Flat Above Business

So, you have a building with a mixed commercial and residential use, and you’re left wondering:

How am I going to insure this?

The main risk with above-shop flats is that their commercial neighbour downstairs is subject to change. What was once a quiet haberdashery may in a year become a late night takeaway. Different businesses require different levels of cover and will have varying premiums depending on the business’ individual risks. A late night takeaway will naturally have significantly more risks than a haberdashery. The biggest risk of course being fire, and this will affect the insurance for the residential property above. So the residential portion of the insurance is expectedly a little higher than if the flat was simply above another flat.

It may be, however, that there is very little risk of the business downstairs dramatically changing to something riskier than a haberdashery – and the insurer will take this into account. As well as other factors such as the general commercial activity in the area, e.g. whether it’s a quiet, mainly residential street or a busy, nightlife area of the town.

Mixed Commercial / Residential Property - flat on top of business

Can I insure the whole building under one policy?

Short answer: YES.

Mixed use property insurance may not be as straightforward as single use commercial or residential properties, but they are a common type of premises. And, at Ashburnham, we have years of experience in crafting bespoke insurance policies to most suitably cover these types of buildings, combining both the residential and commercial use under a single policy.

For example, if you are the freeholder or the landlord of a building with a business (such as an office or a shop) on the ground floor and a residential flat upstairs, this will become commercial let property insurance. Even though there is the residential let element, which will be taken into consideration and premium adjusted for, the policy itself will be for a commercial let property.

This includes:

  • shop downstairs, flat upstairs;
  • office downstairs, flat upstairs;
  • pub downstairs, bed and breakfast upstairs where the guest house owner also resides;
  • and any other combination of residential and commercial use in one building.

When owners are having trouble with insuring a mixed use property, this is usually only because they are attempting to approach the insurance as a residential let property first and fore-mostly. And many residential home insurers won’t insure flats above commercial properties. However, when you are getting a quote for a commercial let property, you will be asked if there are any residential sections within the property.

Is the leaseholder responsible for paying the insurance?

If you have sold the flat above the shop, you may want to bill the flat’s new leaseholder for half of the building insurance. It is the responsibility of the freeholder to cover the bricks and mortar of the building, and the leaseholder or leasehold landlord will legally not be able to take out buildings insurance themselves. However, it is common for there to be a clause in the lease which states that the leaseholder will pay for their share of the building insurance. This may specify either 50% or the insurer may be able to inform you on a fair amount to charge the leaseholder for the residential section only.

Call us FREE on 0800 1696137
if you would like to talk to us directly about your mixed use property or to get a quote!

2 Responses to What Insurance do you need for a Mixed Commercial / Residential Property?
  1. My commercial property is 1,200000 market value, how much should i ask for to insure for rebuilt cost.

    • Unfortunately the market value has no correlation with the rebuilding cost. There are online calculators that give estimates of your building sum insured but most of these are for residential properties only. The only accurate way to get your rebuild figure is from an up to date building survey from a professional.


Ask Us A Question