The computation that is being discussed is in a CFT with central charge c=24k and the trace is being computed for irrep associated the vacuum state |Ω⟩, which has h=ˉh=0. It is easy to show that L−1|Ω⟩ has zero norm with a similar statement for the anti-holomorphic part. In other word, we need to project out descendants of L−1|Ω⟩ from the trace. One has
TrΩ(qL0−c24)=q−kTr(qL0)=q−k∞∏n=11(1−qn)−q−k+1∞∏n=11(1−qn)=q−k∞∏n=21(1−qn) .
In the first line, I have put in c=24k. In the second line, I include a second term to subtract out the contribution of the null (zero-norm) state and its descendants. The second term is not present in a generic Verma module where there are no nulls at all levels and the Verma module is an irrep of the Virasoro algebra. Please check the paper(s) to see if they include the c24 factor in their definition of L0 (it is the usual cylinder vs plane relation).
Remark: The vacuum character in the Ising model (c=1/2) is an interesting example. It has an additional null at level 2. However, the two nulls themselves are not irreducible and there are nulls over nulls and so on. This leads to an infinite sequence of addition and subtractions that lead to the character expansion (see Ginsparg, Applied Conformal Field Theory, for more details)
χ0=12(√θ3η+√θ4η)=q−1/48(1+q2+q3+2q4+⋯) .