Vacant Building Insurance in Texas: The 60-Day Rule

Key Takeaways

Under the standard commercial property form, a building vacant more than 60 days in a row before a loss loses coverage for vandalism, sprinkler leakage, building glass breakage, water damage and theft. Other covered losses are paid 15% less.
For an owner, a building counts as vacant unless at least 31% of its total square footage is rented and in use, or used by the owner, for customary operations.
Buildings under construction or renovation are not considered vacant under the standard form, but keep records that prove the work is real.
A vacancy permit endorsement or a separate vacant building policy can restore some coverage, usually at extra cost and with conditions.
Freeze damage is a major risk in empty buildings. Most special form policies expect you to keep heat on, or drain the system and shut off the water.

On This Page

What Happens to My Coverage When a Building Is Vacant?
When Is a Building Considered Vacant? The 31% Test
How Does Vacancy Change a Real Claim?
What Are Vacancy Permits and Vacant Building Policies?
How Do I Protect a Vacant Building From Freezing?
What Upkeep and Security Help an Empty Building?
What Is a Practical Plan Between Tenants?

What Happens to My Coverage When a Building Is Vacant?

Coverage shrinks once the building has been vacant for more than 60 consecutive days before a loss. Under the Building and Personal Property Coverage Form (CP 00 10), the standard commercial property form, some causes of loss stop being covered. Other covered losses are paid 15% less.

This rule is the vacancy clause, found in the policy's loss conditions. The table shows how it usually works on policies built on the standard form.

Vacancy condition in the standard CP 00 10 form, as described by IRMI. Non-standard policies can be stricter, so your policy's wording controls.
Cause of loss	Building vacant 60 days or less	Vacant more than 60 consecutive days
Vandalism	Covered, subject to policy terms	Not covered
Sprinkler leakage	Covered, subject to policy terms	Not covered, unless the system was protected against freezing
Building glass breakage	Covered, subject to policy terms	Not covered
Water damage	Covered, subject to policy terms	Not covered
Theft or attempted theft	Covered, subject to policy terms	Not covered
Other covered causes, such as fire, wind or hail	Paid under normal policy terms	Payment reduced by 15%

Some policies use different wording, a shorter vacancy period or extra exclusions. This is common with policies written for hard-to-place buildings. Read the conditions section of your own policy, not just the declarations page.

When Is a Building Considered Vacant? The 31% Test

For an owner, the standard form treats a building as vacant unless at least 31% of its total square footage meets one of two tests. Either it is rented to a tenant who uses it for customary operations, or the owner uses it for customary operations. Below 31%, the whole building counts as vacant, even if a few tenants are open.

Two details matter in practice. First, a signed lease may not be enough. The space generally needs to be rented and used for normal business. Second, a building under construction or renovation is not considered vacant under the standard form. Keep permits, contracts and invoices that show the work is real and ongoing.

If the policy is written for a tenant, the test applies to the tenant's own space. That space is vacant when it no longer holds enough business property to carry on customary operations.

Example (Hypothetical)

A strip center has 40,000 square feet. Two tenants are open, using 11,000 square feet, which is 27.5% of the building. Under the standard definition, the building counts as vacant, and the 60-day clock is running. When a third tenant opens in 2,000 more square feet, occupancy reaches 13,000 square feet, or 32.5%. The building is no longer vacant under that test.

Vacant is not the same as unoccupied. An unoccupied building still has its contents but nobody is there, as with a seasonal business. The standard vacancy condition is about vacancy, but some policies add separate rules for unoccupied buildings.

How Does Vacancy Change a Real Claim?

The effect can be large. Some of the most common losses in empty buildings, such as theft, vandalism and water leaks, are the very ones the vacancy clause removes.

Example (Hypothetical)

An office building has been empty for five months. Thieves strip copper wiring and rooftop units, causing $80,000 of damage. Theft is not covered after more than 60 days of vacancy, so the standard form generally pays nothing for it. Two months later a fire causes $400,000 of covered damage. Because of vacancy, the insurer cuts what it would otherwise pay by 15%. Ignoring the deductible, $400,000 becomes $340,000.

Vacancy also raises liability questions. Empty buildings can draw trespassers and squatters, and a person hurt on the property may bring a premises liability claim. Tell your agent when a building goes vacant, so your liability coverage reflects how it is actually being used.

What Are Vacancy Permits and Vacant Building Policies?

There are two common fixes. A vacancy permit adds coverage back to your existing policy, while a vacant building policy replaces it. Which one fits depends on how long the building will be empty and what your current insurer will do.

General comparison. Availability, price and terms vary by insurer and property.
Option	What it does	Things to watch
Vacancy permit endorsement	Suspends some or all vacancy limits for a set period at named premises	Extra premium; it may still exclude vandalism or sprinkler leakage; it has an end date
Vacant building policy	A separate policy written for empty buildings	Often narrower covered causes of loss, actual cash value settlement and higher deductibles; often from surplus lines insurers
Leasing or renovation plan	Getting above 31% use, or starting real renovation work, ends vacancy under the standard definition	Keep records; major renovations may need builders risk insurance

Insurers often attach conditions to vacancy coverage. They may ask for regular inspections, working alarms, utilities kept on, or the building secured against entry. Ask for those conditions in writing and make sure your property manager can meet them.

Check your loan documents too. Many loans require notice when a property goes vacant, or set insurance terms the lender expects to see during vacancy.

Questions to Ask Before a Building Goes Vacant

How does my policy define vacancy, and does it use the 31% test or something different?
Does my policy have separate rules for unoccupied buildings?
Will you offer a vacancy permit, and which causes of loss would it restore?
What inspections, alarms or utilities do you require while the building is empty?
If I start a renovation, what records do you want, and do I need builders risk coverage?
Does my liability coverage change while the building is vacant?
What happens at renewal if the building is still empty?

Get the answers in writing, and keep them with the policy. If the answer to a question changes your coverage, your agent should confirm the change by endorsement, not just by email.

How Do I Protect a Vacant Building From Freezing?

Keep heat on, or drain the plumbing and shut off the water. That is both good practice and what most special form policies expect.

Freeze losses can be costly for commercial property. In TDI's data call on the February 11–19, 2021 winter storm, commercial property was about 10% of claims but about 53% of incurred losses. The average incurred loss per commercial claim was about $149,000, as of March 2022 (TDI).

Policies built on the Causes of Loss – Special Form (CP 10 30) commonly exclude freeze damage to plumbing and sprinkler systems. The exception is when you did your best to keep the building heated, or drained the system and shut off the supply. The vacancy clause adds another layer. After more than 60 consecutive days of vacancy, sprinkler leakage is covered only if the system was protected against freezing.

Keep the thermostat at a steady temperature through winter, and check that the heating system works before cold weather.
Where the building doesn't need water, shut off the main and drain lines, with a plumber's help.
Never shut off or drain an automatic sprinkler system without first checking with your agent and local fire officials. A sprinkler may be a condition of your coverage under a protective safeguards endorsement.
Consider low-temperature and water-flow alarms that alert someone off site, such as a central station alarm.
Before a hard freeze, check the building in person and photograph thermostat settings.

What Upkeep and Security Help an Empty Building?

Regular visits and visible care are the basics. They lower the chance of a loss, and they give you records if a claim is questioned.

Visit at least weekly, and after storms. Keep a log with dates, the person's name and photos.
Keep exterior lighting working and locks, doors and windows secure.
Remove trash, debris and anything that could fuel a fire.
Keep landscaping and the parking lot maintained so the property looks cared for.
Keep alarm, fire and sprinkler monitoring active and paid.
Post no-trespassing signs where local rules allow, and call police about any break-in.

A Common Surprise at Claim Time

Owners often find out about the vacancy clause only after a theft or water loss. The 60-day clock runs whether or not anyone is watching it. Track it on a calendar from the day the last tenant leaves.

What Is a Practical Plan Between Tenants?

Treat vacancy as a project with dates. This checklist works for a single building or a portfolio.

Day 0: Record the date the space empties. Recalculate the building's occupied square footage against the 31% test.
Within the first week: Tell your agent. Ask how your policy defines vacancy and what options your insurer offers.
By day 30: Choose a vacancy permit, a vacant building policy, or a leasing or renovation plan. Read your loan documents for notice rules.
Before day 60: Have the chosen coverage confirmed in writing.
Every week: Inspect, log and photograph the building. Keep heat, alarms and lighting on.
Before winter: Service the heating system, decide whether to drain plumbing, and test low-temperature alarms.
When a tenant opens: Tell your agent, so coverage returns to normal and premium reflects occupancy.

Owners of shopping centers, office buildings and warehouses deal with this most often. If a space is about to empty, contact us and we'll walk through your options before the 60-day mark.

Questions Owners Ask

Is a building under renovation considered vacant?

Under the standard form, buildings under construction or renovation are not considered vacant. Keep permits and contracts as proof, and ask whether the project needs builders risk coverage.

Is vacant the same as unoccupied?

No. A vacant building is empty of the tenants or property needed for normal operations. An unoccupied building still has its contents but nobody is there. Some policies treat the two differently.

What if only part of my shopping center is empty?

Under the standard owner's test, the building is vacant unless at least 31% of its total square footage is rented and in use, or used by you. A center with several empty bays can still pass if enough space is open.

Does my liability insurance still apply to a vacant building?

Usually, but tell your agent when a building goes vacant. Some insurers rate or restrict coverage for vacant property, and liability exposure from trespassers can rise.

How much does a vacancy permit cost?

It varies by insurer, building and length of vacancy, and some insurers won't offer one. We can't quote a typical amount. Ask for pricing before the 60-day mark so you have time to compare.

Sources

IRMI: Vacancy, what does it mean for commercial property coverage? — Standard vacancy condition, 60-day period, 15% reduction, 31% test
TDI: February 2021 Texas winter weather event summary (March 2022) — Commercial share of claims and losses
TDI Bulletin B-0009-21: Winter storm data call
TDI: After the winter storm — Claim and contractor tips

Terms in This Guide

Building and Personal Property Coverage Form Vacancy Clause Unoccupied Building Premises Liability Vacancy Permit Endorsement Builders Risk Insurance Causes of Loss – Special Form Freeze Damage Sprinkler Leakage Automatic Sprinkler System Protective Safeguards Endorsement Central Station Alarm

What Happens to Insurance When a Texas Commercial Building Is Vacant?

What Happens to My Coverage When a Building Is Vacant?

When Is a Building Considered Vacant? The 31% Test

How Does Vacancy Change a Real Claim?

What Are Vacancy Permits and Vacant Building Policies?

Questions to Ask Before a Building Goes Vacant

How Do I Protect a Vacant Building From Freezing?

What Upkeep and Security Help an Empty Building?

What Is a Practical Plan Between Tenants?

Questions Owners Ask

Sources

Check this against your policy.