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Farming Talk, Jack Cooper

Pitfalls Of Empty Lets

 

Many rural businesses incorporate some form of property letting, be it in the form of farm cottages, rural offices, or commercial space in buildings unnecessary for the central enterprise. Void periods between tenants not only place cash flow constraints on such businesses, but also open up owners to liabilities and responsibilities previously managed by the tenant.

The physical matters are common sense – ensuring adequate heating, or perhaps draining down a properties plumbing system, to avoid the risk of frozen pipes over winter (and the damage which inevitably follows when they thaw). Ensuring that properties are adequately secured, and regularly checked, to some extent to ward off would be intruders, but more practically to ensure minor issues aren’t allowed to develop into more expensive problems further down the line.  

Unfortunately for landlords, ownership equals occupation when there are no tenants, with most local councils no longer offering grace periods for council tax, and able to charge double rates for properties unoccupied for the ‘long term’ - typically two years or more. In addition landlords can look forward to correspondence and charges from utility companies, as well as several letters about the temporarily unnecessary television licence.

Whilst the above are, at worst, frustrating to deal with (as the solution inevitable requires an unnecessarily long time on the phone), a more significant consideration is insurance. Most policies presume regular occupation of buildings, with the obvious reduction in risks that this provides.

As a result, it is commonplace for underwriters to reduce cover after a property is empty for a certain period, typically three months, and whatever cover remains will often be contingent on the Landlord having taken various precautions, such as those mentioned above, and having informed insurers of the vacancy.

Obviously this is a pedantic view of an occasionally unavoidable situation, which in virtually all cases lasts only as long as it takes to agree terms with a new Tenant. However, as frustrating as inspections, or any other precautions may be, I suspect that the loss of buildings cover following a damaging water burst would make the time and effort involved in guarding against these situations look fairly appealing in comparison.

Whilst a significant void period might be the opportunity to refurbish and improve energy efficiency, the best solution, of course, is to manage the tenancies well enough to minimise the need for a void period and use an agent who can find you a new tenant quickly.

Jack Cooper MRICS, Associate.

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