I’ll huff and I’ll puff and I’ll blow your house down! But when?

13 May 2013

If you are buying a house or flat, then you are responsible for making sure you have buildings insurance. And with recent media coverage of the devastating occurrences of nationwide floods the importance of having insurance cover is all the more in focus.

But when should you start the insurance from? If you are buying a freehold property, then the answer lies with your conveyancing solicitor who will be the one to advise when.

In the case of leasehold properties where the landlord insures the building, this by definition answers the question. The insurance is always in place. All you do is start paying from the date you become the legal owner.

In freehold cases, the usual contractual position in residential conveyancing is that the 'risk' of damage and destruction passes to the buyer on exchange of contracts. As a result, the buyer should put insurance in place to protect against the risk they now have because if the property is destroyed after exchange, the buyer cannot escape and still has to proceed. Indeed, many mortgage lenders will also require a buyer to insure from exchange irrespective of what the sale contract may say.

So this is the 'when'. Exchange of contracts. But not always!

The usual position can be reversed, and your conveyancing solicitor is the one to do this, if they are on the ball.

'On the ball'?

If you are buying a property and the seller is only selling, then there is no good reason for why the 'risk' should pass to you at exchange just because that is the usual position. It should stay with the seller, so that if there is major damage or destruction, you can pull out after exchange. So your conveyancing solicitor should be on the ball to spot this, and should attempt to negotiate with the seller to try to reverse it back as part of their amendments to the seller's contract.

However, if the seller is also buying then they will not agree to reverse it back, and the risk and insurance obligation will remain with the buyer from exchange of contracts. This is because if the seller's property is damaged, they cannot permit the buyer to pull out, as do not forget, the seller is still contracted in to their own onward purchase, which they cannot pull out of just because their own house was damaged and their buyer pulled out.