MIXED-USE PROPERTY CASE STUDY
Electrical Contractor's Office Below, Tenanted Flat Above, Regional Queensland
A trade business run from the ground floor of the owner's own building, a residential tenant upstairs, a storage shed for the business, and a renewal due in two days. Four markets quoted; bound before the two-day renewal deadline.
THE SITUATION
The owner of a two-storey 1970 building in regional Queensland called with two days left on the existing policy. Downstairs is the office of the owner's own electrical contracting business, with customers and deliveries coming to the door. Upstairs is a three-bedroom residential flat with its own tenant. A colorbond shed on the block is used for the business's storage.
The floor split was about 60 per cent residential and 40 per cent commercial, the building sum insured $600,000, two car spaces at the front, no lender to note. The building is one structure under one roof, which is the first thing any mixed-use underwriter asks.
OUR APPROACH
A trade office under a residence is one of the easier mixed-use placements once it is described properly, so the job was speed and completeness rather than persuasion.
- The business downstairs: an electrical contractor's office, not a workshop, with customers and deliveries coming to the office door and the business's storage in the shed. That distinction matters to the underwriter and it went in the submission in those words
- The shed: declared as a business storage outbuilding rather than left off, so it sits inside the sum insured and the wording
- The insured name: the owning entity exactly as it appears on the title, with a director's date of birth for rating
- The tenancy: residential tenant upstairs on a lease, the owner's own business downstairs, and the floor split stated as a percentage
The submission went to the markets that write a residence above a trade office every day, in parallel, with the renewal date flagged.
THE CHALLENGES
Five markets declined to quote. A building that mixes a trade business, a residential tenancy and a business shed does not fit a home product or a plain commercial product, and an insurer whose products stop there declines regardless of how tidy the risk is.
The other pressure was the clock. With the existing policy expiring in two days there was no room for a slow referral, so the markets most likely to write it were approached first rather than after a round of declines.
THE OUTCOME
Four markets quoted, from approximately $3,700 to approximately $7,200 for the same building. We placed building cover at approximately $3,700 a year, on wording that covers the office, the flat and the shed under one policy.
For this deal, bound before the existing policy expired, in the owning entity's name, at the lowest of the four quotes received. The owner's own business downstairs, the tenant upstairs and the storage shed are all on one schedule.
A tradie's office with a flat above is a straightforward mixed-use building to place once it is described properly. If the business downstairs is yours, see living or working above your own business; if the building is owned through an entity, the insured name is the detail to get right first.
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