Buy House Insurance when Contracts Exchange
Buying ands selling a house can be one of the most stressful things you can do! The experts say it’ sup there with getting married and packing a young family off on a foreign holiday! There are so many things that you need to organize and quite simply not enough hours in the day, to get them done. An important consideration that we all really should put at the top of the list, is the house insurance. Let’s face it, you wake up one day and think, mmh, “buy house” but rarely we think of the house insurance.
All of that running around, doing this & that, meeting with solicitors accounts for absolutely zero if your house goes up in smoke. This piece is designed to give some simple, straight forward clarification, that every home owner ought to know. If you don’t know who should be insuring what, at exchange and completion, then read on! If you are too busy and the middle of a sale, then ring your broker and have it explained. It is best talking it through sometimes.
What are Buyer & Seller Obligations?
The responsibility for the insurance of the property is passed to the buyer with effect from the moment contracts are exchanged (with a few exceptions). A buyer’s solicitor must ensure that the buyer has placed in force a valid insurance policy from the moment of exchange of contracts unless exceptions apply).
The seller is under no obligation to insure the building from the date of exchange of contracts. They are at liberty to cancel their own policy from the date of exchange (although this is never something we would recommend).
What are the exceptions?
The only circumstance where the seller is obliged to continue to maintain insurance between exchange and completion are:
- When the contract of sale has been amended specifically to maintain the obligation to insure the property with the seller.
- When the seller has an obligation to maintain insurance, such as on a leasehold or tenancy agreement, where he has agreed to insure the building under a separate contract.
If the seller of the building is obliged to insure the property, the buyer’s solicitor should request evidence of insurance and that the policy is in force, any terms or warranties are adhered to and the premium is paid up to date. Contracts should not be exchanged until evidence of valid insurance is received.