Mixed-Use Property Insurance
A mixed use building is one property containing two distinct insurance exposures. Below is a commercial unit rated on what the occupier does; above are flats rated on how people live, and the same policy has to answer both without either part being treated as an afterthought.
Fire separation between the two is a key factor in the terms offered. Underwriters want to know what sits between the commercial ceiling and the residential floor, whether the residential part has its own protected entrance, and whether there is detection in both.
The commercial occupier drives most of the rate. Flats above a card shop are an ordinary risk; flats above a takeaway with fryers and extraction ducting are not, and some insurers may decline the second while competing for the first.
We can advise owners of shops with flats above, pubs with accommodation, offices converted in part to residential and other mixed use buildings, including where the combination restricts the market.
Common claims and risk exposures
The exposures that produce claims in this trade, rather than a generic list.
A commercial fire under people asleep
The reason this class is underwritten separately at all. A fire starting in a closed commercial unit at night is a life safety issue for the residents above, and the building's compartmentation is what stands between the two.
Extraction ducting through the building
Where the commercial unit cooks, the ducting frequently runs up through or alongside the residential part. Grease build up inside it is the fuel, and the route it takes is the path a fire uses to reach the flats.
Shared access and means of escape
Where the flats are reached through or beside the commercial premises, the escape route depends on a part of the building the residents do not control. Deliveries, stock and bins left in a shared passage are a routine and serious problem.
Water from above into a trading business
The risk runs both ways. A leak in a flat damages the shop below, its stock and its ability to trade, and produces a claim from a business rather than a household, usually with a business interruption element attached.
Two sets of conditions in one building
The commercial part carries trade conditions such as duct cleaning and alarm setting; the residential part carries unoccupancy and letting conditions. One building can therefore breach a condition on one side while the other is fully compliant.
The cover we arrange
We arrange insurance around the property, its use, construction, occupancy and ownership structure. The cover available will depend on the individual risk and the terms offered by insurers.
Buildings, both parts
The whole structure on a reinstatement basis, reflecting both the commercial unit and the residential accommodation, together with common parts, separate entrances and landlord's fixtures throughout.
- Commercial and residential parts as one structure
- Common entrances and stairs
- Landlord's fixtures in both parts
- Professional fees and debris removal
Property owners liability
Liability to the public, the commercial occupier, the residential tenants and their visitors. Mixed use concentrates several different groups of people in one building, with shared access between them.
- Residents, customers and visitors
- Shared access ways and stairs
- Limits typically £5m or £10m
- Defence costs included
Loss of rent, commercial and residential
A single fire usually stops both incomes at once. The indemnity period should reflect the slower of the two to reinstate and re-let, which is normally the commercial unit.
- Commercial rent and residential rent
- Indemnity period of 24 months or more
- Alternative accommodation for residents
- Service charge income where insured
Glass and shop front where applicable
Where the commercial part is retail, the frontage carries the same glass exposure as any shop, and it is usually written as a separate section with its own excess.
- Plate glass and frontage
- Boarding and temporary glazing
- Separate, lower excess
- Signage and fascia
Unoccupied parts
Mixed use buildings frequently have one half empty: a void shop under occupied flats, or empty flats over a trading business. Terms can be agreed for the empty part without disturbing cover on the occupied one.
- Terms for a void commercial unit
- Terms for empty flats above
- Inspection requirements
- Services isolated in the empty part
What an underwriter will ask
Having these to hand shortens the process considerably, and usually improves the terms.
- The commercial occupier's trade, and whether any cooking or hot process is carried on
- What separates the commercial and residential parts, and its fire resistance
- Whether the flats have their own entrance, or are accessed through the commercial part
- Fire detection in both parts, and whether the systems are linked or monitored
- Extraction ducting: its route through the building, who cleans it and how often
- Number of flats, whether let or owner occupied, and to what kind of tenant
- Rebuild cost for the whole building, and the rents receivable from both parts
- Any previous fire, flood or escape of water claims affecting either part
What affects the cost of your insurance?
The main factors insurers consider when assessing the premium.
What happens in the commercial unit
One of the main factors insurers consider. Hot food beneath residential is the hardest combination to place, while professional or non food retail beneath flats is written readily.
Fire separation and detection
Documented separation between the parts, a protected escape route and linked detection materially improve terms. Where separation cannot be evidenced, insurers price for the assumption that fire passes between them.
Access arrangements
A separate street entrance to the flats is worth a great deal. Access through the commercial premises restricts the market, because the residents' escape depends on a space they do not control.
Occupancy of both halves
Fully occupied buildings rate best. A void unit below, or empty flats above, brings unoccupancy conditions to part of a building that is otherwise in use, and insurers price the complication as well as the risk.
Conditions and exclusions to consider
Terms vary between insurers, so treat these as the questions to ask rather than a description of any one policy.
Duct cleaning and trade conditions
Where the commercial occupier cooks, cover typically depends on ducting being cleaned at stated intervals by a competent contractor. It is the condition most often breached and the one most likely to be examined after a fire.
Occupancy other than that declared
A shop that becomes a takeaway, or flats let room by room instead of as single households, changes the risk materially. Both are common and neither tends to be reported until renewal.
Residents' and occupier's own property
The building policy covers the structure and landlord's fixtures. The shop's stock and the residents' belongings are theirs, and after a fire affecting both, three separate insurers are often involved.
Empty parts outside agreed terms
A void shop beneath occupied flats is still an unoccupied commercial unit. Left unreported past the stated period, theft, malicious damage and escape of water usually fall away for that part.
Common questions
Can I insure the shop and the flats on separate policies?
It is possible where ownership is split, but for a single owner it is usually worse. One structure insured under two policies produces arguments about which policy responds to damage at the boundary, and both insurers will typically want to know about the other half.
Why does a takeaway below make such a difference?
Cooking, hot oil and extraction ducting create a serious fire risk directly beneath people who may be asleep. It is a common reason a mixed use building is declined by the standard market and needs specialist terms.
Do the flats above need their own alarm?
Insurers usually expect detection in both parts, and increasingly that the systems are linked so a fire below is detected above. Where the flats are let, licensing and fire safety duties will generally require it in any case.
The shop is empty. Are the flats still fully covered?
The flats can remain on normal terms while the commercial unit moves to unoccupied terms, provided the insurer is told. Left unreported, the restriction applies to the empty part at exactly the time it is most exposed.
How do I get a quote from True Risk Solutions?
Call 01304 262880 and speak to a broker, or email info@truerisksolutions.co.uk with what you do, what you need cover for and a phone number with the best time to call, and a broker will call you back. We need a phone number to quote, because the cover and the price depend on questions that are quicker to answer on a call than by email.
Related trades
Speak to a specialist who understands your industry
Tell us about your business and the work you undertake, and we will come back to you with cover options built around it. Call 01304 262880, or email us with a phone number and the best time to call and a broker will ring you back.