Illinois Leasing Agent Practice Exam

A fire completely destroyed an apartment building. What happens to the leases of the current residents?

1. They are preserved until reconstruction

2. Canceled/terminated

3. They become month-to-month agreements

4. Residents can claim damages against the landlord

The correct answer is: Canceled/terminated

When a fire completely destroys an apartment building, the leases of the current residents are typically canceled or terminated. This is based on the principle of “frustration of purpose,” which states that if an essential condition of a contract is no longer possible—such as living in a habitable apartment due to its destruction—the contract can be rendered void. When the building is no longer safe for habitation and cannot be restored for a period of time, residents cannot fulfill their obligations under the lease to occupy the property. As a result, the legal relationship between the landlord and tenants is effectively severed, freeing both parties from their responsibilities under the lease agreement. The other options do not apply in this scenario. For instance, preserving the leases until reconstruction is not feasible since residents cannot live in a destroyed building. Similarly, leases transitioning to month-to-month agreements would not make sense, as the foundational conditions of the lease no longer exist. Lastly, while residents can seek damages against the landlord under certain circumstances, this does not pertain to the status of the leases immediately following the destruction of the property itself.