It’s common for owners of commercial properties who rent their spaces to a tenant business (a small business owner who rents or leases a building to run a business) to be occasionally stuck with a vacant property. It happens. But because of the pandemic, the past two years have been particularly rough on small businesses, including commercial property owners.

As reported by CBC News, a survey conducted by the Canadian Federation of Independent Business in January 2021 shows one in six small business owners, or about 181,000 small businesses, are on the cusp of shutting down permanently because of COVID-19 and related supply chain issues.

As those small businesses shutter temporarily or permanently, it’s having a knock-on effect on commercial property owners who rely on leasing their spaces to business owners. While there is hope on the horizon as provincial governments once again reduce or drop their respective public health mandates to ramp the economy back up, commercial property owners may still be left with vacant buildings for which they’re struggling to find tenants.

A closed retail store

So, what can commercial property owners do to protect their properties that are vacant or unoccupied for long stretches of time? The answer is adding vacant property insurance to their existing policies. 

Here are a few frequently asked questions and answers about vacant business property insurance:

What Is Vacant Property Insurance and Why Is It Important?

Vacant property insurance is a special type of coverage for small business owners whose properties are uninhabited or considered vacant for an extended amount of time. Whether the commercial space on your property is a retail store, warehouse, restaurant, or another kind of workplace, vacant property insurance is designed to protect you if someone is injured on that property or if there are damages to the building resulting from an insured loss, such as a fire or severe weather.

You may already have a commercial property insurance policy. But your insurance company may declare it void after a few days or a month (it depends on what your existing policy states as the timeline varies between insurers). Should that happen, you will be left exposed to cover any injuries or damages on your own that occur at that property.

Is There a Difference Between Vacant and Unoccupied Property?

Yes, insurers define vacant and unoccupied properties differently, as they are not necessarily the same.

A vacant property is considered empty for at least six months, has had no renovation or construction work done to it, and has no furniture, equipment, or electronics inside. An unoccupied property is temporarily uninhabited, but it still contains furniture or equipment, the utilities (water, power) are still operating, or there may be renovations underway.

Do I Need Property Insurance for Vacant Land?

Even if the land you own has no existing structures or buildings, it’s wise to have it covered in case of third-party bodily injuries and property damage or if an accident occurs on it. Sometimes referred to as vacant lot insurance, you are still responsible for what happens on that land as the property owner. 

Do I Need Vacant Rental Property Insurance?

Suppose you are a VRBO or Airbnb host who owns a second or seasonal dwelling that you rent. There will be times when the residence is vacant if you don’t have any bookings and you don’t reside there yourself. In that case, it’s critical that you inform your licensed broker of the vacancy. In addition, it is advisable to add vacant property coverage to your Airbnb or VRBO insurance policy to ensure your dwelling is adequately insured.

Will a Landlord Insurance Policy Cover a Vacant Property?

If you are a landlord of a commercial property or a residential building used for student housing, your landlord insurance policy or student rental housing insurance will not cover a vacant property. Therefore, you are left with an insurance gap when a tenant moves out of your commercial space or dwelling, and the premises is vacant for more than a prescribed number of days as defined in your policy. In other words, you may need to add vacant property coverage to your overall policy to be fully protected.

However, if a tenant breaks the lease unexpectedly and vacates the premises (if, for example, your tenant goes out of business and the company ceases to exist), your landlord policy may cover the rental income you lose while you pursue your former tenant for losses in court.

What Kind of Risks Do Vacant Properties Face?

Whatever the reason is that your commercial property is vacant – you could be selling the property, searching for a new tenant, or temporarily closed due to a public health mandate – the potential for something to go wrong still exists. Those risks may include:

  • A fire igniting
  • A water pipe bursts or leaks and causes damage
  • Vandalism or a break-in
  • Severe weather damage caused by lightning, wind, or hail
  • Squatters could inhabit the premises without you knowing

10 Tips for Protecting a Vacant Commercial Property

There are several actions you should take to protect your vacant commercial property to reduce the likelihood of damages and to have to file a claim, including:

1. If your commercial space is unoccupied for a lengthy period, shut off the water to the space.

2. Install a security 24/7 monitoring system for the interior of the unit and have exterior surveillance cameras installed to monitor the perimeter of the building.

3. In the wintertime, hire a snow removal contractor to clear the property’s driveway, sidewalk, and the entrance of snow and ice. During the warmer months, hire a landscaping company to cut the lawn, trim shrubs and trees, and pick up any garbage that’s strewn on the property.

4. Check on the property yourself every 48 hours to ensure there is no vandalism, signs of a break-in, or interior damages, and collect any mail that arrives at the property.

5. Put a ‘beware of dog’ sign in the front window.

6. Keep the blinds or curtains closed but leave a light on inside the unit to appear as though someone may be inside.

7. Hire a private security company to help monitor the property.

8. Hire a local construction contractor to erect temporary fencing around the property.

9. Test and ensure your fire detection system is in working order.

10. Notify your insurance broker to inform them the property is vacant.

You want to find a new tenant for your vacant property as soon as possible. So, get active advertising your space is available to rent. Some of the ways to do that include:

  • Use free online listings for advertising your property, such as LoopNet, CBRE, and Kijiji, and include high-quality images and a detailed description of what the space offers to small business owners.
  • Put up ‘for rent or lease’ signs in the building’s windows and use word of mouth with former tenants, friends and family, and your local business improvement association or chamber of commerce.
  • Place ads in your local and regional newspapers.
  • Consider working with a professional property management company to help you find a new tenant.

In the meantime, protect your commercial building with a vacant property insurance policy. Fill out an online application to get a free quote, and our licensed brokers will do the shopping for you from our network of more than 50 Canadian carriers to find the policy and price that suits you best.

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