The government has recently revealed its proposal to tackle the increasing number of empty properties on the UK’s high streets.
As part of the proposed Levelling Up and Regeneration Bill, local authorities may be granted the power to enforce rental auctions on privately owned, empty properties on high streets and in town centres.
The bill is still under consideration at the House of Commons at the time of writing, but if enacted it will significantly impact the rights of landlords and potentially affect them financially.
Glowsure is keeping a keen eye on developments in order to keep our landlord clients informed should the proposed bill affect their buildings insurance.
What is the difference between a vacant and unoccupied property?
First, an important distinction. Empty property falls under two different categories in legislative terms.
The difference between an unoccupied building and a vacant one basically boils down to the insurance risk:
- A vacant property is one that is completely empty of both occupants and contents (such as furniture and possessions).
- An unoccupied property is one that has no occupants, but has contents such as to enable a tenant to reasonably occupy it.
Insurers consider a property to be unoccupied after 30 days (some insurers up to 90 days), after which they may impose different terms, increase the premium or discontinue the cover altogether. If that happens, there are specialist insurance products that will cover an empty property.
Vacant premises are considered high risk by insurers as they are vulnerable to vandalism and anti-social behaviour, especially dilapidated buildings. Insurance cover is, therefore, harder to come by and premiums are usually higher.
If you own property that will become empty for an extended period of time, it’s essential to talk to a commercial insurance specialist to see what your existing policy covers.
Proposed changes to legislation
A draft of the Levelling Up and Regeneration Bill was published in May 2022, and is currently under consideration. The bill’s purpose is to:
“drive local growth, empower local leaders to regenerate their areas, and ensure everyone can share in the United Kingdom’s success.”
Part of the bill proposes granting new powers to local authorities to bring empty commercial premises back into use in town centres and high streets by instigating forced rental auctions.
The bill states that suitable property must fulfil two conditions:
- The premises must have been vacant for at least 366 days of the previous 24 months
- Occupation of the premises must have a benefit to the local economy or community
If approved, a landlord will have a 10-week window in which to let the property after the council’s initial notice. After that period, the forced rental auction process would begin.
Consequences for landlords and commercial property owners
Under the terms set out in the bill, landlords would not have any input on the selection of new tenants or the negotiation process.
Although it is stated in the proposal that regard will be given to the landlord’s representations, the details around it are yet to be confirmed.
It’s also unclear if there will be a minimum rent level imposed. This has been met with much criticism and scepticism from the property industry.
In addition to the impact on landlord rights during the letting process, there may be financial implications. It’s not yet clear who will be liable for the costs associated to make a property rentable.
Costs such as:
- Building works to dilapidated buildings.
- Safety checks such as electrical testing.
- Pre tenancy works such as refurbishment and redecoration.
If the costs do fall to landlords, it would be particularly tough on owners of inherited properties, those who are already in financial difficulty, or have not been able to sell their property.
While we’re on the subject of empty property, here are some helpful answers to FAQs.
Can I insure a vacant or unoccupied house?
Most standard home insurance policies do not provide cover for properties that are unoccupied for more than 30 days (sometimes up to 90), but there are specialist insurance products out there for long term empty properties.
While it is fairly straightforward to find cover for an unoccupied house, it is not as easy to secure insurance for vacant house, and premiums tend to be higher.
This is because insurers consider vacant buildings as more vulnerable to vandalism and damage.
What are empty dwelling management orders?
An empty dwelling management order (EDMO) is a power given to local government to bring empty properties back into use for housing.
Essentially, it makes it compulsory for the owner to let the property. The orders were introduced as part of the Housing Act of 2004 to tackle the growing housing crisis.
Do you pay council tax on empty property?
Owners must still pay council tax on empty property, but local authorities may offer discounts at their discretion.
Landlords should ensure they remain up-to-date on the progress of the Levelling Up and Regeneration Bill, and the details of the accompanying legislation should it be approved. It will have significant impact on the rights of landlords during the letting process and there may be a financial impact in making a property fit to rent.
Call Glowsure about Brilliant Insurance for Brighter Businesses
If you are in any doubt about insuring an empty property, then team Glowsure are standing by to help. We are commercial property insurance experts and we can find you the best deal to ensure your vacant or unoccupied buildings are safe and secure. Contact us today.