It is believed that 50 per cent of all fires in vacant property in the U.K. are started maliciously. In fact, each year there are approximately 9,000 fires in empty commercial buildings, which is shockingly on average, one every hour. But fire is not the only risk for vacant property.

Pipes, heating equipment and any fixtures or fittings of value are a target for theft. Indeed, there have been incidents of the theft of supporting steel structures and cables from live systems in vacant industrial units. As the majority of insurance policies available in the market will limit cover for vacant property, the increasing risk of theft results in higher uninsured losses adding further to the burden of a vacant property.

There is also a duty of care owed to visitors who access the site. Authorised visitors, including employees, surveyors and potential occupiers, are all at risk from potential injury should a property not be adequately lit for example. Where necessary, the use of hard hats and adequate signage must also be in evidence. But the greater risk is injury to those less welcome such as trespassers, and also children who see a vacant property as an adventure playground. Measures to improve public safety should therefore not be overlooked.

An empty property is also more at risk to water ingress if it is not adequately maintained. Property management has a critical role to play in protecting a property from water damage. Storm damage and escape of water are more likely to occur in a poorly managed vacant property. If loose tiles have not been rectified, a small hole can lead to the loss of half a roof in more extreme storm conditions.

When an insurance underwriter looks at premium rating and assesses the terms and conditions to impose, the risk associated with a property will influence the underwriter's decision. Void property is generally deemed a higher risk than occupied property, and where an underwriter agrees to take on the insurance, the extent of cover offered, rating and the policy conditions will reflect this.

The Insurance market varies considerably in how vacant property is underwritten. The more restrictive approach can have a significant impact on what can be recovered in the event of a claim. For this reason, it is essential any changes to the policy cover (and terms and conditions) are checked and fully understood. Insuring a property as part of a property portfolio policy that offers a spread of risk in terms of geography and other occupied properties within the portfolio can support maintaining cover on any vacant property within the portfolio with less restrictions that would otherwise be the case if insured in isolation.

However, where a vacant property is not part of a portfolio and is insured on a “standalone” policy it is very likely the extent of cover will be severely restricted: in some cases, to loss or damage by fire, lightning, aircraft and explosion only. The location, construction, security and how the property is to be managed will all influence what insurance can be secured. The risk will be assessed on a case-by-case basis with consideration to any adverse risk features.

There is a direct correlation between claims frequency and quality property management. Ongoing, proactive management of a vacant property is therefore essential for maintaining insurance cover and costs at acceptable levels. The management of risk is approached by first identifying and assessing risk, then taking steps to reduce or remove risk, and following up with ongoing monitoring of the risk. This can best be achieved by implementing a structured programme to put in place procedures to manage voids and adhere to insurance conditions.

The first step in risk management is simply to allocate responsibility: in other words, management itself. Without these simple steps, the property is at greater risk. Up-to-date written records must be kept, because in the event of an insurance claim, insurers will check that all conditions have been met before they will confirm indemnity under a policy. If it is not recorded, it did not happen! Once allocated, the removal or reduction of risk should deal with the three key areas of: security, fire, and health and safety. For example, for security this should include an assessment of perimeter fencing/ gates, doors and windows and intruder alarms.

• As soon as it is apparent that a tenant is to vacate the property, notify your insurance provider immediately.
• Provide regular updates of your future plans for the property to your insurance provider.
• Provide full information about any action being taken to re-let the property (include details of marketing, incentives to potential occupiers and any information on any refurbishment plans where applicable).
• Keep your insurance provider fully informed at all times and provide updates on any positive developments that may indicate when the property is to be occupied again.
• Ensure all relevant parties including the person appointed to maintain the property, or tenants where a lease is still active and/or property managers are fully informed of any changes to the insurance cover and conditions (in particular, security/inspection requirements).

• Unless the property is part of a portfolio, it is likely that the cover will be restricted and policy excesses could be increased soon after the property becomes vacant. Make sure all interested parties are aware of these changes.
• The policy will have terms and conditions applied specifically to vacant property. These terms will impose requirements including the need to inspect the property and what security measures must be taken. These must be strictly adhered to, as failure to do so may result in the repudiation of any claim that may arise.
• Read carefully the new conditions applying and ensure they can be implemented within the timescale set by the insurer. If any of the requirements cannot be put in place, notify the insurer/ broker immediately as there may be another more practical option. Discussion is essential to ensure acceptable solutions are put in place that will not invalidate the cover.

Ensure you put in place an inspection programme to arrange visits to the property that meet the inspections timescale imposed by the insurers.

Do keep a full written record of all visits to the property. Record the date, the nature of the inspection (internal and external), note down any damage and/or issues of concern found at the property and log the remedial action taken or planned to rectify the position. Finally, notify the insurer/ broker of any incidents/ repairs at the property.

Always refer to the insurance policy document. If there is any doubt whether a fact is material or not, this must be fully communicated. And always remember that failure to adhere to policy terms and conditions could lead to the repudiation of any future claim on the policy.

Berkeley Insurance Group have been a ProCon Patron for many years and we are committed to supporting the membership. In these challenging times, it’s important that Leicestershire businesses work together and support each other.

Alan Percival, Director

• 0116 261 4728
• apercival@berkeleyinsurancegroup.co.uk

Trevor Palmer, Real Estate Account Director

• 0116 261 4747
• trevorpalmer@berkeleyinsurancegroup.co.uk