Keep Vandals and Vermin out of Vacant Facilities

Aug. 23, 2013
Perform necessary maintenance and tasks to ensure your asset's value and longevity.

Chances are you’re familiar with old, abandoned buildings – hopefully not because one is in your portfolio, but perhaps there’s one in your neighborhood. The roof is caving. It’s infested with rodents. Debris litters the lot. You probably wonder how the property came to be in its present state and why the owner isn’t keeping it in better shape. It’s at this point that onlookers may call the city and make a formal complaint.

When a property of yours becomes unoccupied, keep your eye on it or risk it becoming an eyesore or worse. Maintenance and preservation techniques prevent vandalism, physical deterioration, and citation from local authorities.

However, the troubling truth is that owners aren’t familiar with best practices for maintaining vacant properties. From whom to notify and which inspections to perform, owners feel as hopeless and abandoned as the building itself.

“Maintaining a vacant property can be an unpleasant full-time job,” says Marc Insul, president of Commercial Asset Preservation (CAP), a firm that maintains and oversees vacant properties. “But doing so is a necessary task any owner or lender of commercial property needs to consider if they want to preserve equity while preparing the property for its next use.”

Take the following steps to ensure your vacant property is valued, not vilified.

1.) Make a Plan for Your Property
Even before the site becomes vacant, it’s important to develop a plan for the troubled property, Insul says. Prepping a restaurant for demolition is a lot different than holding a corporate office in storage for it to be repurposed sometime down the road.

“Then, when your property does vacate, you will have a go-to list of steps and resources that will enable you to be nimble and efficient,” he adds.

Identify a goal for your property. Do you want to sell, lease, or adapt and reuse it? “There are many factors that go into the decision, and ultimately, how you approach your vacant property is dependent on the end result you desire,” says Insul. “Financially, you are likely to make different decisions depending on how long you plan to hold the property.”

Once you have an end goal in mind, the other steps begin falling into place. PageBreak

2.) Inform Necessary Parties
Another initial step involves informing a few important people about your intentions for the property.

  • Insurance provider. Promptly notify your insurance company that the building is vacant. Make sure to have insurance in place for any unfavorable event. “Recently at one of our vacant sites, a tree fell on top of a woman’s car while she was using it as a lunchtime getaway from her office,” Insul explains. “Fortunately, she wasn’t injured, but her car was severely damaged.”

    Buildings that are more than 69% vacant for more than 60 days can lose important coverage, says Luanne Funari, vice president of The McIntyre Group, insurance brokers and consultants. The standard commercial policy reduces loss payments by 15% for most causes of loss and does not cover others at all, including vandalism, water damage, and glass breakage.

    “For a premium, the owner may be able to purchase vacancy permit coverage that reinstates some or all of this coverage for a specific time,” she says. “Proper precautions can keep the building secure.”

  • Local authorities. Also notify your fire and police departments of the building’s vacant status, Insul advises. It’s important for authorities to know how they might access the property during an emergency – either via key or lockbox.

    One aspect of the notification process is retaining an accurate and accessible key holder list. Overlooking this simple task can inadvertently result in damage to doors and locks if police and fire departments must open them with axes and drills. Third parties, such as CAP and Vacant Property Specialists, can act as the point of contact if emergencies arise.

  • Attorneys. Next, seek out the services of a tax attorney if you do not have one on staff. Over time, a good attorney should attempt to lower your real estate tax obligations so that the vacant building is less burdensome.

  • Code enforcers. Also contact the municipal planning authority to advise who will handle oversight of the building.

    “Initially this might be considered a way to unnecessarily get yourself on their radar and subject your property to extra oversight,” Insul says. “However, the opposite should occur. Because the local code enforcement department typically has so little information about who to contact about vacant properties, being proactive will make local officials view you as a concerned citizen and partner.”

    There has been a significant emphasis in recent years by local code officials to encourage owners of vacant properties to provide contact information. Many cities have implemented building registry requirements for this reason. A failure to properly notify local code enforcement may lead to harsher penalties on the owner if the property is not maintained.PageBreak

3.) Address Utility Requirements
Make sure all mail – but especially utility invoices – from the property is forwarded to the appropriate party. Contact your local post office to take care of this issue or update your address online.

With a vacant building, you’ll want to try and minimize ongoing expenses related to the property. Reduce heating and air conditioning to minimal levels.

“I took a new client on a walkthrough of a large office building that had been vacant for over one year. On six of the floors I found individual offices with air conditioning units operating at full speed,” Insul says. “Turning these down or off dramatically reduced the bills.”

After the last tenant exits the building, cancel non-essential telephone service unless it is necessary for an alarm system. Insul also recommends terminating other non-essential service contracts such as extermination, trash removal, window washing, janitorial needs, and laundry.

4.) Inspect the Building and Document Findings
Immediately after the vacancy has occurred, one of the most critical steps involves inspecting the building and reporting on the overall condition of the property, Insul notes. CAP uses a checklist – the Property Condition Report (PCR) – for this.

You want to create a baseline of how the property looks and what issues need to be addressed. This information could include property damage, existing and potential citations, signs of deterioration, and life safety concerns.

This inspection should be tailored to the type of building and geographic location.

“Equipment requirements are different in a convenience store than a 10-story office building,” Insul explains. “Likewise, a property in northern Minnesota is affected by different weather concerns than one in southern Texas.”

Photo documentation will provide a key reference point should anything occur. A failure to properly document the condition of the property after vacancy may put you at a risk of losing insurance coverage for theft, water damage, vandalism, and more. Photos before and after repairs and of debris and personal property are key.

A trained inspection specialist is necessary for identifying environmental or safety hazards, Insul notes. Placing an order for hazards to be rectified will reduce risk and liability.

“These hazards can create a crisis for cost and company reputation,” Insul says. “Mitigating their risk is critical. The findings of the inspection can change a client’s whole goal for the property. There have been situations where holding strategies have changed to demolition plans.”

The property may also need to be updated based on current code requirements. It may be necessary to contact local officials to address violations. Upon completion of code repair work, provide proof to local enforcement to clear any issues.

5.) Invest to Get Value out of Vacancy
While it might seem counterintuitive to spend money on a vacant building, neglecting the maintenance, protection, and preservation of your facility will lead to greater financial losses down the road.

“How you maintain your vacant asset not only impacts your reputation, but it greatly influences the future marketability of your site,” Insul says.

Taking preventative measures – even if they require monetary investment – is crucial. These steps ensure your commercial property is up to standard and ready to reuse faster, ultimately saving time and money in the long run, says Insul.

“Preparation is not just good for the budget,” he adds. “It’s key for not becoming that scary eyesore on the block.”

Chris Curtland [email protected] is assistant editor of BUILDINGS.

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