Hurricane Irene is responsible for millions of dollars of property damage and loss of life. Measured against the latter, especially, questions from would-be beach and mountain vacationers concerning their pre-paid vacation rentals might seem rather inconsequential. But if you consider how many vacation rentals are out there -- the popular online rental site HomeAway lists over 260,000 rentals -- the amount of money at stake is impressive. Tenants want to know: Having paid for a weekend or weeks stay at the beach or in the mountains, which they could not use, are they entitled to a full refund?
The legal issue thats involved when a disappointed vacationer asks for a refund is pretty straightforward: When a contract (most states consider leases a form of contract) cannot be honored because the purpose of the deal has become impossible to implement through no fault of either party, what happens to any pre-paid money? The classic situation involves just what happened with Irene: Acts of God, or weather events that either destroy the object of the contract (the house), or make the contract impossible to perform (access roads flooded or closed as a result of the weather).
The weather wasnt the only factor that frustrated vacation rental contracts. Hurricane Irene was literally on the radar of weather experts days before it made landfall. Predictions of its ability to drop huge amounts of rain resulted in prompt warnings by local officials to get out of the storm's way. Voluntary evacuation orders, triggered by declarations of a state of emergency, turned to mandatory orders. Governor Christie of New Jersey initially told residents, "First thing, anyone who has shore rentals or who are planning to go to the shore this weekend, do not go. If your rental starts on Saturday or Sunday, do not go." He soon imposed mandatory evacuations for all of the state's barrier island beach resorts, affecting hundreds of thousands of people.
The New Jersey governor acknowledged that he did not have the ability to arrest people who disobeyed his order. Interestingly, thats the norm in all states -- mandatory orders are not typically enforced beyond strenuous persuasion coupled with offers of assistance. Still, the order had an effect, because it triggered a host of services and measures designed to lessen the populations vulnerability to the storms effects. It also had teeth -- most states make it a misdemeanor to violate the emergency statute that gives the government the power to order evacuations. In North Carolina, a state hard hit by hurricanes, people who must be rescued after ignoring a disaster warning face civil liability for the costs of their rescue (N.C. Stat. Ann § 166-A15.1).
Whether a disappointed vacationer is entitled to a refund depends, in most cases, on what the rental contract has to say. Although many states have statutes that cover this situation when the lease doesnt address it, and general principles of law will kick in when both the contract and state law are silent on the issue, theres usually nothing wrong (or unlawful) with landlords and tenants coming up with their own solutions in the lease. In the majority of cases, a judge will enforce the rule found in the lease.
Rules in the Lease. A comprehensive lease will address the possibility that the landlord wont be able to deliver the rental as promised. A good clause will avoid slippery phrases such as due to the elements (strictly speaking, elements include air, fire, water, and earth -- not the way we generally think of weather events), and Acts of God. Instead, the lease will specify what will happen if the landlord cannot deliver the house through no fault of his or her own. Many clauses provide for a total refund, a partial refund, or no refund at all. When no refund is specified, renters are often urged to purchase travel insurance, which should kick in if a fire, hurricane, or other unforeseen event makes the rental impossible.
State Laws. States sometimes write their own laws, which will apply if the rental contract has not covered this situation. Understandably, states with lots of vacation rentals are the ones likely to have legislated some solutions. For example, North Carolina has a comprehensive Vacation Rental Act (N.C. Stat. Ann § 42A-1 and following). The law directly addresses what will happen when mandatory evacuation orders affect the rental: Tenants are entitled to a refund, but not if they have either refused the landlords or brokers offer of insurance (which would have compensated them for loss of use), or if they purchased insurance that covers the situation. Interestingly, North Carolina does not allow landlords or tenants to vary this rule.
California, which has a robust vacation rental scene, has not passed legislation covering these rentals. This results in a rather harsh rule, following a 1926 case. Unless the rental agreement specifies otherwise, prepaid rent cannot be recovered when the property has been destroyed (Pedro v. Potter, 197 Cal. 751 (1926)).
The Default Rules. In some situations, neither the lease nor state statutes or cases will address the problem of pre-paid rent for a vacation rental that cant be enjoyed. When that happens, a court is likely to look for past similar cases from higher courts and follow the solutions handed down. Most courts will insist that prepaid money be refunded, as long as the event that frustrated the lease was not only beyond the power of the landlord to control, but unforeseen. That last requirement triggers lots of arguments -- are hurricanes during hurricane season truly unforeseen? What about road closures in the mountains in the winter -- when they happen frequently, isnt this a risk that tenants are assuming? The answer is likely to be Yes, especially when the landlord has urged the renter to purchase insurance.