Empty Commercial Space: Protecting Your Commercial Building During a Temporary Vacancy

For commercial real estate landlords and business owners, there are several reasons why a commercial property may remain closed for extended periods of time. Your storefront may be lying vacant for a new renter. Shutters can remain down for weeks or months when large-scale renovations are going on. Vacant commercial properties plagued the United States even before the pandemic.

As an owner, you don’t just endure a loss of income when your property is lying vacant, but also an increased risk of garbage dumping, illegal squatting, and metal theft. Landlords should take a proactive approach to protect their property by employing different measures. An experienced real estate attorney can help you better assess the various risks and take the right steps toward protecting your vacant commercial property.

Stay on Top of Insurance and Mortgage Obligations

When a property is let out, the tenant usually remains responsible for maintaining the occupied areas. The rent received is usually used towards paying for the insurance and repairing any parts not included within the lease. All of these costs fall on the landlords in the absence of a tenant.

There is a real danger that the building may deteriorate unless you take active steps to keep the building secure and in good shape. You should check the terms of your insurance policy. Don’t forget to go through the mortgage agreement to keep on top of things. A seasoned real estate attorney may be able to help you identify specific exclusions and conditions that apply if the property is unoccupied.

Changes in Business Rates

The financial impact becomes worse if a commercial property is allowed to remain empty for more than three months. You may become liable for empty property taxes. In 2022, the City Council approved the Santa Cruz Empty Home Tax to ease the pressure on the housing market. Homes lying vacant for more than 8 months are now taxed.

While this rule doesn’t apply to commercial properties, you should still speak with a seasoned real estate attorney in your area to understand the costs you will be liable for. Many commercial property owners resort to letting out their property to companies to avoid empty rates from becoming due.

There are specific benefits and drawbacks to the different strategies for avoiding empty property rates. You should speak with a skilled real estate attorney to learn more about all available alternatives.

Illegal Use of Premises and Squatters

Empty commercial property is highly attractive to squatters since the government has made it illegal to squat in a residential building. As an owner, you will need to employ formal legal proceedings to get the squatters out. This can be a time-consuming and costly affair.

Another main risk of allowing a commercial property to remain vacant is that it may be used for illegal purposes. This can be by squatters or on a more casual basis. Owners can become liable even if no crimes are being committed. For instance, if neighbors report the property as a nuisance, you may need to hire an experienced real estate attorney to take the necessary steps for avoiding liability.

Alternative Options to Leaving Your Commercial Property Lying Vacant

Typically, commercial property is used for business purposes in offices, industrial, retail, amusement, and lodging. The expected vacancy rates for commercial offices in the United States are between 15 – 20%. You need to take the necessary steps for protecting your unoccupied and vacant building spaces. There are several possibilities for putting an empty building to good use.

There is a trend for pop-up events and businesses. This means that there are several companies and individuals out there looking for short-term occupancies. These are known as ‘meanwhile’ leases. You can reach out to local organizations, including charities for leasing out the building for short-term exhibitions and events. You can also turn the empty and neglected space into a vibrant community area.

Every short-term occupation should be properly documented. This way you can get the property back when a long-term tenant shows interest. Your real estate attorney will walk you through the necessary paperwork that needs to be completed.

Vulnerable properties should also carry adequate property insurance. A knowledgeable real estate attorney can help you determine the right amount of insurance for your property. The tiniest mistake in maintaining or securing a commercial property can result in costly lawsuits and damages. This can be harmful to your reputation. Vacant properties, even if they remain empty for a short period, are especially vulnerable.

You need to obtain adequate insurance for your peace of mind and protection. Make sure you speak with a qualified real estate attorney to get the insurance coverage you require.

Request a Consultation from Our Seasoned Real Estate Litigation Attorneys

The knowledgeable real estate litigation attorneys at Peterson, Martin & Reynolds, LLP are determined to protect your commercial property during a vacancy period and will do everything possible to resolve any legal disputes in the most effective manner. If litigation is necessary, we are seasoned professionals who know how to win inside the courtroom.

To set up your confidential consultation with a member of our legal team, call (415) 399-2900 or reach us online.