Buying a Home?

8 September 2023

Laura Wilkinson

Do you know who is responsible for the building’s insurance after exchange of contracts?

Laura Wilkinson Solicitor from AMD Solicitors explains…

The Process

In a conveyancing transaction there are two key stages.  The first is known as exchange of contracts and the second is completion.  Contracts are exchanged once the buyer and their solicitors are satisfied as to the Property’s Title, its physical condition and that necessary purchase funds are available.  At exchange of contracts a 10% deposit is usually payable by the buyer and a legally binding contract comes into existence meaning that neither party can legally withdraw from the deal without incurring severe financial penalties.  Completion takes place on the date agreed in the contract and on that date the buyer is entitled to have possession of the property and the seller must vacate it.

Buildings Insurance

Under Common Law the responsibility for the risk of damage or destruction of the property passes to the buyer on exchange of contracts unless the contract provides otherwise.  The seller has no obligation to insure the property after exchange of contracts except in certain circumstances, eg where the property is leasehold and insured by the Management Company or Freeholder or the contract provides the responsibility will remain with the seller. 

The buyer is therefore responsible for insuring the property from exchange of contracts.  It can often come as a surprise for a buyer to learn that they must insure the property before they can even move in!

The property may be in an area classified as being at a raised risk of flooding or it may have a history of subsidence or be an unusual construction, which may require further consideration from the insurer before they agree to insure it. The buyer should therefore make enquiries at an early stage to ensure that buildings insurance can be obtained for the property.

What if I am taking out a mortgage?

If you are taking out a mortgage on the property, you can agree with the lender that they will arrange the property insurance for you. However, if you are insuring the property yourself the lender will inform you of the sum you should insure it for.

Know the position

A prudent buyer should make enquiries as to whether they will need to insure the property they are buying well in advance of exchange of contracts to avoid causing unnecessary last minute delays.

Whether you are purchasing or selling a property, it is important that you understand the conveyancing process as well as your liabilities and responsibilities.  AMD Solicitors Residential Property Service can advise you on these matters and will proactively support you to ensure your transaction is as stress free and cost effective as possible.  If you would like any further information please call the team on 0117 9735647, email or visit one of our four Bristol offices.  

This article is provided for general information purposes only and represents our understanding of the relevant law and practice as at the date of uploading. This article should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

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