QUESTION:
My client's dwelling is occupied by them and has a small unit downstairs, which is used for occasional AirBnB. The unit is self-contained.
The client's sum insured reflects the cost to rebuild the whole building, including the Air BnB portion.
My understanding is that as the AirBnB is not the client's usual home or their own holiday home and is not intended to be used as such, it does not attract NHI or FEL levies. Only one set of levies is to apply to the property.
The insurer keeps trying to tell me they need a separate sum insured for the lower unit and that they have to charge additional levies on that unit. I have checked the Insurers Guide to NHI levies (which I am quite familiar with), and I am sure I am correct - only one set of levies applies to the main dwelling. Levies are not charged on the AirBnB.
I would love clarification from an expert.
EXPERT ANSWER: Lynne Robinson, Natural Hazards Commission
(This answer applies to the NHI levy query only, not the FENZ levy)
For a building or part of a building to be dwelling under the NHI Act, it must be both self-contained and be someone’s home or holiday home (or capable of/intended by its owner to be used as such).
In your example, the downstairs unit is self-contained, and it is used for short-term lets (ie non-residential). This unit does not meet the definition of a dwelling under the NHI Act (because it is not used as someone’s home or holiday home), therefore an NHI levy does not apply.
This means there is one eligible building that contains one dwelling and one non-residential property.
Because this eligible building contains both residential and non-residential premises, you need to calculate the residential percentage of the building to determine whether the building is a mixed-use building. This is relevant so you can determine whether NHCover applies to the whole building or only the residential components. An eligible building is a mixed-use building if its residential percentage is less than 50%.
If you determine the building:- Is a mixed-use building, NHCover only applies to the residential components of the building. Is not a mixed-use building (ie the residential percentage is 50% or more), NHCover applies to the
whole building (including the non-residential part,
ie the AirBnB unit).
For further information on calculating an eligible building’s residential percentage, see section 1.5 of the ‘NHCover Insurers Guide – July 2024’ on the NHC website. For examples of mixed-used buildings, see section 5.11 of the ‘NHCover Insurers Guide – July 2024’ on the NHC website.
EXPERT ANSWER: Stephanie Beswick, Fire and Emergency New Zealand
(This answer applies to FENZ levy only, not NHI)
The Fire and Emergency Levy still uses the EQC definition for what is deemed to be a residential building until new legislation comes in to force 1 July 2026.
If it is one residential dwelling the levy is payable on one only.
If it is two residential dwellings the levy is payable on each.
If it is considered to be mixed-use building (part residential and part commercial) the 50% rule applies.
50% Rule:
If the residential portion of the building is 50% or more of the usage, the levy may be calculated off the residential portion and would be the lower amount between:
• the number of residential dwellings x SI capped at $100,000, and
• the building replacement value x levy rate ie, (SI or IV x levy rate)
In this scenario no additional levy is required for the commercial component of the building.
If the commercial portion is more than 50% of the building's usage, then the levy may be calculated as the lower amount between:
• ((SI or IV x portion of building that is commercial) x levy rate)) + (number of residential dwellings x (SI capped at $100,000 x levy rate)), and
• the building replacement value x levy rate I.e., (SI or IV x levy rate).
