Risk Management Tips for Handling Increased Unoccupancy During COVID-19

Although our movement has been restricted due to COVID-19, opportunists could unfortunately view this situation as a chance to cause damage in other ways, such as:

• Theft of copper piping and other valuable fixtures
• Vandalism such as graffiti and broken windows
• Drug users or squatters moving in, subsequently causing damage, and refusing to leave

However, as more retail tenancies are sitting empty it is important for landlords and owners to understand the risks associated with empty/inactive tenancies.

• Weekly inspections?

Insuring a vacant commercial property under normal circumstances requires you to meet certain criteria: the property must be professionally managed through an agency and must be inspected regularly (sometimes weekly) to maintain insurance cover. While these are not hard and fast rules during COVID-19, outsourcing management through a professional agency and inspecting at regular intervals to monitor its condition and security is still recommended.

• Security

If possible, we recommend increasing both interior and exterior security, including additional physical measures and patrols. Ensure alarms are constantly monitored and that any external security lights are in working order and remove/secure any valuables on site (i.e. cash or keys)

• Fire Protection

Fire systems (i.e. sprinklers, fire alarms, extinguishers, and hose reels) should continue to be serviced and maintained in accordance with appropriate standards. Ensure all fire protection equipment is operational and linked to a monitored source.

• Plant and Equipment

Shut down or isolate any plant or equipment that is not in use or contains flammable liquids or gases (where possible). Isolate any gas, electric or water supplies that are not in use and purge any vapours to reduce fire hazards.

• General Maintenance

Manage any excess materials that may build up around the premises, such as rubbish bins, wooden pallets, or other combustibles in the vicinity of the building. Also, check the roof or gutters for any clogging or signs of damage and that the overall condition of the building is good.

• General Hygiene

The following is likely being carried out at all locations, however, we recommend reinforcing the importance of hygienic practices at a location. We highly recommend the following procedures are clearly laid out, perhaps with signs or posters at your property to remind workers and others of the risks of COVID-19 and the measures that are necessary to stop its spread:

• Allow staff to work from home where possible (relevant to employers more than property owners).
• Ensure physical or social distancing of 1.5m between people.
• Encourage frequent handwashing and provide hand sanitizer wherever possible.
• Ensure the building is regularly cleaned and disinfected.

While we strongly recommend carrying out the above to risk manage your property, the current COVID-19 situation may prevent some of these being done. In this case, we recommend notifying your insurer if any fire, security or general maintenance cannot be carried out as per normal to prevent any issues should a claims scenario occur.

Other considerations

With the reduction of business operations across multiple industries, it’s worth considering backing up your suppliers as certain services/supplies are not readily available. Also, have an emergency contact to hand should an after-hours incident occur and make sure all relevant people have these contact details to hand.

The easiest way to explain this is through an example, so we will use a Commercial Property owner providing rent relief to all tenants.

• Rental Income is reduced by 50% through rent relief.
• The insured Rental Income value is reduced, and a slight premium refund is given.
• Building suffers a catastrophic claim and tenants are unable to operate for 24 months.
• During COVID-19 the Owner receives this reduced Rental Income figure.

• COVID-19 situation ends 6 months from now, businesses return to paying 100% rent.
• The Landlord is under insured and Rental Income Coverage is exhausted in 12 months.
• Rental Income is not received for the final 12 months of repairs as the insured limit is exhausted.

While there is a potential for short term savings, there is also a potential for long term crippling income losses. The risk of reducing income is not as detrimental for annual Public Liability policies but seek advice from your insurance provider before considering this. Our recommendation would be to reduce the Rental Income only if a tenant is vacating on a permanent basis e.g. break lease or if they have ceased trading entirely.

• Chubb – Chubb COVID-19 Unoccupancy Guide
• LIU – LIU COVID-19 Unoccupancy Guide
• Zurich – Zurich COVID-19 Unoccupancy Guide

Stay safe everyone!