Empty commercial property security

Posted on: 28 July 2014

Commercial property landlords have responsibilities to keep empty premises secure and safe. Read our experts’ advice on how to ensure you have the best commercial property security.

One of the unwelcome by-products of a recession is empty commercial property. Not only does it mar the landscape but it is also a burden on the landlord that owns it. It can lose significant value if left unmanaged.

Commercial property landlords also have responsibilities to keep empty premises safe, for legal reasons and to ensure the validity of their insurance.

Recently we spoke to Simon Alderson, Development Director at VPS (UK), Vacant Property Specialists and our own Simon Kendall, Senior Underwriter at Premierline, about why and how commercial property landlords can protect their empty premises and meet their responsibilities to third parties and their insurer.

The extent of the UK vacant commercial property problem

Commercial property in the UK was valued at £569bn in 20121. However, according to VPS the last two to three years have seen a significant increase in the number of vacant commercial properties. They estimate that upwards of 10% of commercial property in the UK is now empty. In fact the average vacancy rate in the top 650 British retail centres is 14.1%2.

Landlords hope to re-occupy their commercial property as quickly as possible after their previous tenants have moved out. But the time this takes depends on more than just finding the next tenant. There may be some repair and maintenance work required. Or there may be delays in finalising the paperwork which means the property is uninhabited for a while.

Insurance responsibilities with empty commercial property

If a property is unused or vacant for any length of time, it’s expected that the landlord notifies their insurer (the period depends on the insurer and can range from 30 to more than 60 days). If they don’t the insurer has the right to refuse a future claim. Their insurance policy will tell them what they have to do for the policy to be sustained, such as turning off the gas, arranging for waste to be removed and regularly inspecting the premises.

“There are increased risks associated with empty buildings,” says Simon Kendall from Premierline. “In the first instance landlords should speak to their insurance provider for guidance as to how to reduce the risk of damage”.

He also recommends that landlords take professional advice on how to deal with a vacant property. Not only does this give the landlord peace of mind that they are implementing the right security measures, but it also helps convince their insurer that they are not unduly exposed to future claims.

The biggest risks to empty commercial property

By its very nature, an empty property is an unprotected property. The fact that there is no one around to spot problems means that issues arise and escalate more easily than if the owner or tenants were present.

This can lead to the broken window effect, as Simon Alderson from VPS explains. “If the landlord doesn’t take any action when a property becomes vacant, minor damage is noticed by the local community. One broken window becomes four, leading to theft, vandalism, squatting, arson and potentially the loss of the whole property.”

Arson

30% of all fires in non-domestic buildings are deliberately set3. And according to Simon Kendall, the most prolific type of claim received by Premierline in relation to empty commercial property is also arson.

“A lot of the fires in unoccupied commercial buildings are maliciously started by casual vandalism,” Simon Kendall explains. “Those premises that are obviously empty to the casual eye are most susceptible. We have seen claim values reach several millions of pounds.”

To protect a vacant property from arson, it needs to be properly secured to stop people gaining entry. Removing combustible items and waste from the premises, both inside and out, removes the fuel that could be used to start a fire or reduce its chances of taking hold.

Theft

Second to arson is the risk of theft from empty commercial buildings.

Despite recent changes to the regulation of the scrap metal industry, metal theft is still a big problem. 14% of manufacturing premises experience metal theft4 and with copper wiring and other metals residing in places like water cylinders, radiators and boilers, unoccupied commercial buildings are major targets. “The problem is made worse when the landlord doesn’t bother to isolate the water supply when the tenants leave,” says Simon Kendall. “Not only is there damage from a break-in and theft to deal with, but there’s also water damage too.”

“Some older commercial buildings have architectural items inside them that are also targeted by thieves, such as old fireplaces” adds Simon Alderson.

To reduce the risk of unauthorised access, commercial landlords need to secure the property and change the locks as soon as the tenant moves out. “Securing the area with perimeter fencing is also advisable,” says Simon Alderson.

Squatting

In 2012 the law changed making it illegal for squatters to occupy residential buildings. This has meant that more empty commercial buildings, particularly in London and other major UK cities, are being targeted.

The cost of cleaning up after squatters in an industrial unit can run into the hundreds of thousands of pounds. Not only does the property need to be guarded while the insurance pay out is organised (guards are not inexpensive), but it can also take months to replace stolen items like copper wiring, repair damage, redecorate, recarpet and return a facility to a rentable state. This only adds to the length of time that the property is not earning rental income.

The case studies at the bottom of this page show 2 quite different outcomes from squatters targeting protected and unprotected industrial units.

Burst pipes

Empty properties are also more susceptible to damage caused by burst pipes, because water leakage can go undetected for long periods of time.

“If the property owner is relying on weekly or fortnightly visits to their property to check that it is secure and safe, a burst pipe the day after their last visit can go unnoticed for a long time. This could result in extensive damage requiring expensive repairs,” says Simon Kendall.

Indeed VPS has previously been called to an empty holiday home complex that suffered a burst pipe. It was undetected for three weeks, resulting in the local village running dry. “Nowadays, there are specialist sensors for vacant properties that can detect a flood," says Simon Alderson, "and also sensors that can detect if there is a sudden change in waterflow occurring inside a pipe.”

Commercial property landlords’ responsibilities to third parties

Finally, if a visitor to an empty property, welcome or not, injures themselves while on the premises, if the cause is found to be the result of negligence on the part of the landlord, they can be liable for damages.

“We find that public liability isn’t often top of commercial property owners’ lists of priorities,” says Simon Alderson. “Open manhole covers, for example, are a major risk – if someone falls in there can be serious damage, putting the landlord at risk of a claim.”

The first line of defence is to secure the premises to prevent unauthorised entry. “The landlord must assess the risks to people visiting the property or seek a professional risk assessor’s opinion,” says Simon Kendall, “and take appropriate actions to prevent accident or injury.”

Key actions to take to protect vacant commercial property

1. Complete a health, safety and risk assessment to help identify the risks and take action to protect it
2. Remove unnecessary items like furniture, packaging and waste (including hazardous waste)
3. Have oil tanks emptied
4. Isolate the water, gas and electricity supplies
5. Tell your insurer if the premises are going to be empty for more than 30 days
6. Remove any skips, empty external waste bins and move them away from the building
7. Seal letterboxes or fit a metal box inside and empty it weekly
8. Maintain security fences and gates
9. Protect window glazing by boarding up if necessary
10. Control who has access and record visitors in and out
11. Change locks on doors, shutters and gates if necessary
12. Prevent access for unauthorised vehicles using padlocked gates, lockable security posts or substantial lengths of concrete
13. Consider employing guards or install wireless smoke, flood and intruder sensors and cameras
14. If the property isn’t guarded, ensure it is visited weekly, inspected and that any necessary action to keep the property secure are taken

Case study 1 – the protected property

The organiser of a New Year’s Eve rave party targeted an empty commercial unit in North West London in December 2013. Unbeknown to him, his arrival was noticed by VPS’s SmartAlarm unit, which had been installed by the landlord to help protect the property.

Security guards were on site within 42 minutes of his arrival. Having coaxed him out of the building, a team arrived to secure it, erect steal security screens and deploy guards around the site. The police were also called to help disperse revellers turning up for the party.

Had the alarm system not been in place, which allowed early detection and a quick response, the property could have been damaged.

Case study 2 – the unprotected property

Squatters gained access to an empty building in South Yorkshire in April 2014 by removing a steel plate covering a window, forcing it open and cutting through internal security bars. Before being detected and removed, the squatters detached the tiles from the suspended ceiling, damaged the keypad entry system, graffitied internal walls and irreparably damaged floorings. They also removed concrete blocks from the wall separating two adjoining units.

The insurance claim for malicious damage was estimated at £65,000 and included repairing the windows, doors, party wall and floors and cleaning and redecorating.

Having let Premierline know that the property was empty, the landlord complied with the unoccupied buildings condition in their insurance policy by isolating the utilities, removing waste, fixing all the doors and windows and regularly inspecting the premises. This meant that the claim could be dealt with quickly, allowing the landlord to repair the property ready to let to tenants as soon as possible. 

Simon Kendall is Senior Underwriter at Premierline. He has been a commercial underwriter for 25 years, specialising in property and liability insurance.

Simon Alderson is Development Director at VPS (UK), Vacant Property Specialists where he has been instrumental in delivering new products into the UK market including the launch of SmartAlarm Gold. 

1www.bpf.org.uk/en/files/reita_files/property_data/BPF_Property_Data_booklet_2013_spreads_web.pdf
2www.localdatacompany.com/
3www.gov.uk/government/uploads/system/uploads/attachment_data/file/36467/FSGB_2011_to_12.pdf
4www.gov.uk/government/publications/metal-theft-england-and-wales-financial-year-ending-march-2013/metal-theft-england-and-wales-financial-year-ending-march-2013 

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