Property Insurance – Who is responsible for what and when?

by McColm Matsinger Lawyers



 

 

 

Property Insurance – Who is responsible for what and when?

There is often confusion about who is responsible for the property insurance for the period from signature of a contract to settlement.

In Queensland, contrary to the practice adopted in some other States and sometimes assumed by parties to the property transaction, the standard terms of contract usually provide for the risk in a property to pass from the seller to the buyer, not from the settlement date, but from 5pm on the first business day after the date that the seller signs the contract.

These standard provisions are contained in the “fine print” of the contract and often overlooked by parties. We have recently seen some estate agents including a special condition in the contract drawing the buyer’s attention to the provisions of the risk clause and this is good practice.

What does this mean for the seller?
Despite the contract providing for the property to be at the buyer’s risk before settlement as stated above, it is always recommended that a seller maintains their insurance policy until following settlement in the event that the buyer does not insure the property and there is a loss. A seller has a continuing obligation until settlement to take reasonable care of the property.

What does this mean for the buyer?
A buyer should (preferably as soon as they have signed the contract because they may not always be notified immediately that the seller has counter-signed the contract), approach their insurer to take out a cover note for the property. The type of insurance a buyer should take out will depend of what is being purchased.

Residential House and Land
For vacant land, a buyer should take out public liability cover pending the construction of a building on the land. Once the building has been completed, a comprehensive insurance policy ought to be taken out over the land and building.

For improved land, in addition to public liability, a buyer should take out comprehensive building cover which should include carpets, curtains, light fittings, furniture and any other fixures or fittings within the building.

Lot in a Community Titles Scheme (including units or semi-detached properties)

Lots with common walls
The body corporate is responsible for insuring the building for replacement value and public liability in respect of the common property and any relevant body corporate assets. A buyer should arrange insurance cover in respect of the contents of the unit (which will include things such as carpets, curtains and internal blinds) and public liability insurance for the interior of the lot.

Lots with no common walls
The body corporate is responsible for public liability insurance in respect of the common property and any relevant body corporate assets. The body corporate may insure the building with the agreement of all lot owners.

It is recommended that a buyer takes out insurance cover in respect of the building (initially by way of cover note), the contents of the unit (which will include things such as carpets, curtains and internal blinds) and public liability insurance for the interior of the lot.

The building insurance should cover the buyer until they are able to discover by search whether the body corporate has common insurance for the building.

If the body corporate has not insured the building then the buyer’s insurance of the building will be appropriate, and the buyer should pay the applicable premium, but if the buyer is satisfied with the body corporate insurance then they could cancel their building insurance, but must still maintain insurance of the contents and public liability within the unit.

Landlords Insurance
A buyer should also be aware that, when it comes to insurance, being an owner-occupier is quite different from being a landlord.

If a buyer intends to rent out the property following settlement, they would also be required to take out landlord-specific insurance as standard home buildings and contents policies do not usually provide cover for the most significant risks facing landlords which include :
• malicious or intentional damage by tenants;
• theft by the tenant or their guests;
• failure to pay rent;
• liability including for a claim by the tenant against the owner; and
• legal expenses incurred in taking action against a tenant.

Landlords protection policies are not all the same and a buyer should carefully consider the policy documentation to ensure it provides sufficient cover for their needs.

If you need assistance with conveyancing please contact McColm Matsinger Lawyers.

Brigitte Thieltges

McColm Matsinger Lawyers

Ph: (07) 5443 1800

www.mmlaw.com.au

 

 

 

 

 Liability limited by a scheme approved under professional standards legislation



Findlaw

We welcome your feedback

Hi there! We want to make this site as good as it can for you, the user. Please tell us what you would like to do differently and we will do our best to accommodate!

   
Protected by FormShield


 
 
 
We've updated our Privacy Statement, before you continue. please read our new Privacy Statement and familiarise yourself with the terms.