An investor who bought an empty office building in Tampa planned to renovate it and lease it within a year. He kept the seller’s style of policy in place, not realizing that standard commercial property forms restrict coverage once a building has been vacant for a set period. When vandals broke in and damaged the plumbing, the policy’s vacancy provisions applied.
Vacancy changes the insurance picture for an office building in ways many owners do not expect. Here is how it works and what to do about it.
How Vacancy Clauses Work
Standard commercial property policies contain a vacancy condition. Under the common form, a building is considered vacant when less than 31 percent of its total square footage is rented to tenants or used by the owner for customary operations. Once the building has been vacant for more than 60 consecutive days before a loss, certain losses are not covered at all, and payment for other covered losses is reduced, typically by 15 percent. Policies vary, so the exact wording matters.
What Is Excluded During Vacancy
Under the standard vacancy provisions, losses from vandalism, sprinkler leakage, building glass breakage, water damage, theft and attempted theft are not covered once the vacancy period is exceeded. Those are exactly the losses an empty building is most likely to suffer.
Partially Vacant Buildings
A building that is half leased can still fall under the vacancy condition if the occupied space is below the threshold. Owners repositioning a building, or losing a major tenant, should review the policy as soon as occupancy drops.
Insuring a Vacant Building
The solution is a policy written for vacancy, either a vacant building policy from a specialty carrier or a vacancy permit endorsement on the existing policy. These policies are priced for the higher risk and often require security measures, regular inspections, utilities left on or shut off in specific ways, and secure entry points. Our page on vacant building insurance explains the options.
Renovation
A building under renovation may need builders risk coverage for the work, and contractors should carry their own liability and name the owner as an additional insured. Some vacancy clauses do not treat a building under construction or renovation as vacant, but owners should confirm this in writing.
Liability Still Applies
Empty buildings still attract trespassers, and the owner remains responsible for sidewalks, parking lots and fencing. General liability for a vacant building is usually inexpensive and should not be dropped.
For the full picture of office building coverage, see our page on office building insurance in Florida and our article on what office building insurance does not cover.
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This article is general information and is not legal advice. Coverage depends on the terms of each policy.
