Mixed-Use Building Insurance: Shops Below, Units Above

What is mixed-use building insurance?

Who pays for the policy is a lease question: see Who pays for building insurance on a commercial property.

Who insures the building? Three shapes, three different answers

Which one are you in? Ask the body corporate manager for the plan format, then read the scheme's certificate of currency and schedule. If the scheme's policy covers common property only, the buildings are somebody's, so find out whose before you need to claim.

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. The flats are not insured separately: one building takes one sum insured and one policy, with each tenancy listed. We do not split a mixed-use building across two building policies, and have not found a case where splitting was better for the owner.

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

A building format plan defines the scheme by the floors, walls, and ceilings of a building, and most multi-tenanted commercial buildings are on one. A commercial lot in a mixed-use tower is often on a volumetric format plan instead. On either, the Queensland body corporate must insure each building a lot sits in, to the extent it is scheme land, for full replacement value. What stays yours is everything inside your lot boundary that belongs to you: your fit-out, contents, plant that serves only your lot, and your own liability. Any rental income above the cap the scheme's policy pays is yours as well. Our commercial strata insurance page sets out the rest.

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

A standard format plan defines the scheme by the land, not by the walls: small commercial parks, industrial estates, and some converted sites. In a Queensland basic scheme, a building that stands alone, with no common wall with a building on another lot, has no compulsory body corporate building cover at all. The body corporate may offer a voluntary arrangement, but taking part is optional, so in practice the building falls to its owner. Where a building shares a common wall with one on the adjoining lot, as in a shop strip, the body corporate must insure each of those buildings for full replacement value.

⚠️ Whatever the plan format, a Queensland body corporate must insure the common property and its own assets. It must also hold public risk insurance over them of at least $10 million for a single event. $20 million is the commonly recommended benchmark, and what we recommend a committee holds.

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

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. So the building goes on business insurance, and the residential part is added to it. Residential landlord insurance is the right page only for a purely residential property.

One job a residential landlord policy still does. Written beside the commercial policy, it can carry loss of rent or rent default on the flat and the contents the owner supplied. That matters most on a short-stay let, where the things in the flat are the owner's.

⚠️ The non-disclosure trap. When an insurer will not quote, it is tempting to describe the building as whichever half is easier to place. That is the single most expensive thing you can do, because the assessor finds the other half first, at claim time. Declare both uses.

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

The common stair is yours. Residential tenants, their visitors, delivery drivers, and tradespeople use a stair, entry, bin area, or car park that belongs to the building, not to any tenancy. An injury there is a claim on the building owner, because a commercial tenant's liability policy covers its own premises, not your building. Property owners liability covers what limit to hold. In a strata scheme the cover is the body corporate's, with the $10 million floor above.

The rent stops for the whole building. A ground-floor fire that makes the flats uninhabitable stops every rent line at once, commercial and residential. The loss of rent period is often a number typed once and never looked at again. We work to a period that covers the rebuild and the re-letting after it. How the period is set is on business interruption insurance, and the landlord's side in the commercial landlord's insurance guide.

The owner's contents. In a let flat, the owner's contents are what the owner supplied: appliances, window coverings, floor coverings in some wordings, and any furniture in a furnished let. On a policy covering four furnished flats, that figure is very commonly zero.

One building, one rebuild figure

The building need not come back as the same mix: the floor that was flats can come back as offices. In our experience no insurer tests your sum insured: an underwriter is not a valuer. What a genuine rebuild figure includes is in how to calculate your building sum insured.

What a shortfall costs. On a partial loss, the overwhelming majority of claims, most commercial wordings carry an average or co-insurance clause, generally tested at 80 per cent of the true value and at 85 per cent on some. Below it, the insurer reduces the payment in proportion to the shortfall. On a total loss the full sum insured is paid, and it falls short of the rebuild. The co-insurance clause explained has the arithmetic, and underinsurance in commercial buildings what the gap costs an owner.

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 estimate at no cost to you.

In a strata scheme, the shortfall becomes a special levy on every lot owner, by lot entitlement: see commercial strata insurance.

What an insurer asks about a mixed-use building

⚠️ Tell your broker the day a tenancy goes empty, not at renewal. Most wordings deal with unoccupancy expressly.

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

What goes wrong most often on a mixed-use building

The flats never get mentioned. Owners very often do not tell us there are flats at all, and more and more often they are let short-stay. Not every insurer will write a building with a residential component. Several that will want the majority of the floor space to be commercial. Where an insurer would not have offered cover had it been told, that is its answer at claim time.

A tenant starts cooking, and nobody tells the insurer. A café with no deep fryer becomes one with a benchtop fryer. To the owner it is the same café on the same lease; to the insurer, the risk it priced no longer exists. In our experience it is the single change most worth a phone call the week it happens.

The renewal does not list the tenants. Many renewal schedules do not, though insurers have tidied this up in recent years. Nothing prompts a call, so the loss of rent figure and the sum insured go another year unexamined.

A rise that looks too small to bother with costs the most. 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 untouched across that stretch leaves you underinsured: a cut payment on a partial loss, and a shortfall on a total loss. Where an owner does not ring us, we generally lift the loss of rent figure by around four per cent a year, because landlords take a rent increase most years.

A lease gets signed before anyone asks what the tenant does to the premium. Street-level trade is one of the largest drivers of a mixed-use building's premium. A cooking risk moves the premium by multiples, not by a margin. Some trades push a building out of the mainstream market to a specialist agency, at a price the owner never budgeted for. On a gross lease the owner absorbs all of the increase. It is one phone call before the lease is signed, and the one owners almost never make.

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 sum insured stays whatever it once was. That is why we commission a desktop building replacement estimate ourselves.

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, the tenant's claim on the salon's own business policy; the building damage and the rent sat on the owner's side. 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 over them added months. The damage was not the expensive part of that file. The tenant's business interruption cover was set too low, with an indemnity period of only twelve months. So the back end of a twenty-one month displacement came out of a pocket rather than a policy. Loss of rent on a building policy is the same decision under another name.

What a claim looks like in a mixed-use building

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

A kitchen fire after hours guts the ground-floor takeaway shop, leaves the two flats above smoke damaged and unusable, and damages the stairwell and roof cavity. The building is closed for months.

In shape one, where you own the whole building. Your commercial property policy responds to the building damage against your one sum insured, and carries all three rents for the period you chose. The shop's own insurance covers its fit-out, stock, and income. A stairwell injury during the make-safe is your liability.

In shape two, on a building format plan. The body corporate's policy takes the whole structure, stairwell and roof cavity included. Your own policy takes what is yours inside your lot, and rent above the scheme's cap.

In shape three, on a standard format plan with detached buildings. There may be no scheme building policy at all, and the first to say so may be the loss assessor.

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