A Guide to Insuring Mixed-Use Buildings

When shopping for investment opportunities in the New York City area, prospective building owners often encounter mixed-use properties. These buildings combine commercial and residential space, and they’re found throughout the five boroughs and the surrounding area.

Mixed-use properties can range from small buildings with a store or restaurant on the ground level to large apartment buildings that have retail and office space on the lower stories. In most cases, the residential portion of a mixed-use property occupies more space than the commercial section.

Even for experienced landlords, having commercial tenants differs from having residential tenants. On the plus side, businesses often sign a long-term lease, and many commercial tenants don’t occupy the space at night. But businesses also bring other considerations, especially when it comes to insurance.

General insurance guidelines for mixed-use buildings

Building owners and property managers should require each commercial tenant to carry a liability policy of at least $1 million. This policy should name the landlord or building owner as an additional insured. Building owners should not be held responsible for tenants’ customers.

Also, make sure the insurance carrier for commercial tenants is rated B+ or better on the A.M. Best scale, which indicates an insurance company with a good ability to meet its financial obligations. Other insurance rating groups use different classifications, but the key is to find a carrier with a “good” outlook.

Occupancy-specific concerns

Building owners need to consider special requirements that depend upon the specific nature of occupancy. Consider the following examples:

• Restaurants that serve liquor also need to have a liquor liability policy of at least $1 million.
• Tenants that involve children, such as daycare centers and tutoring facilities, require special licenses and insurance, as well as two means of egress.
• Laundromats require inspections of water hoses to prevent leaks.

Keep in mind that the types of commercial tenants in your building can affect your insurance premiums as well. You may wish to adjust the proposed rent based on the type of business.

Getting the best insurance for mixed-use buildings

To help small building owners in New York City get the right policy for their mixed-use building, City Building Owners Insurance goes through the following process:

• Review of exposures for different tenant types, including types of insurance proof associated with each
• Discussion of risk transfer
• Review of certificates of insurance

In addition, we help building owners look at their property with the goal of lowering their overall risk profile. This process allows us to find the right policy at the best price for each building.

For a free insurance review or more information about insuring a mixed-use building, please call City Building Owners Insurance at 877-576-5200.