Managing Vacant Property

Vacant properties can require as much attention as occupied premises and the number of vacant properties is likely to increase as demand reduces and companies go into receivership.

Recent figures from KPMG Restructuring predict that corporate insolvencies (administrations and receiverships) will rise dramatically in 2009 reaching 5,000 by the end of the year, well over double the number in 2007.

Property owners, and tenants that no longer occupy their premises, need to actively manage their vacant property to ensure it retains value and does not fall into disrepair. The existing security arrangements and contracts for the premises should be reviewed to ensure that, while overheads are minimised, the building is well maintained and secure. The longer a property remains vacant the more it is open to risks.

As soon as your property becomes vacant you should notify your insurer as this constitutes a material change in occupation and must be declared due to the increase in risk. Most insurance policies will include extra requirements to maintain cover on unoccupied properties as well as increased premiums.

Insurance policies vary but standard conditions will include:

• Accessible openings must be secured and letterboxes sealed.
• Services must be turned off and plumbing drained.
• Rubbish and combustible materials must be removed.
• External doors must be fitted with bolts or a 5 level mortice deadlock.
• The property should be inspected at least weekly by a reputable property specialist and a log kept of all visits.

Making an insurance claim can be problematic if policies become void as a result of owners or tenants failing to comply with any of the insurer’s conditions.  Regular inspections are also a good way to identify potential problems before they occur.  Owners can take pre-emptive action and resolve issues cost-effectively.

If a problem does occur, and it leads to a claim, your position is stronger if you can produce evidence of regular inspections.  Owners should keep records and reports of all inspections as supporting evidence.

Active management of vacant properties can help you retain the value of your investment and will not only prevent you falling foul of insurance requirements but ensure the property is always well presented for viewing purposes.  Being prepared is key to protecting property and with a proactive approach your risks can be greatly reduced.

If your property becomes vacant you should:

• Let your insurer know as soon as possible, even if it is only partly vacant.
• Check the details of your insurance cover carefully and note any changes to the cover.
• Conduct an assessment of the risks to your property.
• Act on any risks identified to protect your investment.
• Arrange regular inspections so any changes to the property condition can be noted promptly.

For further information on Managing Property please contact: susan.cameron@ryden.co.uk