Buyers liability between exchange and completion

3mph

G_M. That's it, I read it last October when we put our house on the market as it had been many years since we had sold and bought previously.

Freecall

G_M wrote: »

The 5th edition appears to have been introduced in 2011. Previously as kingstreet said, the previous (4th) edition left liability with the seller.

Correct but for those that are interested there is a bit more to it than that.

Under general contract law the liability has always passed to the purchaser at the point of exchange of contract. I am sure that those who bought houses in the 60's, 70's & 80's (or earlier) will have been advised of this by their solicitor.

When the standard conditions were introduced in 1990 this situation was reversed in the contract and stayed that way for 21 years until the 5th edition when it was introduced in 2011.

The reason that the standard conditions were written in this way was that it was felt that many people were unaware that liability would pass to the buyer on excahange and therefore it was 'safer' the draw up a contract which was written specifically to leave liability with the seller.

Many vendor's solicitors disliked this and it was not at all uncommon for an additional clause to be added which effectively put the situation back to where it would have been under general contract law.

This had the effect of potentially creating confusion amongst buyers and sellers and so the situation was once again reversed in the current 5th edition.

Liability now firmly lies with the purchaser as it has done since the Middle Ages and certainly for most of the history of contract law in England & Wales. I suspect that things will now be left that way in any future editions as ultimately it is the purchaser who, as the landowner, will always be in a better position to sort things out going forward should the worst happen.

Tax_Slave

As I said I have zero intention of cancelling any insurance on property until day after completion.
But just curious ....let's play devils advocate and say house did burn down post exchange.
Who would claim from their buildings insuranve ?
The current owner
Or
Buyer ?

G_M

As explained, the contract requires the buyer to insure. And the buyer will own the land (as freecall explains above) going forward post completion, so is best able to 'manage' any claim.

There is of course an additional risk/complication if both buyer and seller insure: many insurance policies have clauses reducing liability where the insured property is subject to other insurance.

The risk is that the two insurers end up in a squabble about which should pay or how the cost should be apportioned. This can considerably delay pay-out and hence rebuilding, especially if the courts get involved.

Rodders53

Many (most?) house insurances will cover BOTH properties from exchange to completion... Ours did on our 2006 purchase and again in 2016 (different insurance companies). In both cases no extra premium (over and above any change due to area and/or house rebuilding costs) was charged.
{G_M may well be correct about insurers arguing, but if both parties have 'cover' on paper but one is legally (contractually) liable - surely that party's insurer should foot the rebuilding costs?. Seller's insurer would still be liable for their contents and alternative accommodation up to completion date, though.}

On timescale:
On both moves we had difficulties getting a removal company, due to lack of firm completion date.
In both cases we were without landline or broadband in new home due to the provisions timeframes.
A month is IMHO reasonable... especially where there is a chain involved, to allow such things to be arranged.

davidmcn

Freecall wrote: »

Under general contract law the liability has always passed to the purchaser at the point of exchange of contract. I am sure that those who bought houses in the 60's, 70's & 80's (or earlier) will have been advised of this by their solicitor.

When the standard conditions were introduced in 1990 this situation was reversed in the contract and stayed that way for 21 years until the 5th edition when it was introduced in 2011.

The reason that the standard conditions were written in this way was that it was felt that many people were unaware that liability would pass to the buyer on excahange and therefore it was 'safer' the draw up a contract which was written specifically to leave liability with the seller.

Many vendor's solicitors disliked this and it was not at all uncommon for an additional clause to be added which effectively put the situation back to where it would have been under general contract law.

This had the effect of potentially creating confusion amongst buyers and sellers and so the situation was once again reversed in the current 5th edition.

Liability now firmly lies with the purchaser as it has done since the Middle Ages and certainly for most of the history of contract law in England & Wales. I suspect that things will now be left that way in any future editions as ultimately it is the purchaser who, as the landowner, will always be in a better position to sort things out going forward should the worst happen.

Always seems a bit odd from my Scottish perspective - here contracts invariably say that risk doesn't pass until completion, and if something disastrous happens to the property then either the purchaser or the seller have the right to pull out.

Freecall

I have just located a Radcliffe Chambers briefing document on the changes made to the 5th edition located here.

If you scroll down to page 7 it explains in a bit more detail the background and effect of the changes as well as the history.

I do wonder whether on-line conveyancing companies and the like adequately explain this to their clients (no doubt it is covered somewhere in their text).

Freecall

Tax_Slave wrote: »

As I said I have zero intention of cancelling any insurance on property until day after completion.
But just curious ....let's play devils advocate and say house did burn down post exchange.
Who would claim from their buildings insuranve ?
The current owner
Or
Buyer ?

The buyer.

After all they are the one who suffered the loss and are left with the mess to clean up.