There are many steps involved in purchasing a property. Something that can cause confusion is who is responsible for insuring the property between the contract date and settlement?
The rules vary depending on which state or territory you are in. In this two-part series, we compare the rules in Queensland and NSW, and outline the different types of insurance you need when purchasing property.
The position in Queensland
In Queensland, the property is usually at the buyer’s risk from 5pm on the first business day after the contract is signed. As such, the buyer should take out insurance immediately after signing the contract.
Despite this, the seller still has an obligation to take reasonable care of the property until settlement.
What happens if a Queensland property is damaged between the contract date and settlement?
If the property is damaged sometime between signing the contract and settlement, the buyer is responsible for the damage and is still obliged to settle for the full purchase price, unless the property is so destroyed or damaged it is unfit for occupation. In that case, the purchaser is entitled to terminate the contract and recover the full deposit.
If the damage arises from the failure of the seller to take reasonable care of the property, the buyer may be able to seek compensation from the seller.
The position in NSW
In NSW, the insurance risk of the property usually passes to the buyer at settlement, unless the buyer takes early possession, in which case the risk usually passes to the buyer on the date of possession. We recommend that the buyer take out insurance well in advance of settlement or if they intend to take early possession, sometime before that date.
What happens if a property in NSW is damaged between the contract date and settlement?
The seller is usually responsible for any damage that occurs to the property between the contract date and settlement and should therefore maintain their insurance until settlement.
The buyer will still be required to settle in accordance with the contract unless the damage is substantial, or makes the property unfit for occupation.
Look out for part two of our series where we outline the different types of insurance a buyer needs to obtain when purchasing property.
For more information, please contact a member of our property team at Fox and Thomas.