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3 Reasons Vacant Buildings Make Underwriters Twitch

By | March 29, 2017

I spent some time this weekend with some friends who live in another city. We were talking about their church and the neighborhood that its located in. I noticed that the building next door was up for sale so we started talking about it. I found out that the building has been vacant for at least eight (if not 10) years. There are several reasons that it’s sitting vacant; since that’s not the point of this post, we won’t get too deep into them. Our conversation got me thinking about occupancy, vacancy and how a vacant building normally makes an underwriter twitch uncontrollably.

A vacant building is an attractive nuisance. This 3,000-square foot, two-story building sits on a corner lot in an area that has both light commercial and residential occupancies. You could also say that it’s not located in the best of neighborhoods. What does a vacant building attract? It can be a place where people loiter, congregate, or otherwise gather and do whatever they’re going to do. The least troubling group that could gather here is a group of kids having some fun in the parking lot. Vacant buildings that have space where people can avoid being seen from the road can also provide a place for people to hide. Without proper lighting or outdoor cameras nearby, that vacant building can turn into a place where illegal activity takes place. I’ll let you fill in that blank on your own. If I’m the underwriter for the church building next door, I’m wondering what’s going on with that building to mitigate that attractive nuisance. It happens that the church has an agreement with the building owner to use the parking lot if they keep it clean and keep it clear of trouble. That’s why the church has cameras that record activity in the parking lot.

A vacant building is not being used as it was designed. We have all seen buildings that aren’t being used the way they were originally designed. Almost all my dentists’ offices have been in houses that were converted into the office. That building was originally designed as a single-family dwelling and now it’s being used for dental work. It is fashionable these days to convert old commercial buildings (warehouses and churches especially) into residential buildings. An early 20th century warehouse structure certainly wasn’t designed for 21st century studio apartment living. A building that is sitting vacant is also not being used the way it was designed because people don’t build buildings so that they can sit empty. When you have a 3,000-square foot building that sits empty, it isn’t fulfilling the purpose that it was built for and because of that, problems are going to come up. Not matter what the configuration inside, the key building systems are not being used, which makes them more likely to fail when they are used.

Let’s look at the four major building systems (plumbing, electrical, roof, HVAC). If that building has been vacant for eight years, that means that the last occupants were using the building in 2009 and a quick search of the county records shows that the building was built in 2003. It’s possible that the electric is in good shape. It may not need any upgrade for any occupancy that you might consider for that building. What about the roof? Certainly, a flat roof that’s only 14 years old should be in good condition. I would generally agree, but since people haven’t been in the building to know if there is a roof problem, and it’s possible that no one has gone up on that roof in years, so no one has seen that there are no issues. What if a roof drain was clogged and water stood on that roof for weeks at a time? While we’re thinking about the roof, the air conditioners are mounted up there. At least they didn’t have them on the ground, where they would likely have been stolen by now. I once rented a house that had been vacant long enough to have the air conditioner stolen from out back when the price of copper was highest. Those air conditioner units haven’t been used in so long that it’s possible that the moving parts have seized up. Maybe it has developed a leak and the coolant is gone. I’ll hold off on a discussion of the duct work for now. Let’s talk plumbing. Water lines that aren’t used can crack and fail once water pressure is reapplied. Sewer lines can crack and become filled with tree roots, causing potential backups later. Systems that would normally have a 20-year usable life lose that usable life when left unused.

Let’s talk about one more thing that’s a real issue here in Florida, and I think it’s an issue where you are, too. We will use some insurance language to talk about it here. “Fungus”, wet rot, dry rot and bacteria is a potential issue. One of the functions of an air conditioner is to remove moisture from the air. When that system doesn’t work, moisture hangs in the air. Fungus, better known as mold, loves warm, moist climates with organic materials that it can eat and grow on. I’ll leave it to your imagination as to what the inside of that building might look like if any mold has grown over the last eight or more years and what the heating and air conditions ducts have growing in them since they haven’t been running.

Vacant buildings are difficult to deal with when you are trying to insured the building itself, or when it’s an exposing property to another building that you’re dealing with. I’m sure that I missed something here. Use the comments to tell us about what issues you have with vacant buildings or your “favorite” vacant building story.

Topics Underwriting Church

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Latest Comments

  • April 24, 2017 at 3:29 pm
    That's a sad tale that illustrates the issues that we have with vacancy. Thanks for sharing that.
  • April 24, 2017 at 3:28 pm
    Gary, there's one of those examples where you hope the Risk Manager and the underwriter can work together. It's interesting that you noted the area that your company occupied.... read more
  • April 6, 2017 at 10:55 am
    Gary says:
    I was a Risk Manager for a company that occupied the front 20% of a 350,000 sq. ft. former boat manufacturing plant. In the winter I had to walk through the plant each morning... read more

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