Do I insure new house after exchange as well as present one?

Debras_Angel

Thanks Andy,

I don't know what I would do without this website, everyone is so supportive.

Debs

LH79_2

We exchanged yesterday (hurrah!), and our solicitor confirmed that we just need to have buildings insurance in place for completion - we need to send him a copy of the policy before completion. Phew!

allycat999

We bought a new build house and the house was not insured at exchange of contracts but only when we actually completed. We exchanged contracts 4 months before completing - normal with most new builds. As far as I was aware you do not own the house until you complete the contract, you can after exchanging pull out of the contract which is why you pay the deposit which you would obviously lose if you didn't complete the contract.
My insurance company were informed of the move and on the day of completion both houses were insured but as you do not own the property until you complete why should you insure it. If anything happened to a new build house before completion of contracts surely the builder would put it right or its going to be a very long snagging list!!!

quatro

I am a bit confused now - so I will have to ask my solicitor nearer to exchange. The house I am buying [cash buy upon the sale of my house now] is a probate property and is being dealt with by the executors - who are the solicitors who are also doing the conveyancing.
I would think they would have the building insured until completion but as previous posters have said there needs to be 2 insurances running at the same time as both have interests in the property until completion.

silvercar

I think the situation is different with new builds; you are buying from the builder subject to the house being built. You also have the opportunity to go back to the builder with a snagging list.

Buying a pre-owned property you are legally obliged to complete the purchase and therefore you do need the insurance. If there are problems that you uncover after completion, you cannot look to the previous owner to put right; you are left to deal with them or refer to your insurance/ surveyor/ solicitor etc

AndrewSmith

The situation is different on new-builds.

On a private sale / purchase you will be expected to insure the building (unless it is leasehold of course) at exchange of contracts. Once contracts are exchanged you are legally bound to purchase. If you pull out after exchange you will not only loose your deposit but can and will usually be sued for much more.

On newbuild, it is normal to only insure the property at completion.

Certainly over the last 12 years I have lost count of the number of times I have been contacted by a client's solicitor asking for proof of the Buildings insurance being 'on risk' before they will exchange. In fact this is the norm in my experience if the solicitor is being thorough.

Andy

allycat999

silvercar wrote:

Buying a pre-owned property you are legally obliged to complete the purchase and therefore you do need the insurance.

You are only legally obliged in scotland. In england you can stop the sale after exchanging before you complete, not a nice thing to do but it can be done.

Ian_W

allycat999 wrote: You are only legally obliged in scotland. In england you can stop the sale after exchanging before you complete, not a nice thing to do but it can be done.

Think you're wrong alleycat. You're obliged to complete in Scotland once your offer has been accepted, in England & Wales you are only obliged to complete once you've exchanged contracts. Obviously you can't be forced to hand over all the money but the vendor can keep your, often substantial, 5/10% deposit, AND sue you for damages they incur, as you are in breach of contract.

On new builds, as I understand it, the contract is different. You're buying a peice of free/leasehold land with the builder contractually obliged to build a specific house on it. Until it's built and handed over at completion, although you have exchanged contracts, the builder hasn't completed their side of the contract, so you don't need to insure as the builder must hand over in an acceptable state.

But that's only on new builds, on resales you are obliged to complete or pay damages for failing to do so, so it's very much in your own interest to insure the prop. There may be an argument if the house blows up that it no longer exists, but anything much less than that is unlikely to void the contract. You may be able to sue the vendor for the damage to be repaired but if they are not insured it might be a long, expensive and futile battle. Which is why lenders insist on buildings cover by the purchaser from exchange, if you don't have a mortgage then it's your choice, but it is even after you've bought.

The wisdom of it is shown by something that happened to our friends only a few weeks ago. They bought a property where the owner had moved out but left some furnishings in as dressing. After exchange she removed a fitted washing machine but "the old trout" [their words, not mine!] didn't turn off the taps properly and water damaged the base kitchen units, flooring and a bedroom ceiling below [upside down type house]. Owner had cancelled her buildings insurance and though they could probably have sued her - because they had insurance, they just claimed off that and got £4k to repair damage and replace units within a couple of weeks. As they haven't moved straight in themselves it turned an excuse to put a new kitchen in earlier than they would have intended.

I was always a bit scepticle about insuring on exchange but for what a few weeks buildings cover costs, IMO it's not worth not doing.

AndrewSmith

Ian, I have to agree.

Having been in the business for some 12 years now I have the same understanding of the laws as you do. I also contacted a friend of mine this afternoon who is a conveyancing solicitor whoalso agrees with you and I.

Andy

allycat999

Ian_W wrote:

Think you're wrong alleycat. You're obliged to complete in Scotland once your offer has been accepted, in England & Wales you are only obliged to complete once you've exchanged contracts. Obviously you can't be forced to hand over all the money but the vendor can keep your, often substantial, 5/10% deposit, AND sue you for damages they incur, as you are in breach of contract.

I didnt explain it very well. Meant it to sound just like above -