of "loss of use" coverage provided by a homeowner's insurance policy. Loss of use, or "additional living expense" coverage, will pay for the cost of living in another home. A homeowner may use this coverage under the following circumstances:

  • Damage covered under the insurance policy makes the home uninhabitable; or
  • A law enforcement agency or a disaster relief organization ordered the evacuation of the home.

While a home undergoes repairs or rebuilding, loss of use coverage will reimburse the policyholder for living expenses that exceed those that a homeowner would normally incur while living in their home. Covered expenses include temporary housing, the cost of temporary storage and moving, laundry costs, and the cost of some meals. Most policies place limits on benefits by enforcing time constraints or by restricting the maximum reimbursement to a percentage of the coverage amount on the home.

The type of housing the insurance provider will pay for depends on the severity of damage to the home. If it is possible to make repairs quickly, loss of use coverage will pay for a hotel stay. However, if it is impossible to fix the home quickly, the homeowner may use the coverage to pay for a rental. In general, the insurer will pay for a rental that is similar to the home the policyholder lived in.

2. Gather Required Documents

When a widespread natural disaster occurs, prospective tenants often saturate the rental market. Gathering the appropriate documentation will help alleviate delays and increase the chance of moving into a rental quickly. The following are important tips about the documents a homeowner should obtain prior to searching for a rental:

  • Credit report: Although a landlord can obtain a copy of a prospective tenant's credit history through a credit reporting agency, providing a copy will speed up the application process.
  • Proof of employment: Verify employment and income by obtaining a letter from an employer.
  • Proof of income: If self-employed, establish proof of income with the most recent tax return.
  • Proof of "loss of use" proceeds: Verify housing reimbursement from an insurance provider by giving the landlord a letter from the insurer about the circumstances of the homeowner's situation and provide a copy of the insurance policy.

3. Don't Fall Prey to Rent Gouging

Price gouging after a natural disaster is illegal in many states. Laws prevent service providers from unreasonable price increases on certain services and supplies, including housing, medical supplies, gas, building supplies, repair services, and transportation. In California, for example, it is illegal to engage in rent gouging. California defines rent gouging as an increase in the price of a rental unit by more than 10 percent of its price before the disaster. A violator is subject to a fine of up to $10,000, a year in jail, or both. A homeowner can report rent gouging to a state's attorney general or to the local prosecutor's office.

4. Understand the Tenant Screening Process

A landlord must base the selection of a tenant on objective criteria. For example, a landlord must require all tenants to provide the same information. A landlord may choose a tenant by considering such factors as credit history, income, and references. The federal Fair Housing Act and the Fair Housing Amendments Act prohibits the selection of tenants based on race or color, national origin, religion, disability or handicap, sex, and familial status.

5. Decide Whether to Sign a Lease or a Rental Agreement

Because a displaced homeowner is only seeking temporary housing, it is important to understand the difference between a rental agreement and a lease. The anticipated length of the stay will help determine whether a rental agreement or a lease is most appropriate. It is important to avoid oral agreements since the terms and conditions agreed upon will be difficult to prove if problems arise.

If a displaced homeowner expects to return home in a few months, entering into a rental agreement may be best. A rental agreement is a contract for a short-term tenancy. Rental agreements are more flexible than leases because the tenant or the landlord can easily end the tenancy by giving 30-days notice for a month-to-month agreement. If neither party ends the tenancy, the agreement automatically renews with the same terms and conditions each month. The landlord, however, can change the rental terms by giving appropriate notice to the tenant.

If a homeowner will rent for a year or more, a lease agreement may be the best option. A lease agreement is a contract for a long-term tenancy that usually lasts for at least six months or a year. Unlike a rental agreement, the terms and conditions of tenancy remain in effect until the lease term expires or until the tenant agrees to the changes in writing. This means that the landlord cannot increase the rent during the term of the lease and the renter will remain responsible for the balance of the rent even if the rental is vacated prior to the expiration of the lease.

6. Obtain Money for the Security Deposit

It is necessary to pay a security deposit when moving into a rental. State law allows landlords to collect a deposit from renters to pay for damage to the property and unpaid rent. In many states, a landlord cannot charge more than one to two times the rent for a security deposit. After the tenant moves out, a landlord may use the security deposit to make repairs that exceed ordinary wear and tear. Within the time specified by state law, the landlord must return the remaining security deposit to the tenant.

7. Obtain Renters' Insurance

Similar to homeowner's insurance, a renter can obtain renters' insurance to protect against loss while living in a rental. Renters' insurance provides reimbursement up to the maximum amount of the insurance policy.

8. Consider Speaking With a Lawyer

If your insurance denies coverage for your temporary rental, or you face challenges with your landlord, speak with a lawyer. 

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