California Commercial Insurance Broker BLOG

In recent conversation with a commercial property investment client of mine got me thinking about vacant property during these time of decreasing occupancy rates. As a commercial property investor in California, the property owner or the insured is well aware of the hazards that owning property can bring and some of the reasons he carries a commercial insurance policy to protect his investment. That being said, the insured owns a building with 50% occupancy in a downtown area of a metropolitan area. He has had issues with squatters and recently ask if by locking off the second second floor of his commercial building could help him avoid the minimum occupancy clause in his insurance policy. This conversation got me thinking about the other forms of hazard that exist around vacant building and how that would affect both the insured's property and coverages.

It may help to describe a few types of commercial property and then to look at the risks that are present within each type of commercial property and where commercial property coverage would respond. Multifamily/apartment complexes define an property risk that has a very unique set of hazards and will be covered in greater detail in a future blog. Commercial real estate can be divided up into warehouses, industrial, mixed use, office \buildings and complexes, HOA and condo associations, Hotel and motels, Bio-Tech / Med
Data Center, Industrial/Warehouse, Land, Mixed Use, Multi-Family/Investment, Office, R&D, Office/Retail, Retail, as well as vacant buildings. Property management companies also retain much of the responsibility for maintaining various types of commercial real estate and also must be proactive in managing the hazards associated with vacant property. If you are a property owner or manager that needs a property liability and fire quote for your vacant building let us know, we have access to admitted and not admitted markets that accept vacant buildings.

Vacant properties present interesting challenges because they lack the everyday activity that naturally reduces or mitigates many common hazards. One example would be in a cold environment, reducing or turning off the heat to a building leaves pipes subject to freezing and bursting. Draining the internal sprinkler system leaves the building vulnerable to even the smallest fires. Often in California vacant building experience a much greater degree of vandalism and incidents of fire. Even beyond the property hazards, completely vacant buildings can become a liability hazard to the public and local government by creating an attractive nuisance. If a criminal act occurs on the premises the property own could be pulled into litigation due to the negligence of failing to maintain a secure property.

If you find yourself with a vacant property you can due a number of things to mitigate the risk of this undesirable situation. An added benefit of these steps is that they show a potential buyer or tenant that the building owner has good risk management practices in place and takes care of the property.

Action to take on the exterior of your facility:

Building owners and property managers should arrange to have property inspections on a weekly basis. If their is any evidence of forced entry contact the authorities immediately. Remove all excess materials and combustibles from around the building. Trim and maintain vegetation to prevent overgrowth that provided hiding places for those wishing to break into the building. When overgrowth is present it is an indication that the property is not monitored. Remove any containers that might be attractive for dumping trash or hazard waste such as motor oil or chemicals. Check the roof for plant material, vegetation growth, clogged drains, or signs of vandalism. Block parking lot entrances to prevent vehicles and pedestrians from entering the property. Maintain exterior lighting to deter crime and vandalism. Hire a guard service to conduct daily drive by and building observations, especially during the evening and early morning hours.

Building Interior action items for vacant property:

Building owners and property managers should notify local authorities, including police and fire departments, when a building becomes vacant. Take precautions to avoid hazards that could injure people who access the building, such as firefighters, police, security, property management, and even trespassers. Hazards include unprotected floor openings, self-locking doors that could trap individuals , and storage of combustibles, flammable liquids, or materials that could collapse on emergency personnel. Ensure that emergency lighting and emergency exit signs remain powered. Maintain pest control services.

Building system maintenance issues for vacant buildings:

Building owners and managers should continue electric and gas services for alarm and heating purposes. Shut off water in any areas of the facility where it will not be needed. Properly shut down any non-building related equipment or systems and disconnect gas services to the greatest extent possible. For areas protected by a wet pipe sprinkler system, maintain adequate heat to prevent freezing of sprinkler pipes. Protect all exterior openings, including any roof access, with an activated UL listed central station alarm system.

If you have any questions please do not hestitate to contact me:

Labels: Commercial Property Insurance for vacant building