Building insurance before exchange

Devi

FTB hoping to exchange next week.

one of the conditions of my mortgage is to insure the building before exchange.

Is this just normal buildings insurance or a "special" kind especially for this purpose?

Will i be able to insure a property that i do not technically own until a couple of weeks later?

I would be grateful for some clarification around this.

Thanks

D

FireWyrm

It's just normal buildings insurance although it's normally from the day of exchange, not before exchange. Basically, at the point of exchange, you are legally obliged to buy the property even if it's a smoking ruin, so the buyer is told to secure building insurance at the point of exchange - literally, on that day. If you ring any insurance company and explain, they'll understand what you mean and help you.

Devi

thank you - i will get it sorted on the day.

go_cat

If you currently have building insurance many companies will add the new address for a couple of weeks and cover both properties.

PZH

FireWyrm wrote: »

...Basically, at the point of exchange, you are legally obliged to buy the property even if it's a smoking ruin...

Technically - the property should be in the same condition as it was at exchange of contracts.

However, my solicitors did advise the following...

Damage to the Property between Exchange of Contracts and Completion
Strictly speaking, it is usual for the seller to remain liable for the property until completion and they should keep it insured. The seller should transfer the property in the same physical state as it was at the date of the exchange of contracts (except for fair wear and tear). It is important, therefore, that you arrange to view the property immediately prior to exchange and again before completion, so that you are fully aware of the state and condition of the property.

Of course, we cannot guarantee that a seller has kept their insurance policy running so would always advise you to arrange for your insurance to be put in place on exchange.

Richard_Webster

Damage to the Property between Exchange of Contracts and Completion
Strictly speaking, it is usual for the seller to remain liable for the property until completion and they should keep it insured. The seller should transfer the property in the same physical state as it was at the date of the exchange of contracts (except for fair wear and tear). It is important, therefore, that you arrange to view the property immediately prior to exchange and again before completion, so that you are fully aware of the state and condition of the property.

That applied to the Standard Conditions of Sale (4th Edition) which some solicitors are still using but the new 5th Edition more or less goes back to the common law position that the buyer takes the risk form exchange and therefore should insure from that point.

A sensible buyer should contact insurers before exchange and get quotes and check how quickly the insurer can notify the insurance details to his solicitor who will have to check them for the mortgage lender. If they can't send a fax or e-mail to your solicitors within a day or two of exchange, go somewhere else.

Having got the quote you contact the insurer as soon as contracts have been exchanged to start the policy going.

PZH

Richard_Webster wrote: »

That applied to the Standard Conditions of Sale (4th Edition) which some solicitors are still using but the new 5th Edition more or less goes back to the common law position that the buyer takes the risk form exchange and therefore should insure from that point.

Excellent information. Thank you. Shall I politely suggest my solicitor update their details ?

Richard_Webster wrote: »

A sensible buyer should contact insurers before exchange and get quotes and check how quickly the insurer can notify the insurance details to his solicitor who will have to check them for the mortgage lender. If they can't send a fax or e-mail to your solicitors within a day or two of exchange, go somewhere else.

Not sure I follow this completely - does this assume that the mortgage lender insists on buildings insurance ? (I only ask this because my mortgage very clearly states that Buildings Insurance is not a requirement of the loan - not a risk I would be prepared to take admittedly)

G_M

phoodless wrote: »

Not sure I follow this completely - does this assume that the mortgage lender insists on buildings insurance ? (I only ask this because my mortgage very clearly states that Buildings Insurance is not a requirement of the loan - not a risk I would be prepared to take admittedly)

Are you sure? This is very unusual.

Unless you are buying a flat and the freeholder of the building insures.

PZH

G_M wrote: »

Are you sure? This is very unusual.

Unless you are buying a flat and the freeholder of the building insures.

My sincere apologies - you are very correct :rotfl:

Just dug the paperwork out and it actually states that Buildings Insurance is not required to be bought from the Mortgage Lender - but IS needed :T

Must learn to read properly :rotfl:

Richard_Webster

Quote:
Originally Posted by Richard Webster
That applied to the Standard Conditions of Sale (4th Edition) which some solicitors are still using but the new 5th Edition more or less goes back to the common law position that the buyer takes the risk form exchange and therefore should insure from that point.
Excellent information. Thank you. Shall I politely suggest my solicitor update their details ?

Yes, but whilst I personally prefer the 5th Edition, not all solicitors would agree.

I've just had a buyer's solicitor wanting a clause in a sale contract I produced using the 5th edition to incorporate the 4th Edition wording that was mentioned above. It wasn't worth it in that particular case having the argument on the merits so I advised my clients to agree it.

When the 4th Edition was current and I was acting for a seller who was also buying I used to alter that wording to restore the common law position in my standard draft contracts because I felt that if there was a major fire or whatever the buyer could get out of the contract but my seller client would be stuck with having to comply with his onward purchase contract. If my client wasn't buying and the buyer wanted the 4th Edition wording used it wasn't worth the argument as my seller client would be insuring anyway.

So solicitors do have differences of view about these things. Sometimes it's important, other times we have more important issues to concern ourselves about.

fluffymuffy

We bought our house last week. We use a walk-in broker for all our insurance and they were happy to insure the house a few days before completion. All that would have happened if there was a problem before completion would be that we wouldn't have made a claim because it wasn't ours. Yes, we paid for some days of insurance we didn't need but we're busy people and needed to get it sorted.

When it came to the completion day our solicitor informed us that since the seller had already moved out we should inspect the property again. The EA met us there and we checked it was OK before phoning the solicitor who completed the purchase by lunchtime.