Buying or Selling? Are you Covered?
The aftermath of Tropical Cyclone Debbie is a timely reminder to buyers and sellers of the importance of taking proactive steps towards protecting their investment.
In Queensland, the standard terms and conditions of a Residential Contract notes that the property is at the buyer’s risk from 5pm on the first business day after the Contract date, not from the settlement date. These provisions are contained in the “fine print” of the contract and often overlooked by all parties involved.
What does this mean for the seller?
Despite the contract providing for the property to be at the buyer’s risk before settlement, it is always recommended that the seller maintains their insurance policy up to and including settlement date for these reasons:
it is a requirement of your mortgage (if applicable) to maintain insurance;
you have a continuing obligation to take reasonable care of the property until settlement and you are liable for any damage that may have been caused by you between the contract date and settlement date;
the buyer may not have in place or may not have adequate insurance over the property;
the buyer may not complete the purchase.
What does this mean for the buyer?
Once you have signed a contract your rights to terminate are limited or you may have no right to terminate at all if the property sustains damage in the contract period.
Even though the property is at the buyer’s risk from 5pm after the Contract date, it is recommended that a buyer contact their insurance company and take out a cover note for the property as soon as possible after they have signed the contract as they may not always be notified immediately that the seller has counter-signed the contract.
The type of insurance a buyer should take out will depend on what is being purchased. You should discuss your insurance requirements with your conveyancer if you are unsure.