MIXED-USE PROPERTY CASE STUDY
Cafe Below, Three-Bedroom Unit Above, Owned by a Super Fund, NSW Central Coast
The building had just moved from the owner's own name into her self-managed super fund, and the lender would not proceed without cover. Eight insurers declined. Placed once the fund's details were in hand, with the lender satisfied.
THE SITUATION
The owner of a two-storey building on the NSW Central Coast came to us with one line: she needed the insurance for her mortgage. She had owned the building in her own name and had transferred it into her self-managed super fund, and the lender required cover in the fund's name before it would complete.
It was one building under one roof. Downstairs was a small cafe, not licensed to sell alcohol, that did deep fry. Upstairs was a three-bedroom residential unit with its own tenants. The building sum insured was $900,000.
There was a deadline, and the ownership structure added a layer that trips up a lot of mixed-use placements: the insured was now a corporate trustee acting for a bare trust, and the policy had to be issued in exactly the name the lender's documents used.
OUR APPROACH
We split the job into the two things that had to be right: the risk detail and the paperwork.
- The cooking: we asked the owner to confirm the litres of oil in the cafe's fryers before we approached anyone, because that number decides whether a hospitality building is accepted
- The insured name: we sent the owner a written list of exactly what we needed for the trustee and the trust, so the policy would be issued in the name the lender's documents used
- The market: a small unlicensed cafe with a residence above sits inside the appetite of the markets we use for hospitality below residential once the cooking is documented, so we went there first rather than collecting declines from insurers that don't write hospitality below residential
The submission set out the tenancy split, the cafe's cooking arrangements, the construction and the ownership structure in one document.
THE CHALLENGES
Eight insurers declined to provide a quote. A cafe that deep fries under a residential unit is outside mainstream appetite on both counts: the residential share and the cooking. We didn't wait on those answers: the submission went to the markets that write hospitality below residential in parallel, which is where the building was always likely to land.
The ownership transfer was the other pressure. A super fund buying a mixed-use building from its own member is a legitimate and common structure, but the lender's conditions and the insurer's requirements for the insured name have to line up exactly, and the owner was assembling those details while we were placing the risk.
THE OUTCOME
We placed building cover at approximately $5,800 a year, on wording that covers both the cafe and the unit above.
Cover was bound in the super fund's name once the trustee details were in hand, with the lender satisfied. The building went from uninsurable at eight insurers to covered under one policy for both the cafe and the unit above.
Buying or transferring a mixed-use building into a super fund or trust is a paperwork question, not an appetite question, and it is one we handle regularly. If you have a lender waiting on a certificate, see cover before settlement or refinance, and if the tenant downstairs cooks, see cafe or restaurant downstairs for the questions we'll ask.
More Case Studies
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1920s heritage building with cafe and residential tenants. Came to us uninsured after 8 declines.
Read case study Mixed-Use PropertyCafe, Martial Arts Studio and House, Melbourne's Outer East
2011 building, half commercial with a deep-frying cafe, half residential. Existing policy had never covered the home. 6 declines. Placed at ~$4,600 vs ~$12,000.
Read case study Mixed-Use PropertyThree-Tenancy Mixed-Use with Boarding House
1910s building with food retail, apartment, and boarding house. 11 insurers declined.
Read case studyLender waiting on a certificate for a mixed-use building?
Give us the date and the ownership structure first. We sequence the markets around the deadline and can usually issue the certificate the day cover is bound.