Although we might use the terms ‘vacant’ and ‘unoccupied’ interchangeably, they are not the same from an insurance perspective – and you need to know the difference if you own or manage any empty building! In this article we look at the difference between an unoccupied property and a vacant property for landlords and insurance providers, why insurance for empty commercial properties is so complicated and the security steps you need to take to maintain insurance compliance for those empty premises.
Rental properties, both commercial and private, will inevitably be empty between tenancies. Still, you need to consider the furnishings, access and condition of the building to understand what category your asset falls into.
What is an Unoccupied Property?
An unoccupied residential home is simply one where nobody is living at that moment in time. Perhaps you own a holiday property, and you are between visits, or you’ve inherited a home and haven’t yet decided what to do with it. Both constitute an unoccupied property – it can be fully furnished, temporarily unused, or empty because you’re travelling, as a few examples.
You may need to consider your buildings and contents insurance if you have a home that will be unoccupied for more than 30 days, such as planning a hospital stay that is expected to last a few weeks.
Landlords may also have unoccupied properties where the building is not categorised as vacant. Student accommodation often falls into this group since the rental could be empty outside term time.
What is a Vacant Property?
A vacant property is a different consideration and is entirely empty, without personal possessions or people living there. You can read more about the definition of vacant properties here.
Unfurnished rental homes between tenants can be deemed vacant. However, your existing insurance may cover you for a specific period between one tenancy and another, so it’s worth checking your policy.
Examples of vacant property scenarios include:
- Empty homes waiting to be sold.
- New builds that do not yet have a tenant.
- Commercial properties that have been cleared.
- Unused warehouse, storage or studio spaces.
Business premises are a little trickier because the building will normally be treated as vacant unless a proportion remains in use.
If you manage a complex with several units, and 31% of the total floor space is occupied, then you may be able to demonstrate that the property has unoccupied rental units but isn’t, in fact, vacant. In that case, the trade carried out in the rest of the building needs to match the intended property use.
Differentiating Between an Unoccupied and a Vacant Property
Exact conditions vary between insurers, but they usually want to see a few basic appliances and furnishings in a property to consider it unoccupied rather than vacant.
That might include:
- A bed
- Cooking equipment
We recommend speaking to your insurance provider if you have doubts about whether they will cover your building for loss or damage because requirements depend on the company you use. Usually, if the building is unoccupied for 30 days or more, it will be an exclusion. Still, some insurance policies have a much shorter coverage period, and others will protect your building for longer.
Why is Insurance for Empty Commercial Properties so Complex?
There is a market for empty property insurance, but it’s much harder to come by if you have vacant business premises. Although a commercial rental unit will likely have gaps between tenants, unoccupied commercial insurance is very limited and tends to carry strict requirements for security to remain valid. Empty commercial buildings are not an easy prospect for an insurer, given the increased risk levels, and it can be hard to secure a policy.
Standard buildings insurance for a business premise normally lasts for 60 days as a maximum from the first day of vacancy, and after that, it will not pay out for water leaks, theft, damage or vandalism.
You may also find that if you have a commercial policy that includes vacant property insurance, the payable values drop by 15%. If you lose £10,000 of fixtures following a break-in, your provider may pay you £8,500, minus any excesses.
The Importance of Understanding Vacant vs Unoccupied Buildings for Landlords
Any building that isn’t in use carries a long list of hazards and risks because if there isn’t a tenant or a homeowner on site most of the time, there is a far higher likelihood of fire, flooding, damage, theft or vandalism.
Insurance policies can include exclusions, which are more relevant to vacant properties than those with a short-term empty period, such as:
- No coverage for broken windows or vandalism.
- Limited cover for water damage or theft.
As the risk to the insurer increases, so too do the policy premiums and the security requirements you must comply with to remain within the terms. As one of many possible issues, fire incidents affect 9,000 empty properties every year in the UK alone, so preventative measures are often mandatory. It can cost as much as three times more to insure a vacant property than an occupied building, so it’s essential to be clear about which category your assets fall into and to what extent your insurance policy applies.
Insurance Security Requirements for Empty Properties
Once you have determined whether your building is unoccupied or vacant, you’ll also need to identify the right measures to reduce the potential for an insurance claim. Failure to safeguard the building properly will usually mean the insurance policy becomes void, so you must take all the necessary precautions and might be asked to provide evidence of compliance.
Although insurance terms vary depending on whether the building is residential or commercial, vacant or unoccupied for the short-term, you may need to:
- Turn off or isolate all services to the building, including gas, water and electricity.
- Remove all contents, inside and outside, particularly higher value items, fly-tipped water, flammable liquids, or gas cylinders.
- Secure the building with locks compliant with BS3621, security shutters or screens, sealed letterboxes and one controlled access point.
- Drain the water supply.
- Arrange periodic inspections according to your policy requirements or property risk assessment.
Enhancing empty property security safety with security surveillance, vacant property alarms, mobile patrols or commercial CCTV cameras can also be a requirement. It provides an added layer of protection to keep the building covered until it is brought back into use.
If you need assistance with property clearance, security, utility checks or insurance compliance talk to us. Clearway is one of the UK’s leading vacant property security, environmental and property services companies, trusted to secure, monitor and protect vacant properties, sites and their associated assets since 1992. Our extensive portfolio of solutions ensures your critical assets are protected with minimal hassle.
We look after residential and commercial buildings, working directly with property managers, landlords, estate agents, local authorities, retail businesses and some of the largest hotel and leisure groups and housing associations in the UK.
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