Commercial Property Owner’s Insurance
Doesn’t
Protect Vacant Buildings
by Byron Carlock
Posted on nreionline.com
Since the global economy collapsed in 2008, the number of vacant commercial properties in the United States has risen steadily. The projected commercial property vacancy rate for 2016 is 5.4 percent, a year-over-year increase of 0.6 percent and a 1.4 percent increase since 2012. The rates of vacant office and industrial properties are 12 and 10 percent respectively. Retail space is at 9 percent, and apartment properties have a 4.8 percent vacancy rate.
Commercial Property Owners Insurance
Commercial Property Owners Insurance
Because vacant properties don’t generate income, it is tempting to neglect them or leave them uninsured or
underinsured. However, this can be a very costly mistake. Vacant properties play host to numerous hazards including:
- Squatters: Vacant buildings offer shelter to the homeless, who often build fires to cook or keep warm. They also attract young people looking for a deserted place to “party” or take illicit drugs. These uninvited occupants leave behind trash and other debris.
- Drug manufacturing: The chemicals used in the manufacture of methamphetamine include acetone, toluene, lithium, phosphorus and lye. Any of these substances can emit toxic gas or explode, resulting in severe property damage and loss of life.
- Theft: With the price of copper hovering at just above $2 a pound, copper piping in vacant buildings remains a hot commodity for thieves.
- Accidents: Deferred maintenance can result in multiple hazards, from broken sidewalks to frayed electrical wires, all of which pose potential dangers to neighboring buildings and passers-by.
- Fires: Over 30,000 vacant structure fires occur in the United States each year, many of them resulting in loss of life.
- Chemical spills and leaks: If hazardous materials are stored on the property, leakage can result in
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contamination of groundwater and soil.
- Floods: Pipes can burst and sprinkler systems can leak.
Commercial Property Owner’s Insurance & Vacant Property
If you own a building that is vacant or minimally occupied, you may not be aware that your commercial property owner’s insurance coverage is significantly reduced or no longer in effect. The standard coverage form for this type of building states the following:
- A building is vacant unless at least 31 percent of its square footage is rented to a lessee or in use by the building owner for the purpose of conducting customary business operations.
- When a building has been vacant for at least 60 days, there is no coverage for vandalism, building glass breakage, water damage, theft or attempted theft. Leaking sprinkler systems may be covered if they were protected from freezing.
- When the building has been vacant for 60 days, coverage for other property damage, such as floods or fire, is reduced by 15 percent.
Protect Vacant Property with a Few Common-Sense Strategies
If you own a building that is vacant or soon to become vacant, protect yourself from financial loss by implementing a few simple strategies. Risk management experts suggest that you:
- Invest in regularly scheduled maintenance — Hire a property management company to clear the building of any trash and debris, keep sidewalks in good repair and routinely check the integrity of the pipes.
Keep exterior lights functioning to discourage trespassing and theft.
Remove any toxic chemicals and combustibles from the site.
Drain the pipes or keep the heat on in the building during the winter months.
Keep all fire-detection and alarm systems in working order.
Hire a security firm to patrol the building site, especially at night.
Additionally, talk to an insurance expert about adding an endorsement to your existing commercial property owner’s insurance policy if the property will be vacant for 60 days or more.
Featured Property
www.nationsre.com
p(850) 785-2233
f(850) 763-9353
2325 Frankford Ave., Ste. A
Panama City, FL 32405
Darren Haiman
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