Guide to insuring a mixed-use property

Mixed-use properties can be complex, often combining homes, shops, offices, and other spaces under one roof. And when it comes to insurance, that mix of uses means a one-size-fits-all policy usually isn’t enough.

If you’re a landlord, freeholder or property manager, getting suitable cover can help keep your property protected. This guide covers what a mixed-use property is, the types of insurance you might need, and what to consider before choosing a policy.

What is a mixed-use property?

A mixed-use property combines residential and commercial spaces within the same building. It might be a high street shop with flats above, an office building with a penthouse apartment, or even a converted warehouse with a ground-floor café and rental units upstairs.

These properties serve more than one purpose, which makes them popular in city-centre areas where space is limited. They’re often owned by landlords or freeholders who rent out the different units to separate tenants—for example, a business on the ground floor and private tenants above.

Since they’re used in different ways, mixed-use properties come with unique risks and responsibilities, including how they’re managed, maintained, and insured.

What insurance do you need for a mixed-use property?

Insuring a mixed-use property isn’t always straightforward. Since the building has multiple uses, your insurance cover should reflect the various risks and responsibilities of each use.

The type of insurance you need depends on your specific setup and the agreements in place with your tenants, but most owners may want cover for the following:

  • Buildings insurance: Can cover the cost of repairing or rebuilding the structure of the property after events like fire, flood, storm damage, or vandalism. It can include both residential and commercial parts of the building.
  • Public and employers’ liability insurance: Can protect you if someone is injured on the property or if you employ people to maintain or manage the building. This cover can also help with legal fees and compensation.
  • Rental and income protection: If the property becomes uninhabitable due to an insured event, this type of cover can help you recover lost rent or income from tenants who can’t use the space.
  • Legal costs cover: Can help with the costs of resolving disputes with tenants, contractors, or third parties. It can include cover for legal advice, court fees, and solicitor costs.
  • Rehousing costs for business and residential tenants: Can pay for alternative accommodation if tenants need to live elsewhere temporarily due to property damage.
  • Malicious and accidental damage cover: Can cover damage caused intentionally or by accident, whether by tenants or other third parties. This can be especially useful in mixed-use properties with different types of tenants.

How does mixed-use property insurance work?

Mixed-use property insurance is designed to cover buildings including both residential and commercial spaces. It’s tailored to protect against the specific risks that come with running a building used in multiple ways, such as different fire safety requirements or multiple tenancy agreements.

This means one policy can provide flexible cover across the entire building, even if the individual units are used differently. Insurers may ask you to provide details about the types of tenants, how the building is used, and any special requirements, such as late-night trading hours or communal access areas.

Insurers will take all of this into account to build a policy that matches your property’s layout and usage, so you’re not left with gaps in cover or paying for unnecessary add-ons you don’t need.

Considerations when insuring your mixed-use property

No two mixed-use properties are the same, and that means insurance needs can vary. Before arranging cover, it’s important to understand how your building is set up and who is responsible for what.

Key things to consider include:

  • Occupancy types: The risk at your property depends on who’s using the space. A café or retail store will usually pose different risks to a private residence or office.
  • Responsibilities and agreements: Are you responsible for insuring the whole building, or just part of it? Do your lease or tenancy agreements clearly set out who arranges and pays for insurance? These varying responsibilities can affect the insurance you need.
  • Shared spaces: If tenants share communal areas like stairwells, hallways or parking areas, they may need to be included in the cover.
  • Usage hours and access: Commercial tenants working late at night or with high numbers of customers may increase risk. Your insurer will likely want to know about this.
  • Compliance and safety: Properties with multiple uses often have stricter requirements for fire safety, access, and general maintenance. Make sure these are factored into any insurance policy.

Who is responsible for insuring a mixed-use property?

Responsibility for insurance depends on who owns the building and how it’s structured. If a single landlord or freeholder owns the entire property, they’ll usually arrange freeholders’ insurance cover for both the residential and commercial parts. The cost is shared through tenant agreements or service charges.

In split ownership buildings, the freeholder often arranges buildings insurance and recovers costs from leaseholders, for example, leasehold flats above a commercial unit.

If there’s a Residents’ Management Company (RMC) or Right to Manage (RTM) company involved, they may arrange insurance for the residential areas, while commercial tenants handle their own cover. Always check your lease or management agreements to be clear on who needs to insure what.

FAQs

Yes, you can usually insure the entire building under a single mixed-use property policy. However, it depends on how the building is owned and occupied. If different parts of the property are owned by different people, it might not be possible or practical to cover everything under one policy. Always check individual responsibilities and lease terms first.

Mixed-use insurance can give you protection for properties with both residential and commercial uses. Instead of juggling separate policies, you can cover multiple risks under one plan, such as fire, damage, or loss of rent. It can help simplify things and ensure there are no gaps in cover between different areas of the building.

Yes, you can live in a mixed-use property. These buildings often include residential flats above commercial spaces, such as shops or offices. As long as the property is legally set up for residential use and meets local planning and safety requirements, living there is allowed.

Disclaimer:

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.

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