Residential vs commercial strata insurance

Residential strata insurance is intended for buildings used mainly as homes. Commercial strata insurance is intended for schemes with a material business, retail, hospitality or industrial use.

Mixed-use buildings sit between those descriptions. Providers often use the percentage of commercial floor area and the type of tenants to decide which product may suit the scheme.

The word strata describes the ownership structure. It does not tell an insurer everything about the risk.

What counts as residential strata?

Residential strata can include:

• apartment buildings;
• unit and villa complexes;
• townhouses with shared property;
• duplexes or small schemes; and
• mainly residential mixed-use buildings within a provider's permitted commercial share.

The property must still fit the types of buildings the product is designed to cover. A residential product may not accept a building used as a hotel, resort, boarding house or other accommodation business.

The number of people who live in the building can also matter. A building that is vacant, under construction or used heavily for short stays may need a closer review.

What counts as commercial strata?

Commercial strata can include schemes containing:

• offices and professional suites;
• shops and showrooms;
• cafes, restaurants or food businesses;
• medical or allied-health premises;
• warehouses and storage units;
• light-industrial units;
• manufacturing premises; or
• several uses in one scheme.

These activities do not carry the same risk. An office building and a complex with commercial kitchens, stored chemicals or late-night licensed premises can be treated very differently.

The provider needs the actual tenant activities, not just the description “commercial”.

How mixed-use strata is classified

A mixed-use scheme combines residential and commercial use. A common example is apartments above shops or offices.

Some providers use around 20% commercial floor area as a cut-off between residential and commercial products. It is not a national rule. Another provider may use a different measure or review the whole property before deciding.

Count floor area as well as lots

Lot count can give the wrong answer.

A scheme with 20 apartments and one large supermarket lot may have a substantial commercial floor area. Another scheme with several small office lots may still be mainly residential by area.

If the exact percentage is not known, provide:

• the number of residential and commercial lots;
• approximate floor area for each use;
• the strata plan, if available;
• a current tenancy schedule; and
• a short description of each business.

Select Not sure in the Specialist Compare quiz if the committee cannot confirm whether commercial floor area is below or above 20%.

Why the type of commercial tenant matters

Offices and ordinary retail

Offices and ordinary shops may be easier to place than businesses with cooking, hazardous materials or late-night trading.

Acceptance still depends on the building, location and claims history.

Food and hospitality

Commercial kitchens add heat, grease, extraction systems and higher fire risk. The provider may ask about cooking methods, fire protection, cleaning and the share of floor area used by the business.

Some providers apply limits or ask for more information where a large part of the property is used for cooking.

Licensed venues and late-night businesses

Bars, nightclubs and other licensed venues can create different fire, liability and security exposures.

Providers may ask for more information about licensed and late-night venues before deciding whether they can offer cover.

Storage, industrial and manufacturing use

The stored goods, processes and fire load matter. Light storage can be treated differently from manufacturing, spray painting or chemical handling.

Give the broker or insurer an accurate business description. A tenancy schedule using only broad labels such as “warehouse” may not be enough.

Serviced apartments and short-stay use

Accommodation can look residential but operate as a business.

Providers may apply limits or ask for more information about short-stay use. Give the actual use, the share of short-stay lots and any onsite management.

When a provider may need more information

The property may need a closer review if the scheme has:

• a commercial proportion close to a provider's cut-off;
• an unusual or hard-to-describe business tenant;
• manufacturing, high-hazard storage or a late-night licensed venue;
• known structural, waterproofing or fire-safety defects;
• ACP or EPS cladding;
• major works or staged development;
• low occupancy or prolonged vacancy;
• a difficult claims history; or
• a high natural-hazard exposure.

Being asked for more information does not mean the provider has declined the property.

Information to prepare for a commercial or mixed-use quote

Scheme details

• Legal scheme name and registered plan.
• Property address and building sum insured.
• Number and type of lots.
• Current policy schedule and renewal date.

Tenant details

• Tenancy schedule.
• Business activity in each commercial lot.
• Commercial floor-area percentage.
• Hours of operation and vacancy details.
• Cooking, storage, manufacturing or licensed activities.

Building and risk records

• Construction and year built.
• Fire-safety systems and current certificates.
• Claims history.
• Defect and cladding reports.
• Major works or remediation plans.
• Current replacement-cost valuation.

Tell the provider about every use of the property when asking for a quote. Missing information can delay the decision or affect the policy later.