When a commercial property becomes empty, the insurance that covered it while it was let may no longer apply in the same way. Many commercial property policies restrict cover once a building has been unoccupied for a period set out in the policy wording, and many insurers add conditions you must meet while it stays empty.
The first step is to tell your insurer or broker before the building empties. From there, how long it will be empty, why, what is left inside and how it is secured all shape the cover available, whether that is your existing policy with new terms or a specialist unoccupied commercial property insurance policy.
This guide sets out the questions insurers ask about an empty commercial building, so you have the answers ready when you ask for a quote.
Key Takeaways
- Tell your insurer before a commercial property becomes empty. Each policy defines "unoccupied" in its own way, so check your wording rather than relying on a typical figure.
- Once a building is empty, cover is often reduced, and some perils, such as escape of water, theft and malicious damage, may be removed or restricted.
- Insurers usually make regular inspections and securing the building a condition of cover. Missing one can affect a claim.
- The length of the vacancy, the reason for it and any planned works all affect the cover available.
- The buildings sum insured should still reflect the full rebuild cost, and any contents left inside need to be declared.
- Your liability as owner continues while the building is empty, so property owners' liability cover is still needed.
Tell Your Insurer Before the Building Empties
Commercial property policies are priced on the basis that the building is occupied and in use. When it empties, the risk changes. Problems such as a burst pipe, a break-in or a fire can go unnoticed for longer, and an empty building can attract theft, vandalism and squatters.
Each policy sets out what counts as unoccupied, often by reference to a number of consecutive days, and what happens to the cover after that point. The definitions, vacancy periods and limits differ between insurers, so read the unoccupancy section of your own insurance documents rather than relying on a typical figure.
Tell your insurer or broker as soon as you know the building will be empty. Doing so allows the insurer to confirm whether cover continues, and on what terms. If you do not tell them, a later claim may be reduced or declined, depending on the policy and the circumstances.
How Long Will the Property Be Empty?
Some owners know exactly how long a building will be empty, for example during a planned refurbishment or between agreed lettings. Others do not, particularly when a tenant leaves unexpectedly or a building is being marketed.
The expected length of the vacancy affects the options. For a short vacancy, check what your existing insurance allows, as your policy may continue cover for a set period, often with conditions attached. For a longer or open-ended vacancy, a specialist empty commercial property insurance policy may be more suitable.
If you are not sure how long the building will be empty, say so. An estimate, together with what you know about the plans for the property, is enough to start the conversation.
It is also worth asking what happens if the building is let sooner than expected. Find out whether the policy can be changed or cancelled when a new tenant moves in, and on what terms, so you are not left with cover that no longer fits.
Why Is the Property Empty?
The reason for the vacancy matters to insurers, because different situations carry different risks.
Between Tenants
A building that is empty between lettings, kept secure and inspected regularly, is generally the most straightforward situation to insure. Insurers will still want to know how it is being marketed and how often it is checked.
During Refurbishment or Building Works
Renovations change the risk considerably. Contractors on site, hot work such as welding or roofing, and temporary openings in the structure all need to be disclosed. Tell your insurer the scope of the work, the value of the contract and who is carrying it out. Some insurers will cover an empty building during works under vacant property insurance, while others will need the works insured separately.
Your building contract may say who is responsible for insuring the works and the existing structure while work is under way. Check it alongside your policy, as you may need contract works cover or additional cover, or the contractor's insurance may need to note your interest.
If the building shares walls with neighbouring properties and the work affects a shared wall, you may also have obligations to your neighbours. In England and Wales, the Party Wall etc. Act 1996 guidance explains when notice is required.
Awaiting Sale, Redevelopment or Probate
A building waiting to be sold, redeveloped or dealt with as part of an estate may be empty for an uncertain period. Insurers will ask about the expected timescale, any planning applications and the condition of the building to arrange suitable cover. Where redevelopment work is planned, ask whether contract works cover can be arranged alongside the unoccupied property cover.
What Changes in Your Cover When a Building Is Empty
When a building is unoccupied, insurers often narrow the cover. The detail depends on the policy, but common changes include:
- Restricted perils. Escape of water, theft, malicious damage and storm are usually removed or restricted. Some policies reduce cover to fire, lightning, explosion and earthquake only.
- Higher excesses. An increased excess may apply to some or all claims.
- New conditions. The policy may add requirements for inspections, security and the water supply, covered in the next section.
Flood cover depends on location and may already be restricted or excluded, whether a building is occupied or not.
Your liability as owner does not stop when the building empties. A visitor, contractor or trespasser injured on the premises, or damage to a neighbouring property, can still lead to a claim. Property owners' liability cover is still needed, so discuss the right limit of indemnity when the cover is arranged.
Conditions You Will Usually Need to Meet
Insurers usually set conditions for empty buildings. These are policy conditions, not suggestions, and failing to meet one can affect a claim. The specific requirements, and how often they apply, vary between policies, so check what your insurer expects. Common examples include:
- Regular inspections. A named person visits the building at the frequency set out in the policy, checks inside and out, and keeps a written record of each visit.
- Securing the building. All doors and windows locked, and in some cases boarding, shutters or steel security screens fitted to ground-floor openings.
- Water and heating. Depending on the policy, either draining down the water system and isolating the supply, or keeping the heating at a set level during cold weather.
- Services. Isolating gas and electricity, other than supplies needed for alarms, heating or lighting.
- Waste and post. Removing combustible waste from inside and around the building, and sealing letterboxes or clearing post.
- Alarms. Keeping any intruder or fire alarm working and, where required, monitored.
Keep the records of inspections and any works carried out. If you make a claim, the insurer may ask to see them.
Getting the Values Right
The Building
The buildings sum insured should reflect the full cost of rebuilding the property, including demolition, site clearance and professional fees, not its market or sale value. An empty building can be undervalued if its sum insured has not been reviewed for some time.
Where a policy includes a condition of average and the building is underinsured, a claim is reduced in proportion to the underinsurance. For example, if a building would cost £800,000 to rebuild and is insured for £600,000, it is insured for 75% of its value. A £100,000 claim would then be settled at £75,000. Reviewing rebuild costs regularly is one of the practical steps in reducing risk across a commercial property portfolio.
Anything Left Inside
An empty building is not always cleared. Fixtures, fittings, machinery or stock may stay in place, particularly between commercial tenants or before a sale.
Tell your insurer what is left inside, who owns it and what it is worth. Items belonging to a former tenant are not normally covered by your policy unless the insurer agrees. A building that still contains goods or equipment can also be a target for theft, which may affect the terms offered.
What to Have Ready When You Ask for a Quote
Having this information to hand makes it easier to present the building accurately to insurers:
- The address, type, construction and age of the building, and any listed status
- The date it became, or will become, empty, and how long you expect the vacancy to last
- The reason it is empty, and details of any planned works
- A recent rebuild valuation
- Anything left inside, with its value
- Security measures, including locks, alarms, boarding and shutters
- Who will carry out inspections, and how often
- Your claims history
How Ellis David Can Help
We have arranged insurance for over 50 years from our office on Essex Road in Islington. Our team has 150+ years' combined experience, and we place cover with 100+ UK insurers and MGAs, giving access to 1,000+ products.
Insurers differ in which empty buildings they will cover, how long for, and the conditions they apply. That breadth of access lets us compare how different insurers would treat your building, and explain the conditions in plain English before the cover starts, so you know what is expected of you while the property is empty.
We arrange unoccupied commercial property cover for buildings empty between lettings, during works or awaiting sale. We can also look at the cover once a new tenant is found, through commercial landlord insurance or, for landlords with several buildings, property owners insurance.
You deal with UK-based people, not an automated call queue, and you can meet the team before you speak to us. If your commercial property is about to become empty, or already is, contact our team to talk it through and arrange empty property insurance today.
Frequently Asked Questions
How Long Can a Commercial Property Be Empty Before My Insurance Changes?
It depends on the policy. Each insurer defines unoccupancy in its own wording, often by reference to a number of consecutive days, and sets out how cover changes after that point. Check your policy, and tell your insurer or broker as soon as you know the building will be empty.
What Happens If I Don't Tell My Insurer the Building Is Empty?
If the insurer is not told, a later claim may be reduced or declined, depending on the policy terms and the circumstances. Telling them early allows them to confirm whether cover continues and what conditions apply.
Does Unoccupied Commercial Property Insurance Cover Escape of Water?
Not always. Escape of water is one of the perils most often removed or restricted when a building is empty, because a leak can run undetected for some time. Some policies offer it if conditions are met, such as draining down the water system. Check the policy wording before relying on it.
Do I Need to Inspect an Empty Commercial Property?
Usually, yes. Unoccupied property policies commonly make regular inspections a condition of cover, at a frequency set out in the policy. Keep a written record of each visit, because the insurer may ask for it if you make a claim.
Do I Still Need Liability Cover When the Building Is Empty?
Yes. You remain responsible for the building as its owner, so a claim can still arise if someone is injured on the premises or a neighbouring property is damaged. Property owners' liability cover is usually included in, or arranged alongside, unoccupied property insurance for commercial buildings.
Can I Insure an Empty Property During Refurbishment?
Often, yes, but the works must be disclosed. Insurers will want to know the scope and value of the work, who is carrying it out and whether hot work is involved. Your building contract may also set out who insures the works, so check it alongside your policy.
This article is general information, not a personal recommendation. All cover is subject to the terms, conditions, limits and exclusions of the policy. Ellis David Ltd is authorised and regulated by the Financial Conduct Authority, register number 442066.
