Vacant property solutions: why do buildings become empty & what can be done about it?
Posted on March 10, 2017
Why do properties become vacant?
Vacant properties have arguably become more of a national problem in recent years, especially when one considers the scarcity of affordable housing in the UK, and the lack of housing supply contrasted with the increase in demand. But whether they are making headlines or not, the problems caused by allowing buildings to stand empty remain the same, be it commercial or residential property.
There are a number of reasons why UK properties fall vacant; some of these are more general, whilst others are down to structural problems with the British economy.
- The economic downturn:- the 2008 crash is now renowned for the long-term damage it caused for the economy, infrastructure, consumer spending and the housing market. Weak consumer confidence, mortgage repossessions, businesses going into liquidation and unemployment led to an understandable rise in vacant commercial and residential properties.
- Public sector cuts:- many local authorities have seen cuts to their budgets, which has resulted in major changes to how they deliver services; these include changing the functions or usage of public sector buildings. This, in turn, has led to an increase in vacancies.
There are also more commonplace/universal reasons why properties may become vacant.
- Building undergoing renovation: we call this more of a “life-cycle” factor, given that a property owner will hope that the building will increase in value as a result of renovation and thus the building will not stay empty indefinitely. However building renovation still presents an owner with financial and security concerns, given the potential loss of rental incomes and the risk from vandalism or theft.
- Long-term vacancy:- a property may fall out of use for a number of reasons – these can include changes to the building’s usage (commercial to residential), eviction of tenants or a change to ancillary costs (business rates, utilities) which makes the property difficult to maintain.
- Demolition:- – a building will fall out of use and will, naturally, become vacant in advance of its eventual demolition.
What are the risks presented by vacant properties?
Vacant properties will often accrue problems for their owners through security costs, maintenance and upkeep costs and a general loss of revenue/rental income due to lack of use or the absence of tenants. One estimate from insurance provider Aviva estimated that 25% of the damage accrued to properties in the UK is inflicted on empty properties. Some of the most common security concerns for the owners of vacant properties are as follows:-
- Squatting: squatting is often a big problem for vacant property owners. A recent estimate put the number of squatters in the UK at 22,000. Squatters have made the newspapers for invading a few high profile properties over the past few years, including Guy Ritchie’s Grade 1 listed property in Fitzrovia. In 2011, the Coalition government passed a law making squatting in residential properties a criminal offence. However, this law did not extend to commercial properties, and commercial property owners can still face bills up to £5,000.
- Metal theft: this is another common risk for vacant property owners, as not only is the metal difficult to replace, but can also lead to aggregate costs for the building’s infrastructure; for example stolen copper piping can then cause to problems with a building’s water supply or heating system.
- Vandalism/anti-social behaviour: vacant properties are also at risk from arson, graffiti, break-ins and fly-tipping.
- Value depreciation/lack of rental income: if a property remains empty for too long, it will begin to depreciate in value, as there is no guarantee it is being kept in prime condition.
- Empty property business rates:- since 2011, only empty/non-domestic properties with a rateable value of £2,600 or less have been exempt from business rates. This means there is a rather immediate incentive to
How to manage the closure/maintenance of a vacant property
Do not advertise the vacancy: Don’t make a big deal of the fact that the property is vacant, or leave any exterior clues to a building’s lack of use. This can be best achieved by keeping the general appearance of the building clean and tidy.
Regular inspections: inspection and maintenance of the property is the most surefire way to avoid problems such as arson, graffiti and fly-tipping. Also clear the building of any hazardous or combustible material.
Security: security costs are an absolute must for commercial property owners, especially in high risk areas where crime or vandalism is prevalent. High risk areas or long-term derelict buildings will most likely require a constant security control; even medium risk areas will require some kind of overnight security and constant CCTV coverage. It’s also important that you are using a licensed security company – this is especially important for insurance purposes.
Re-occupation:- if and when the business is ready for re-occupation, the property may need to be cleaned and refurbished, the utilities reconnected and a thorough risk assessment done.
Property guardianship: managing a vacant property
- Property guardianship is a pro-active and preventative approach to dealing with the problem of a vacant property, as it saves a commercial property owner the costs inherent in using a security company for round the clock protection.
- Property guardianship also has the effect of changing a building’s primary use from commercial to residential, thereby freeing a commercial landlord from having to pay business rates.
- The presence of guardians also means the property is kept in better condition, and insurance premiums are lower.
- Property guardianship is a flexible and temporary security solution: because the nature of a property guardians’ contract is short-term, the building can be re-purposed at short notice, or indeed returned to its original function.