In this edition of FAST Facts, vacant property management experts SitexOrbis’s managing director Layton Tamberlin explains how to manage the risks presented by vacant properties, with a focus on complying with a property’s insurance requirements
WHAT ARE THE RISKS?
Vacant property can easily become a liability rather than an asset if not properly managed. Landlords with vacant properties risk losing significant rental income, not to mention their property being a target for metal thieves, squatters, vandals, arson, graffiti and fly-tipping. According to insurance company Aviva, £2bn of damage is done to property in the UK through vandalism and arson, with 25 per cent of this relating to empty properties. Theft of electrical and copper pipes, and radiators, are the fastest-growing insurance claim, having replaced arson claims in the past six months.
Your insurance premiums will also likely be affected. And if the property is broken into and vandalised, you may be faced with a substantial repair bill.
SURELY THE FAULT LAYS WITH THE INTRUDER?
This may be so, but a landlord’s statutory obligations and Duty of Care remain, even when a property is vacant – empty buildings are covered under the Defective Premises Act and Occupiers Liability Act – and failure can prove costly. Your organisation could face prosecution if a trespasser injuring themselves on your premises. One trespasser injured in a vacant commercial property received almost £600,000 in compensation.
WHAT’S THE VACANT PROPERTY SITUATION LIKE AT THE MACRO LEVEL?
From offices, warehousing and retail units to houses and pubs, there is plenty of vacant property in the UK. Retail store vacancy rates across the country have increased from 5.4 per cent in December 2008 to 14.1 per cent in March 2013, a rise of 161 per cent. Knight Frank says the vacancy rate for offices in central London was just under 8 per cent for the first quarter of 2013, about 1.4m sq ft. Across England, 710,000 homes are currently empty. And it’s not only economic conditions that are driving up the number of vacant properties. Trends in technology, behaviour and patterns of consumption are all contributing factors.
AM I RISK FREE IF I’M INSURED?
Failing to tell your insurance firm that your property has or is to become vacant puts you in breach of your “change of occupancy clause”, and you may not be covered in the event of a problem. And even then, you will likely have to conduct regular inspections with a full audit trail to remain compliant with your insurance policy. Requirements vary depending on the insurer so it’s vital to know what’s required of you to remain compliant and covered. Property insurers continue to have a poor experience with empty buildings and tend to apply higher rates, reduced cover (for example for perils and/ or basis of settlement), higher excesses, and at least an annual review (sometimes three monthly).
SO HOW DO I MANAGE THE RISKS?
Keeping empty buildings secure and preventing intruders is cheaper and easier than dealing with problems after they occur. A big part of this is managing the closure of a recently vacated property then keeping up appearances. The following steps should be taken:
- Inform your insurer of any changes. Regular inspections with a full audit trail are often necessary to remain compliant.
- Carry out a comprehensive risk assessment looking at how intruders might access the property. Check for risks from fire and water damage, such as through freezing pipes as the seasons change. Turn off the water supply at the main stop valve.
- Ensure you are complying with your insurer’s requirements by adequately securing the premises. You do not have to make your property as secure as Fort Knox, but you must have strong enough measures in place to deter an intruder. Each property is different, and will need a mix of security measures depending on its location and building type. The most popular security measures for empty properties include: mains-fed alarms, CCTV, manned guarding and security screens/ boarding. It is also important to understand the insurer’s vacant policy. They will have specific measures that will need to be followed, and may have types of approved equipment, such as alarm systems, which must be used.
- Remove items of value, even if the building will only be empty for a short time. If the building will likely remain empty for an extended period then you should remove all waste and any fixtures that are combustible such as furniture and floor coverings.
- For large commercial buildings, inform the fire and rescue department at the local fire brigade headquarters about access issues, including security measures and keyholders in case of a fire or an arson attempt. Contact you local police station as well.
- Keep up appearances by not advertising the fact that the property is vacant. If the property has a glass front door, then a large pile of post behind the door is a clear sign that nobody has been in and checked the property for a while. Keep the building and its surrounding clean and tidy, and if waste is dumped or graffiti artists target the area, clean up the damage quickly to prevent the problem escalating. Carrying out regular inspections of your empty buildings is essential not just to meet insurer’s requirements but also to prevent petty instances of graffiti, arson and other damage escalating.