Praise be to Allah.
If someone rents out a house and it is destroyed, the rental contract is annulled for the remaining period, but rent must be paid for the past as agreed.
In al-Mawsu‘ah al-Fiqhiyyah (7/26) it says: The jurists are agreed that if the rented item is destroyed, then the rental contract is annulled, such as if a specific mount dies or a rented house collapses. End quote.
It says in ar-Rawd al-Murbi‘ (p. 414): The rental contract is annulled if the rented item is destroyed, such as a mount or slave who dies, because the benefit of it is lost entirely.
If the destruction occurs within the rental period, then what remains is annulled but the past rent should be paid. End quote.
So if the tenant had lived in the house for two months out of that year, this is one sixth of the rental period, so one sixth of the rent should be paid, which is fifty dollars. And you must return the remaining amount to his heirs.
And Allah knows best.
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