Safeguarding vacant assets: A blueprint for portfolio risk management

A property becoming vacant transforms it from a once-desirable asset, into a space that presents a high risk from property damage and premises liability. To help mitigate vulnerabilities, an effective risk management process is needed that encompasses taking action, conducting at least weekly site inspections, performing regular maintenance, engaging the appropriate resources and leveraging technology.

While both vacant and unoccupied buildings are technically not inhabited, there are important distinctions. Vacant buildings imply a total absence of occupants, belongings, and sometimes, utilities. Unoccupied buildings are often in a temporary state, with some belongings remaining and utilities active.

While both scenarios present exposures that require actions to minimize the risk, many times the extent of damage for unoccupied buildings is greater because of damage to both contents and the building structure. We will use the term ‘vacant or unoccupied properties’ when the risks and strategies apply to both.

Vacant or unoccupied properties present unique challenges for a trustee. They are considered high-risk as no one is present for extended periods of time. As issues go unnoticed, the extent of damage intensifies.

The causes of loss for vacant or unoccupied properties include:

• Water damage: This is the leading source of loss in unoccupied properties, with sources ranging from burst pipes, water heaters, and leaking appliances and fixtures.
• Theft: Appliances, copper piping, and wiring are frequent targets in vacant or unoccupied properties.
• Vandalism and arson: Vandals often target vacant properties, and deliberately set fires can cause considerably higher property loss and costs for repair and replacement compared to accidental fires.
• Illicit activities: Vacant properties can present heightened risks for illicit activities.
• Deferred maintenance: Critical components such as roofs, HVAC systems and appliances can impact the severity of the loss in both vacant or unoccupied properties if maintenance is deferred.
• Attractive nuisance: Spas, pools and playscapes are sources of loss in vacant or unoccupied properties due to attractive nuisance risks.
  
  

These trends highlight the importance of implementing a proactive risk management plan to safeguard the trust’s interests.

Trustees can significantly reduce hazard risk by implementing the following strategies that should be built around a routine property inspection process:

• Inspect vacant or unoccupied properties at least once a week to ensure safety and maintenance.
• Maintain regular schedules to inspect HVAC, plumbing and electrical systems for proper building operation.
• Enhance security by implementing actions that decrease a property’s vulnerability. Maintaining landscaping and interior/exterior lighting can help detract unwanted attention. Installing smart locks provide scheduled access to the property by contractors and authorized individuals. Keep security systems active and monitored by a central station. If property has unique attractive nuisances, installing physical deterrents, like fences, may help.
• Prevent water damage by scaling measures to vacancy duration.  Cost-effective IoT sensors are an effective method. The main water supply should be shut off and water lines drained to appliances and fixtures, if  unoccupied long-term.
• Prevent fire by removing combustible materials from the interior and exterior of a property, including wood and kindling. Dispose high-hazardous items, such as solvent-based cleaning supplies and oily rags – a leading cause of spontaneous combustion, igniting without an external flame. Ensure fire detection and suppression systems are fully operational and monitored.
• Notify local authorities of the property address and vacancy duration. Provide them with emergency contacts details, the presence of any special risks or hazards and the water shutoff status.

Modern technology empowers trustees to proactively manage trust portfolios with greater efficiency. Many Chubb clients partner with StreamLabs to reduce the risk of costly water damage, which is the leading cause of property loss in the industry.

Water sensors detect leaks early, helping prevent major incidents and minimize claim costs. In addition, monitoring water usage can drive operational efficiencies and provide peace of mind, knowing your portfolio is protected.

The following resources can be found on the Chubb Risk Consulting Library:

• Vacant Property
• Preventing Water Damage
• War on Water: Sensor Detection Systems
• Reduced Occupancy – Arson and Malicious Damage Control
• Arson: Preventing Deliberate Fires