Building insurance (not to be confused with home insurance) covers damage to the structure of a property and sometimes damage to outdoor structures such as sheds or greenhouses, fences and gates. Household contents insurance is a necessary protection for your property. But do you need replacement or completion home insurance and who is responsible for it? This is insurance coverage for all damages that may occur if the buyer does not take out insurance. Or if they make a mistake in their application or are not covered for some other reason. Once each party has signed the contracts and they have been exchanged between the lawyers on both sides, they are binding. For the exchange of contracts to be legally binding, there must be a so-called “quid pro quo”. If any of them are intentionally damaged, the sellers are responsible for the repairs. “Exchange” means the exchange of contracts between buyer and seller, making the purchase legally binding. “Completion” is the date on which buyers physically move into the property and have legal ownership of it. From the exchange of contracts, the buyer is legally obliged to proceed with the purchase, even if the property is damaged before completion. Not only is the time between replacement and completion difficult to predict, but there can also be problems if the new owners do not immediately move into the property, so that it is empty or still inhabited by the previous tenant. The buyer is responsible for home insurance between replacement and completion, unless the contract provides otherwise. Your lawyer should advise you to remove insurance coverage from the contract exchange.
But even if you`re buying a home without a mortgage, you`d better insure the building unless you can afford the cost of a major disaster. If you are buying a new home from the developer, the developer`s protection policy should provide coverage until the completion date. There is an optional provision in the standard transfer agreement that both parties can contractually agree that the developer retains responsibility for insuring ownership until completion. You should check with your lawyer if this has been applied. You should not assume that the buyer insured the property despite his obligation. If something goes wrong, you don`t want to be left without a backup plan. Even if the buyer has insured the property, there are reasons why policies can fail, especially right now. If they made an error in the information they provided to their insurer, their policy may be invalid. A common mistake is that a buyer does not report to his insurer that he does not yet live in the house inhabited by the seller until its completion.
Many insurers will not cover this period even if they have been notified. Even if you don`t owe the buyer to insure the property, you still need to protect yourself. If the buyer has not insured the property and a disaster occurs, the buyer is contractually obliged to finalize the purchase. However, if the damage is not insured, the buyer`s mortgagee is likely to withdraw its offer so that the buyer cannot receive funds. If there is a lack of money, you have no buyer, damaged goods and little chance of recovering your losses. Even if the buyer has insured the property, there are many reasons why their policy might fail. Undisclosed convictions, undisclosed claims, errors on proposal forms, or they may have purchased a budget policy without coverage between exchange and closing, making their policy useless in case of damage. To overcome the problem of obtaining adequate home insurance from the exchange, the buyer may be advised to take out our home insurance for temporarily vacant non-residential buildings. The responsibility of insuring ownership between exchange and completion is a gray area. However, it is unlikely that the seller`s building insurance policy will cover you after the contracts are replaced. It is therefore customary for the buyer to ensure that there is building insurance on the property at the time of replacement. After the contracts were exchanged, a fire caused significant damage to the property, but the sale was concluded in accordance with the terms of the purchase contract.
Both parties have an insurable interest in the property between exchange and completion, and it is not uncommon for both parties to insure themselves during this period. The General Conditions allow each party to insure. In England and Wales, exchanging contracts is the penultimate step in buying a home. Where completion is the last step in the process. A buyer should therefore generally insure the premises between the exchange of the contract and the conclusion of the contract, although in some cases it is appropriate for the premises to remain at the seller`s own risk until the transaction is completed (e.B. if the contract is subject to conditions or if the seller has to insure himself due to an obligation arising from a rental contract of the premises). Comparison sites do not take into account or make it clear that the chosen policy may not cover the period between the exchange and the conclusion. This may be explicit in political terms, but in the hustle and bustle of activity around exchange, most buyers won`t read the fine print. However, it may also be advisable to take out insurance for the content. This is because things like carpets and curtains tend to fall under the contents in case of damage.
But talk to an insurance broker to make sure the coverage you`re getting is correct. It is common for a seller and a buyer to insure a property within the period between the exchange of the purchase contract and its completion. Standard condition 8.2.3 states that if the seller cannot claim an insurance premium from a lessee, but the seller insures between the exchange and completion, the buyer is obliged to pay the seller a proportionate part of the premium paid by the seller for the period from the date of conclusion of the contract to the date of the actual conclusion. It would be customary for the parties to agree that the seller should maintain its insurance if: In certain circumstances, replacement and completion take place simultaneously. Most often, there is a gap of a week or two, while the necessary funds are called and various practical aspects are settled. .