Vacant unit: how to effectively manage a unit that remains unoccupied for several months

For a landlord or manager, a vacant unit is not just an empty space; it represents a loss of net operating income (NOI) and increased pressure on the overall profitability of the asset. When vacancy stretches over several months, it becomes essential to analyze the situation from a strategic rather than an operational perspective.

Here’s how to optimize the management of your unoccupied units and turn this transition period into an opportunity for value enhancement.

Analyze the causes of prolonged vacancy

Before adjusting your approach, it is important to determine why your vacant unit is not attracting tenants in the current market. The issue is rarely a lack of visibility, especially when you manage a large portfolio and are familiar with marketing rental units. More often, it is a mismatch between the product and market demand.

Analyze the causes of prolonged vacancy Is it a pricing issue compared to similar units in the area?

In practice, it is mainly a matter of supply and demand. It may therefore be preferable to adjust the initially projected rent to better align with current market realities and needs.

Does the unit’s location within the building align with the asking rent?

In larger buildings, a vacant unit on the ground floor or near elevators may require a tailored marketing approach or slight incentives (such as a free month or added inclusions) to offset a less desirable location.

Value enhancement and preventive maintenance

A vacant unit is the ideal opportunity to carry out refresh work or major renovations that would be more complex to coordinate with a tenant in place. It can therefore be a good time to invest in improving your asset. It is also preferable to complete the work, especially major renovations, before starting visits. This allows prospective tenants to better appreciate the unit and clearly envision the final result.

Make sure the unit remains in impeccable condition in case of spontaneous visits. A unit that smells of humidity or accumulates dust will immediately deter serious applicants. Schedule regular visits by you or your maintenance team to dust, run water to ensure plumbing is functioning properly, and adjust heating to prevent damage caused by temperature variations. These routine checks are also important to comply with the requirements of many multi-unit insurance policies.

Secure the asset and notify insurers

Managing a vacant unit for several months involves increased insurance risks. Most commercial policies require formal notification after 30 days of vacancy. Failing to declare this situation could result in a denied claim in the event of water damage or vandalism.

Increase monitoring of the unit: ensure all windows are locked and, if possible, install connected leak detection or motion systems. As a landlord, integrating smart locks allows you to keep track of activity without needing to be constantly on-site.

Optimize your digital marketing strategy

If you have tried everything and your vacant unit still remains unrented, it may be time to revisit your marketing strategy. For large portfolios, the use of professional photos and virtual tour videos is very common. You may even consider hiring a designer to stage and furnish the unit for photo shoots. These visuals can help prospective tenants better imagine themselves in the space. Presenting the unit both “empty” and “staged” is a good way to maximize your chances of success in marketing.

Foreign investor landlords, be cautious

The federal Underused Housing Tax (UHT), in effect since January 1, 2022, is an annual 1% tax on the value of residential property, primarily targeting foreign owners who leave housing vacant or underused in Canada. The goal of this tax is to discourage foreign investors from leaving units vacant and to increase the supply of available housing.

In general, Canadian citizens and permanent residents who personally own their property are not subject to this tax. However, certain ownership structures (such as corporations, trusts, or partnerships) may be required to file an annual return, even if no tax is payable.

Several exemptions exist, particularly when the unit is used as a primary residence, occupied by a tenant for at least 180 days per year, or temporarily uninhabitable. However, when a return is required and not filed, significant minimum penalties may apply.

Managing a vacant unit requires discipline and a long-term perspective. By remaining proactive with maintenance, properly securing your property, and adjusting your marketing strategy, you will be able to protect the value of your investment.