Hello World! Welcome Friends! It’s no secret that when times are tough economically, the number of commercial properties lying vacant rises noticeably. Company insolvencies increase, struggling tenants default on their leases and are evicted, or else businesses scale back their operations and close branches. At the same time, demand from new tenants dwindles.
Things are even more stark at present because of the fallout from the COVID pandemic. On the one hand, many retail and hospitality businesses simply never reopened following lockdown-enforced closures, leaving premises conspicuously empty on our high streets.
On the other hand, the work from home trend that started out as a necessity for office-based workers has continued as a preference. Once-sceptical employers now see the benefits of lower overheads when staff operate from home. Demand for office space has fallen as businesses seek to reduce what they spend on rent and rates.
This leaves landlords in a difficult position. Vacant premises don’t bring in any income and so are a wasted asset. But more than that, unoccupied property can end up costing money, too. Left empty for any length of time, they will inevitably attract attention from vandals and squatters. Security costs money. Insurance still has to be paid, and premiums often rise because of the extra risk of damage.
Moreover, if you still have a mortgage, the fact that you don’t have any rental income doesn’t make you exempt from keeping up with the repayments. And once a property has been left empty for three months, landlords become responsible for paying rates.
With so much at stake financially, landlords have to be on their mettle and be fully up to speed with their obligations. It also pays to think creatively about how to mitigate these risks.
Talk to Your Insurance Company
Buildings left empty for any period of time are prone to decay. It’s easy to assume that most of the damage that can happen to a property comes from occupancy. But with heating systems switched off, boilers and other amenities left dormant, it’s surprising how quickly things can deteriorate.
Cold, unheated buildings are prone to damp, which as well as damaging structures also increases the risk of electrical appliances fusing when they are switched on again. Unused water pipes can freeze and burst in cold weather. Wildlife will quickly make a home where humans are not present. And, of course, vacant properties attract vandals and intruders.
For all of these reasons, plus the fact that there are no tenants there to report on and/or take care of maintenance issues, insurance companies often have strict policies on covering unoccupied premises. Landlords should be sure to check on requirements around security and upkeep. You could easily find, for example, that damage caused by intruders is not covered if the building is not secured to the insurer’s satisfaction.
Get Your Property Back in Use ASAP
The best solution to all the problems posed by vacancy is to get premises back in use as quickly as possible. But as far as finding new long-term tenants goes, this might be easier said than done, especially in the current economic climate.
Equally, there might be good reasons why a property has to remain empty for a period. For example, with demand for the likes of office, retail and hospitality rentals likely to keep falling, landlords will naturally look to make property available for different purposes. But this may involve applying for change of use permission from planning authorities, which inevitably causes delays.
This is where creative thinking comes into its own. Demand for long-term retail and hospitality leases may be flat at the moment. But you could cash in on the trend for ‘pop-up’ and seasonal outlets on a short-term basis. This is also useful for keeping premises occupied at least some of the time while you apply for change of use.
For other types of premises, including offices, one option to consider is appointing property guardians. Property guardians are essentially short-term tenants who live in an otherwise vacant building on the basis that it is a temporary arrangement until it can be returned to its normal or prospective use. Landlords are required to provide basic amenities (i.e. running water, electricity, heating, toilet facilities) and arrange the building into secure, separate accommodation.
The big benefit is that having people living on site will deter vandals and unwanted intruders. It also means you have ‘eyes on site’ to keep you informed of any security and maintenance issues, which can also help to lower insurance premiums. It also means getting at least some income from the rents property guardians pay. Although the benefit for them is that the rates charged are typically much lower than they would have to pay for a standard residential contract.
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