The office vacancy rate is 20.1% in the U.S., according to Moody’s. That’s a 30-year high, with more than 900 million square feet of office space empty — enough to fill New York City’s One World Trade Center 300 times.
When buildings lack occupants, they become susceptible to a variety of problems. And if your building is vacant, you may have trouble getting your claim paid in case of damage.
Buildings that are more than 69% vacant for more than 60 days lose some important insurance coverage. The standard commercial property insurance policy reduces loss payments by 15% for most causes of loss and does not cover others at all, including vandalism, water damage, glass breakage and theft.
In some cases, the insurer will void coverage for the property after the 60th day if you do not notify them. And even if you do notify the carrier, they may still reserve the right to cancel that building from the policy and provide a return premium.
There are approximately 31,000 fires in vacant buildings annually, resulting in dozens of deaths, hundreds of firefighter injuries — and an average $1 billion in property damage.
Vacant buildings receive little or no maintenance, attention or security. This can lead to problems such as:
- With no security on the premises, the building becomes a target for vandals. Vacant buildings frequently wind up with broken windows and graffiti-covered walls.
- Fixtures and materials inside the building, such as copper piping, may attract thieves.
- Vacant buildings can become convenient hangouts for young people or shelters for homeless people; they also can become centers of criminal activity, such as drug dealing and use.
- Trespassers smoking on the premises, decayed wiring, arson and production of illegal drugs like methamphetamines may cause fires in vacant buildings. In addition, automatic sprinkler systems may be shut off, meaning they won’t engage if a fire starts. A lack of security prevents early detection of fires.
- Toxic substances remaining on the premises may leak and contaminate soil and groundwater.
What commercial property owners can do
Owners of vacant properties can take the following steps to prevent these problems or make them less likely:
- Visit the property at least weekly, or hire a property management company to do so.
- Clear the exterior of the building of scrap wood, paper, cardboard and brush.
- Remove any toxic substances that could contaminate the area or harm police or firefighters.
- Maintain sidewalks and parking areas so they are in good condition, and clear them of snow and ice during winter.
- Erect obstacles to keep vehicles and pedestrians out of the parking areas.
- Hire security guards to watch the building at night and have exterior lighting turned on.
- Maintain the heat or drain the plumbing system to keep pipes from bursting, but maintain at least a minimum temperature in areas protected by automatic sprinkler systems.
- Maintain electricity to emergency lighting and exit signs.
- Shut off utilities, except where necessary to power desired lighting and alarm systems.
- Maintain fire detection systems and link them to a central station monitoring service.
Your insurance
If you have a building that is 70% or more vacant, there is an endorsement available that waives the vacancy clause. If this is the case, you will need to specifically request it from the insurance carrier.
The insurer will place conditions on what must be maintained to continue adequate insurance, such as:
- Heat,
- Lighting,
- Electricity,
- Alarms,
- Sprinkler system, and
- Security systems.
Some carriers may also request frequent visits by a contracted guard service.
For an additional premium, you may be able to purchase vacancy permit coverage, which reinstates some or all of this coverage for a specific period of time.
A vacant building is never a good situation, but with the proper precautions, you can maintain its value and keep it secure until new tenants move in. If you have questions about your coverage, call us.
Or Get a free Vacant Buildings Insurance quote online today!
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