Own A Vacant Commercial Building? Beware
If you own a vacant commercial property like a retail shopping center, office building, industrial building, etc., be really careful when it comes to your property insurance. There are limitations with coverage.
By definition, a building is considered vacant unless at least 31% of its total square footage is rented to a lessee or sub-lessee and used by the lessee or sub-lessee to conduct its customary operations.
Typically, insurance carriers will not pay for any loss or damage caused by any of the following, even if they are Covered Causes of Loss if the building where loss or damage occurs has been “vacant” for more than 60 consecutive days before that loss or damage occurs:
- Sprinkler Leakage, unless you have protected the system against freezing;
- Building glass breakage;
- Discharge or leakage of water;
- Theft; or
- Attempted theft
With respect to Covered Causes of Loss other than those listed in Paragraphs (1) through (6) above, an insurance carrier will reduce the amount they would otherwise pay for the loss or damage by 15%.
If you own a commercial building which is currently vacant, or if you know you will be losing a tenant soon, the first thing you should do is contact your insurance broker to see what options are available before you secure a new tenant.