Natural Disasters such as floods, earthquakes, bushfires, tsunamis, and storms can have a devastating effect on a community; we have all seen this recently with the flooding in Queensland and throughout Australia. But how do property managers cope with the fall-out from these disasters? Michael Hughes of LJ Hooker Hamilton, was generous enough to give us a first-hand account of his experience from back in 2007.
When a natural disaster occurs, the loss of a basic necessity – housing – leaves tenants in a stressful state, and property managers need to deal with this front on. It’s often not just about the disaster itself, it’s about how you cope during this stressful time.
I experienced the fallout of a natural disaster first hand when the Pasha Bulker ran aground on Nobby’s Reef in Newcastle on the 8th of June 2007. Along with the Pasha Bulker came huge winds and heavy downpours of rain. This lead to localised flooding in inner-city Newcastle and surrounding suburbs. There were houses that went underwater in places that we would never have imagined in our wildest dreams.
Obviously, the fallout from a natural disaster creates an extremely busy period, but if you are ever faced with this situation, you need to remember that there is a light at the end of the tunnel, plus a few opportunities along the way to differentiate yourself from the competition. In the case of my experience, it took 18 months for the final property affected was habitable and back on the rent list.
Looking back on this experience it is possible to create a list of each stage of what a property manager goes through during a natural disaster and also show how to deal with the problems that arise in a pro-active manner.
INITIAL RESPONSE
During this stage it’s about answering phone calls and noting all the problems that have happened and treat each person’s call as important. We had calls that people’s homes had gone under water and they had lost everything, to television aerials being blown over and our tenant not being able to watch the disaster on television. All repairs are important to each tenant and they all need to be attended to in a timely fashion.
If tenants reported a possible life threatening problem such as a tree overhanging a house or roof blown off we recommended that the tenant contact the SES on 132 500. They are equipped to help people with these types of problems either by cutting the tree limb that is overhanging the house or putting a tarp over the home to protect peoples belongs. They will create a short-term fix but the problem will still need to be fixed down the track.
At this stage you also need to get out there and inspect as many damaged properties as possible, photograph the damage and then notify the landlords, starting from the most affected property to least affected.
It is also very important to make the decision that a property is un-tenantable and end the lease. If a tenant tries to remain in the property while repair work is carried out they will receive a reduced rent. The landlord on the other hand will not be compensated through their insurance unless the lease is ended, its probably best that if a property is un-habitable, that the tenant does not remain in the property. This way the insurance company will pay the landlord the same as their full rent until the repairs are completed.
DAMAGE CONTROL
In this stage you are aware of the major problems and properties that can no longer be lived in but it is important that you take pro-active action and write to every tenant asking them to respond to any damage that has happened to their home so that all repairs can be tracked. The response from the tenant needs to be in written form, fax, letter or email. We created an excel spreadsheet to track that a response had come back as well as follow up where all repairs were up to. At this stage major repairs were taken over by the insurance companies and our office was left with the minor repairs, such as roof leaks, fallen trees, fallen fences and flooding to outside buildings like garages.
So that we could track the progress of repairs we faxed off to all our tradespeople every week a list of outstanding repairs from the storms asking them to report back. Fortunately, they were all really good at responding and repairs were dealt with in a timely fashion. We were also able to keep both the landlord and tenant up to date with how various repair jobs were progressing.
One other thing that you need to be aware of is the arrival of “out of town” trades people. There were a lot that arrived with the intention of making “quick money” from insurance claims and then disappearing back to where they came from once the work was completed and they were paid. However, this also means that making a warranty claim against their work would be very difficult. We were careful to ensure that as much work as possible, therefore, was given to local tradies.
In order to ensure that landlords were protected from insurance companies not paying out we also offered the services of a Clerk of Works. He would go into properties and do a report similar to a pre-purchase building inspection. The landlord could then take that report back to the insurance companies and they would use that as their scope of works to enable the negotiation of a payout figure direct with the landlord.
TENANT “OVERLOAD”
This overlapped the damage control stage. We had a large number of tenants who were actually homeless and needed a new home. At the same time, we also had homeowners who were pushed out of their home due to the floods. This put a massive amount of pressure on an already tight rental market. The positive for landlords that were not affected was that they could increase their rents considerably. For homeowners that were forced out of their homes, the insurance companies covered their rent and subsequently they offered over the asking price to secure a property to live in while their home was repaired.
FOLLOW UP! FOLLOW UP!
While we were following up on repairs and informing landlords and tenants of the status of these, we also had to stay on top of tenants who had to move out of properties. The insurance companies would not commence work until all the tenants “destroyed” possessions were removed. So we had to chase up tenants to remove their old furniture from the property so that the insurance company could commence their work. Fortunately, the local council allowed affected people to put out their damaged furniture onto the footpath and they would take it away free of charge. This service only lasted two weeks and after that the tenants had to remove the goods themselves.
This follow up was the crucial step as nothing would happen unless we made contact with the past tenant, the insurance company or the tradesperson. There was one property that took 18 months to come back onto the available rental list due to the slowness of the insurance company in commencing the repairs.
OPPORTUNITIES
Despite all the extra work that was created, we were also able to see business opportunities from the floods. We were able to increase our management income due to rent rises as a result of the increased number of people looking for properties.
As I previously mentioned, there were many homeowners who were forced into the rental market. We immediately had new contacts that we could add to our database and build a professional relationship with them. We have had some of these people sell their home since the storm and we became their agent of choice, I believe, due to our professionalism in handling the natural disaster.
Private landlords were also quick to hand their properties over once the repairs were completed. It was evident that they really would have appreciated the assistance of an agent during the repair process of their investment property and did not want to have to deal with the repair process caused by a disaster again.
Our office was also able to acquire “mismanaged” properties. These are properties where the current managing agent handed the keys back to the landlord and said, “once it is fixed bring it back and we will lease it for you again”. We were able to reach these investors by advertising in the local paper offering help with their storm damage. This included noting the Clerk of Works, weekly update reports and personalised service. Again, this created extra work for our office but it also grew our number of managements considerably.
Once properties were repaired and ready to lease again they were like brand new homes. This meant that the rents the owners received were considerably higher than prior to the floods coming through. Additionally, they received rental income from the insurance company while the work was completed.
IN CONCLUSION
To bring it all together there are some other important lessons that we learnt from the Pasha Bulker Storms. They are:
- Always have an offsite back up. Had our office been flooded we would have been able to set up computers at another site as we had an offsite back up of our trust account data. Having an offsite backup ensures minimal downtime.
- Follow up, follow up, follow up! By following up with tradespeople and tenants we ensured that work was completed in a timely fashion. This was so important in ensuring that we could keep landlords and tenants up to date with repairs.
- Constant communication: Even if a job is not completed, keeping people updated with progress, or lack of, was crucial. If you are able to report to a landlord or tenant where the repair is up to and what follow up you have actioned they will appreciate your openness.
- Stay positive and look for opportunities. No question, it’s hard work to deal with a natural disaster, but there are also opportunities for the people who do it better than others. It may even lead to new business if you can demonstrate that you are a safe pair of hands.
- Finally, do not fall into the trap of thinking “it will never happen to me”. As we have seen recently, Australia is suffering more and more natural disasters and they are happening everywhere. If you are unlucky enough to have to deal with a natural disaster be aware that the problems will eventually be fixed and things will get back to normal; until then – stick with it, and do the best job you possibly can.
Editor’s Note: In 2021, we suggest Tip 1. above is replaced with ensuring you are cloud-enabled. And today, faxes might be replaced with email. Of course, check the latest legislation in your state as well as your insurance policies.
