Mixed-Use Building Insurance: Shops Below, Units Above

Quick answerIf you own, or own part of, a building with shops or offices below and flats above, who insures it depends on the title rather than the mix of uses. One owner of the whole building insures the whole structure. A strata lot may not be yours to insure. Ring us on 07 3292 1111.

Written by William Paull, Co-Founder & Account Director · 22 min read · Reviewed by James Kirk, Compliance Manager

What is mixed-use building insurance?

Quick answerA mixed-use building is one structure with more than one use. There is no mixed-use product: the building goes onto a commercial or a strata policy, and the mix is priced inside it.

Who ends up paying for the building insurance is a lease question rather than a building question. Who pays for building insurance on a commercial property covers the strata and mixed-use case.

Who insures the building? Three shapes, three different answers

Quick answerThere are three ownership shapes a mixed-use building comes in, and the answer is different in each. One owner of the whole building on one title insures the whole structure themselves. In Queensland, a lot created under a building format plan or a volumetric format plan is generally the body corporate's to insure. A lot in a basic scheme created under a standard format plan, where the buildings are detached, is generally the lot owner's. There the body corporate's building cover is not compulsory, and taking part in any voluntary scheme is optional. Other states read against their own Act.

How to find out which one you are in. The plan format is recorded on the survey plan for the scheme, and the body corporate's records will show it. In practice the fastest route is to ask the body corporate manager which plan format the scheme is on. Then ask for the current certificate of currency and the schedule behind it. If the scheme's policy covers the buildings, the scheme is insuring them. If it covers common property only, the buildings are somebody's and it is worth finding out whose before a loss decides it for you.

Shape one: you own the whole building on one title

There is no body corporate, no scheme, no levy and nobody else with a duty to insure anything.

The residential half does not get insured separately just because the tenants upstairs are residential. It is one building, so it takes one building sum insured and one policy, with each tenancy listed on it. We do not split a mixed-use building across two building policies, and we have not found a case where splitting it was the better answer for the owner.

Shape two: you own a lot, and the scheme is on a building format plan

A building format plan is a scheme defined by the floors, walls and ceilings of a building. If your lot is a suite, a shop or an apartment stacked with others inside one structure, this is almost certainly the shape you are in. It is what most multi-tenanted commercial buildings are. A commercial lot in a mixed-use tower is often subdivided a different way again, under a volumetric format plan. That is an air-space parcel rather than a set of walls.

In Queensland, where lots are created under a building format plan or under a volumetric format plan, the body corporate must insure each building in which a lot in the scheme is located, to the extent the building is scheme land, for full replacement value, reinstated to the condition it was in when new, with debris removal and professional fees included. Where the body corporate has a duty to insure a building, it must also obtain an independent full replacement value valuation at least every five years.

So in this shape the building is not yours to insure. What is still yours is everything inside your own lot boundary that belongs to you: your fit-out, your contents, plant that serves only your lot and your own liability, plus any rental income above the cap the scheme's policy pays. That is a genuinely different conversation, and it has its own home on our commercial strata insurance page. That page sets out both layers and what the body corporate's policy leaves behind.

Shape three: you own a lot, and the scheme is on a standard format plan

A standard format plan is a scheme defined by the land, not by the walls of a building. Small commercial parks, industrial estates, some townhouse-style schemes and some converted sites are subdivided this way.

Here the Queensland rule flips, and this is the case almost nobody expects. Where the lots sit in a standard format plan in a basic scheme and there is a stand-alone building on one or more of them, meaning a building with no common wall with a building on another lot, there is no compulsory body corporate building cover at all. The body corporate may set up a voluntary insurance arrangement over those buildings for the owners of the lots they sit on, and taking part in it is optional. The statute says nothing about the lot owner's own duty either. It is simply silent, which means nobody else has to insure the building and in practice it falls to the owner.

There is one qualifier on that, and it is the part that catches a shop strip. Where the lots sit in a standard format plan and a building on one lot has a common wall with a building on the adjoining lot, the body corporate must insure each of those buildings for full replacement value. So the plain-words test is not just "which plan is the scheme on". It is "which plan is the scheme on, and are the buildings detached".

⚠️ Either way, whichever plan format the scheme is on, a Queensland body corporate must hold public risk insurance over the common property and its own assets of at least $10 million for a single event. That floor does not depend on the plan format. It is the legal minimum rather than a recommendation: $20 million has become the commonly recommended benchmark, and it is what we recommend a committee holds. The wider explanation of why a building owner's liability limit matters is on property owners liability.

And in every scheme, of any plan format, the body corporate must insure the common property and its own assets.

⚠️ This is the Queensland position. Strata law is made state by state and the split is not the same everywhere. In New South Wales, for example, the duty to insure the building sits with the owners corporation and does not turn on how the scheme was subdivided. If your building is in another state, the answer is read against that state's own Act. What is legally required of a commercial building owner, in each of the four places a requirement can come from, is set out in what insurance is required on a commercial building.

Why an ordinary home policy and an ordinary business policy each leave a gap

Quick answerA home or residential landlord policy is written for a dwelling, and a shop at street level is not one. A business pack is written around the business, and flats above are an occupancy it must be told about. Each was written for half your building.

The residential side. A shop at street level is a business being run inside the same structure. That is not what a home and contents or residential landlord policy was written or rated for. In our experience a residential insurer will not take a building that is designated commercial or that has a commercial tenancy in it at all. The building goes on business insurance, and the residential part is then added to that. If your property is purely residential, residential landlord insurance is the right page. The moment part of the building is leased to a business, it is not.

One job a residential landlord policy still does in a mixed-use building. The building itself stays on the one commercial policy. Say an owner wants loss of rent or rent default on the flat, and cover for the contents the owner supplied inside it. Beside the commercial policy, a residential landlord policy can be written to carry those. That is the usual way around the gap rather than an exception to the one-policy rule. It matters most where the flat is let short-stay, because the things in that flat are the owner's rather than a tenant's.

The commercial side. Residential tenants living above a business are an occupancy the underwriter has to be told about. People asleep upstairs change the fire and liability picture of the whole building, whether or not they are anything to do with the business below.

⚠️ The non-disclosure trap runs the other way to how people expect. It is tempting, when an insurer will not quote, to describe the building as whichever half is easier to place. That is the single most expensive thing an owner can do with a mixed-use building, because it is the fact the assessor finds first. The building is described as what it is, both uses declared, and it is placed with a market that writes that. What an insurer is entitled to be told, and what happens at claim time when it was not, is covered in what insurance is required on a commercial building.

The residential tenants upstairs: three things that stay with the owner

Quick answerResidential tenants do not change who owns the building's risks. Three things stay with the owner: the parts tenants share, the rent that stops while the building is unusable, and whatever the owner supplied inside a let flat.

The common stair is yours, and it is used by people who never signed a commercial lease. In a mixed-use building the residential tenants, their visitors, delivery drivers and tradespeople all use a stair, a landing, an entry, a bin area or a car park that belongs to the building rather than to any tenancy. Where a person is injured in one of those places, the claim comes to the building owner. A commercial tenant's own liability policy is written to cover that tenant's occupation of their own premises, not the owner's building. That is the property owners liability question, and its canonical home is property owners liability, which explains what limit to hold and why. In a strata scheme the body corporate holds its own public risk cover over the common property, which is the $10 million floor above.

The rent stops for the whole building, not just the damaged half. A fire in a ground-floor shop that makes the flats above uninhabitable takes out every rent line in the building at once, commercial and residential together. Loss of rent, and how long it is insured for, is one of the two questions a mixed-use owner most often has set wrongly. The period is usually a number somebody typed once and nobody has looked at since. The rule of thumb we work to is that the period has to cover the rebuild and the re-letting after it, not just the rebuild. How that is set, and what a business interruption section is actually doing, is on business interruption insurance. The landlord's cut of it is in the commercial landlord's insurance guide.

The contents question is smaller than owners think, and it catches them anyway. In a let residential flat, the tenant's belongings are the tenant's. What is the owner's is whatever the owner supplied: the appliances, the window coverings, the floor coverings in some wordings, and any furniture in a furnished let. It is not a large figure, and it is very commonly a figure of zero on a policy that covers a building with four furnished flats in it.

One building, one rebuild figure

Quick answerA mixed-use building is rebuilt as one structure, so it takes one sum insured: demolition and debris removal, professional fees, rebuilding to today's standards, and the time the work takes. Adding the shop's worth to the flats' worth is market value, not rebuild cost.

A fire does not stop at the ceiling of the shop. The building goes back up as one building, and not necessarily as the same mix of uses it had before. The floor that was flats can come back as offices.

What a genuine rebuild figure includes is set out in how to calculate your building sum insured.

And no insurer is checking it for you. In our experience an underwriter is not a valuer, and it is not their role to advise you on the number. So a building can sit on cover for years, renewing quietly, with a sum insured nobody on the insurer's side has ever tested. The number is yours and your broker's to get right.

What a shortfall costs, and it does two different kinds of damage. On a partial loss, which is the overwhelming majority of claims, most commercial wordings carry an average or co-insurance clause. The test is generally set at 80 per cent of the true value, and some wordings set it at 85 per cent, so the figure in your own policy is the one that counts. Insuring below that figure means the insurer reduces the payment in proportion to the shortfall. On a total loss there is no clause to argue about. The insurer pays the full sum insured and the owner then finds out that the full sum insured does not rebuild the building. The arithmetic is in the co-insurance clause explained, and what the gap does to a commercial building owner in practice is in underinsurance in commercial buildings.

One thing changes the economics of getting this right. On several of the wordings we place, the co-insurance clause is switched off entirely. The condition is that the sum insured is the full figure in a current professional valuation by an approved valuer. We commission a desktop building replacement valuation at no cost to you, so the figure is settled before the policy is written rather than after the loss.

In a strata scheme the same problem has a different bill attached to it. A shortfall in the scheme's sum insured is raised as a special levy across every lot owner, by lot entitlement. That mechanism is explained on commercial strata insurance.

What an insurer asks about a mixed-use building

Quick answerFour things decide how a mixed-use building is looked at: what the ground floor is used for, whether there is cooking in it, what hours it trades, and what the building is made of. The use at street level sets the fire and liability picture for everybody above.

⚠️ One tenancy sitting empty is worth telling your broker about the day it happens, not at the next renewal. An unoccupied tenancy is a change to the risk the insurer priced, and most wordings deal with unoccupancy expressly.

What moves the price of a commercial building generally is in what commercial building insurance costs.

What goes wrong most often on a mixed-use building

Quick answerSix things go wrong repeatedly: the flats are never mentioned; a tenant starts cooking and nobody tells the insurer; the renewal omits the tenancies; the sum insured drifts behind building costs; a lease is signed before the trade is priced; and nobody values a freehold building.

The residential half never gets mentioned. Owners very often do not think to tell us there are flats in the building at all. More and more of the time the residential part is short-stay accommodation rather than a long lease. It matters far more than it sounds. Not every insurer will write a building with a residential component in it. Several of the ones that will want the majority of the floor space to be commercial use before they will price it. So the detail the owner did not think worth mentioning is often the detail that decides which markets are open at all. And it does not stay a new-business problem. Where an insurer would not have offered cover had it been told, that is the answer the owner gets at claim time.

The tenant downstairs changes, nobody tells the insurer, and cooking is the one that hurts. A café with no deep fryer becomes a café with a benchtop fryer. To the owner nothing has changed, because it is the same café with the same lease. To the building's insurer the risk it priced no longer exists. In our experience that is the single change most worth a phone call the week it happens. It is also the one owners are least likely to think of as insurance news.

The renewal never prompts anyone, because the tenants are not on it. A good many renewal schedules do not list the tenancies at all. So the owner opens the mail, sees the same building and a familiar premium, with nothing in front of them saying a change of tenant is theirs to report. Insurers have tidied a lot of this up over the past few years. The effect on the owner is the same either way. Nothing on the page asks the question, so nobody rings, and the loss of rent figure and the building sum insured go another year without being looked at.

A rise that looks too small to bother with is the one that costs the most. It never once looks urgent. An owner sees building costs go up a little, decides it is not worth a call, and five years go very fast. The real movement is larger than the figure most owners carry in their heads. Non-residential building construction costs across Australia rose 4.4 per cent in the year to June 2026, and about 40 per cent since 2018 (Australian Bureau of Statistics Producer Price Indexes, construction, released 31/07/2026). A sum insured that has not been looked at across a stretch like that is not slightly behind. It is behind enough to bite on a partial loss, where the co-insurance clause cuts the payment in proportion to the shortfall. And behind enough to leave the owner short on a total loss, where the full sum insured is paid and does not put the building back. Where an owner does not ring us, we generally lift the loss of rent figure by around four per cent a year ourselves. Landlords take a rent increase most years, and the insured figure has to follow the rent rather than trail five years behind it.

A new lease gets signed before anybody asks what that tenant does to the premium. The trade at street level is one of the largest single drivers of what a mixed-use building costs to insure. A cooking risk moves it by multiples rather than by a margin. Some trades are harder again. A building can fall out of the mainstream market altogether and have to be placed through a specialist agency, at a price the owner never budgeted for. On a gross lease the owner absorbs every cent of that, and a meaningful slice of the new rent goes straight back out again as premium. It is one phone call before the lease is signed. It is the call we most wish owners would make, and the one they almost never do.

And nobody makes a freehold owner value their building. Where a body corporate has to insure a building, it also has to hold an independent full replacement value valuation, renewed at least every five years. An owner who holds the whole building on one title has no such duty from anyone at all, so the valuation is the thing that simply never gets done and the sum insured stays whatever it once was. That is the reason we commission the valuation ourselves rather than waiting to be asked for it.

And one that actually happened. A water pipe burst inside an internal wall of a mixed-use building. The escaping water went through all the flooring and flooded the ground-floor shop, a beauty salon. The claim came to about $110,000, and it was the tenant's claim on the salon's own business policy. That leaves the building damage and the rent on the owner's side of the same event. It happened in February 2020, and the business was not back in its own shop until November 2021. The first repairs were not accepted, and the argument about putting them right added month after month to the timeline. The damage was not the expensive part of that file. The tenant's business interruption cover was set too low, and its indemnity period was only twelve months. So the back end of a twenty-one month displacement was uninsured, and came out of a pocket rather than a policy. The lesson transfers straight to the owner, because loss of rent on a building policy is the same decision under another name. The period is a real decision and not a formality, and water inside a wall does not care which half of the building it is in.

What a claim looks like in a mixed-use building

Quick answerThe same fire produces three different answers, and which one you get was decided by a document signed before you bought the place. Whether the building is yours to insure, the body corporate's, or nobody's, turns on the ownership shape.

This is an illustration, not a real claim, and not a promise about how any particular policy responds.

A takeaway shop on the ground floor has a fire in its kitchen after hours. The fire is put out, but the shop is gutted, the two flats above are smoke damaged and unusable, and the stairwell and the roof cavity are both damaged. Nobody is hurt. The building is closed for months.

In shape one, where you own the whole building. Your commercial property policy is the only building policy in the picture. It responds to the building damage across all three tenancies, and the rebuild figure it pays against is the one sum insured you set. Your loss of rent section carries the commercial rent and both residential rents while the building is out of action, for as long as the period you chose runs. The shop's own business insurance covers the shop's fit-out, stock and its own loss of income, not your building. If somebody is injured in the stairwell during the make-safe work, that is your liability, not your tenants'.

In shape two, where you own a lot and the scheme is on a building format plan. The body corporate's policy takes the building, including the stairwell and the roof cavity, and it takes them for the whole structure rather than lot by lot. Your own policy takes what is inside your lot that is yours, and the rent above the cap the scheme's policy pays. If the scheme's sum insured is short, the shortfall is raised as a special levy across every lot owner by entitlement. Including you, and including the lot owners who pushed for a valuation and were outvoted.

In shape three, where you own a lot and the scheme is on a standard format plan with detached buildings. There may be no scheme building policy at all. If nobody has told you that, the first person to say it out loud is the loss assessor.

FAQ

My building has shops below and flats above. Is that commercial or residential insurance?

Commercial, in almost every case. In our experience a residential insurer will not take a building that is designated commercial or that has a commercial tenancy in it. So the building goes on a commercial wording that carries both uses, with the mix declared.

Does my body corporate insure the building, or do I?

In Queensland it depends on the plan format. Under a building format or volumetric format plan the body corporate must insure the building. Under a standard format plan in a basic scheme with detached buildings there is no compulsory scheme building cover at all. In every scheme, whatever the plan format, the body corporate must still insure the common property and hold public risk cover of at least $10 million for a single event.

I bought a house that has been converted into a shop with a flat behind it. What do I insure it as?

As one building with two uses. A converted house is still one structure with one roof, so it takes one building sum insured. The rebuild figure has to reflect what it would cost to put back what is standing there now, rather than what a house of that size costs. If the conversion created separate lots, you are in a scheme and the plan format question above applies.

A bank wants a certificate of currency before settlement on a mixed-use building. What does it need to say?

Broadly, that the building is insured, for what amount, for what period, and that the lender's interest is noted. The detail is the lender's to state and it varies, which is why the certificate is worth reading against the loan conditions rather than assumed to match them. Two things go wrong on mixed-use buildings in particular. The sum insured is the number the lender asked for rather than a rebuild figure, which satisfies the bank and not the claim. And the description of the property does not mention both uses. What lenders, leases and bodies corporate can each require is set out in what insurance is required on a commercial building.

Does a commercial kitchen downstairs affect the flats upstairs?

Yes, and it changes how the whole building is rated rather than one tenancy. What tends to make the difference is not the kitchen itself but what is in place around it. The extraction system, how often the ductwork is professionally cleaned, and what suppression is fitted.

My tenants upstairs are residential. Does that mean I need landlord insurance as well?

Sometimes, and never as a second policy on the building. The building stays on the one commercial policy, and a residential landlord policy beside it can carry loss of rent, rent default and the contents you supplied.

Who is responsible if someone falls on the shared stairs?

The building owner, or in a strata scheme the body corporate for the common property. A commercial tenant's liability policy covers that tenant's own premises, so the shared stair, entry and car park sit outside it.

Do you insure purely residential strata as well, or only commercial and mixed-use?

We do both. Our strata work leads with commercial and mixed-use schemes, which is where most of our clients are and where the questions on this page come from. We place residential strata as well. Every one of our account managers can, and it is a live product on the panel we use. We write it in Queensland, Victoria, New South Wales, South Australia and Western Australia, on both plan types. If that is what you have, ring us on 07 3292 1111.

Related content

Product pages:

• Commercial strata insurance
• Commercial building insurance
• Commercial property insurance
• Commercial landlord insurance
• Residential landlord insurance
• Property owners liability
• Business interruption insurance

Who you are:

• Commercial building owners
• Commercial property owners

Guides:

• Commercial strata insurance vs building insurance: which policy covers what
• Who pays for building insurance on a commercial property?
• What is in the insurance clause of a commercial lease?
• What insurance is required on a commercial building?
• How to calculate your building sum insured
• The co-insurance clause explained
• Underinsurance in commercial buildings
• What commercial building insurance costs
• The commercial landlord's insurance guide
• Is commercial property insurance tax deductible?
• Insurance terms glossary

Tools:

• Desktop building replacement valuation
• Underinsurance risk checker