New build and buildings insurance

Aproia

Hi,

We recently reserved a new build property and are due to exchange in the next few weeks.

The one thing I do query is buildings insurance and when it needs to be active from. The mortgage offer states that the building must remain insured for the repayment period, so that would be on completion.

However, the solicitors state that it must be insured from exchange, which doesn't make sense to me. Surely we can't insure something that's actively under construction and the builders are contractually obliged to provide.

Any advice would be greatly appreciated!

AdrianC

Insuring from exchange is absolutely standard across all purchases - not just new-build. Remember, you are contractually obliged to purchase it.

If the builders do something to break it, then that's their problem, not yours. But you are covered...

B'sides, what's the actual difference to your pocket for the period between exchange and completion? A tenner or two?

TrickyTree83

Aproia wrote: »

Hi,

We recently reserved a new build property and are due to exchange in the next few weeks.

The one thing I do query is buildings insurance and when it needs to be active from. The mortgage offer states that the building must remain insured for the repayment period, so that would be on completion.

However, the solicitors state that it must be insured from exchange, which doesn't make sense to me. Surely we can't insure something that's actively under construction and the builders are contractually obliged to provide.

Any advice would be greatly appreciated!

I had a similar confusing notification from my solicitors.

I took it as, you can't insure the building as you don't own it, you can't insure the contents as there aren't any.

But you can insure your life, considering at the point of exchange you are legally liable for the purchase. If you have life insurance for the value of the mortgage it would mean that your nearest and dearest would be spared the problem of having massive debts to deal with should the unthinkable happen.

That's what I did. In fact I was told by my insurer that I couldn't insure the building until I owned it. Makes sense really. And if there was a significant problem requiring you to claim on buildings insurance (if you had it), it's unlikely to pass NHBC regulations, so the builder will be liable to resolve the issue since you can't complete without NHBC approval.

kingstreet

The builder retains the risk on a newbuild between exchange and completion, so you do not need buildings insurance until then.

For a standard non-newbuild purchase, the version of the standard conditions of sale determines who accepts the risk.

Version 4 is the vendor, version 5 is the purchaser, IIRC.

It is "normal" for the purchaser to insure a non-newbuild from exchange of contracts as that is the point insurable interest starts as the contract is legally binding regardless of the later condition of the property.

Niv

Aproia wrote: »

Hi,

We recently reserved a new build property and are due to exchange in the next few weeks.

The one thing I do query is buildings insurance and when it needs to be active from. The mortgage offer states that the building must remain insured for the repayment period, so that would be on completion.

However, the solicitors state that it must be insured from exchange, which doesn't make sense to me. Surely we can't insure something that's actively under construction and the builders are contractually obliged to provide.

Any advice would be greatly appreciated!

you are mistaken, you owe the money from the date that your solicitor receives it from the mortgage provider so often before completion - would be sometime between exchange and completion normally. This is why your first mortgage payment is higher than your regular monthly payment.

As others have said, being insured from exchange is normal and often stipulated by the mortgage company (certainly is with mine).

davidmcn

Niv wrote: »

you are mistaken, you owe the money from the date that your solicitor receives it from the mortgage provider so often before completion - would be sometime between exchange and completion normally. This is why your first mortgage payment is higher than your regular monthly payment.

As others have said, being insured from exchange is normal and often stipulated by the mortgage company (certainly is with mine).

Completion is the only relevant time from the lender's point of view. Exchange to completion is your risk (and/or possibly the sellers'), not theirs. From the CML Handbook:

You must make reasonable enquiries to satisfy yourself that buildings insurance has been arranged for the property from no later than completion.

You should remind the borrower that they:

• Must have buildings insurance in accordance with the requirements of the mortgage contract no later than completion, and
• Must maintain such buildings insurance throughout the mortgage term.

david1951

You don't want to rely on the builder's insurance as it might be inadequate.


I'm not sure about the fact that it is under construction - you need to speak with the insurance companies about this but I guess some will be used to such a query.

lee111s

I'm purchasing a new build. Nationwide advised me that I need insurance in place FOR completion, not exchange.

Surrey_EA

lee111s wrote: »

I'm purchasing a new build. Nationwide advised me that I need insurance in place FOR completion, not exchange.

As mentioned above, it is standard procedure to have buildings insurance in place from exchange. However, it may depend a little on what stage of construction your new build is at. I'd speak to your solicitor to get their opinion, but surely better to be over-insured, rather than under?

swishy87

As others have said, with new builds it is from completion, not exchange.