Buildings Insurance - Exchange through to Completion

Legacy_user

My wife and I are downsizing and buying a small new build property that will be completed two months after exchange of contracts. There is no mortgage involved.

The Agreement for Sale states:

Quote: The Property shall be at the risk of the Seller until actual Completion but the Seller shall be under no obligation to provide details of the insurance cover to the Buyer Unquote

My conveyancer recommends that we take out buildings insurance to cover the period through to Completion.Having read The agreement for Sale, I am struggling to see why it is necessary, and where does one go for this type of insurance?

Thoughts/advice appreciated.

foxy-stoat

Is the new building being built to NHBC Standards?

You may find you dont need to insure it until 1 day prior to completion - even if you did manage to cover it and the worst happened it is highly that your insurance would not pay out as it would be covered by the builder's contractors all risks insurance.

System

foxy-stoat wrote: »

Is the new building being built to NHBC Standards?

You may find you dont need to insure it until 1 day prior to completion - even if you did manage to cover it and the worst happened it is highly that your insurance would not pay out as it would be covered by the builder's contractors all risks insurance.

Yes - the property will be built to NHBC Standards.

Quote: The Seller will complete the work of the building the Property in accordance with:

The requirements of the Local Authorities and NHBC and warrants that they will at their own expense obtain all the necessary consents for building the Property from the Local Authorities NHBC...


The Seller undertakes to provide prior to Completion an NHBC Certificate of Completion..... Unquote

I should add that I happy to take out short-term buildings insurance if it is necessary, but I am not sure how best to go down this particular route?

foxy-stoat

Google "building insurance from exchange to completion" you will find a few specialist brokers - they should be able to help.

System

foxy-stoat wrote: »

Google "building insurance from exchange to completion" you will find a few specialist brokers - they should be able to help.

Thanks. I have done that and got mixed advice. This is typical:

Quote: Many developers use their own contracts which remove the usual requirement for the buyer to provide insurance for the property between exchange and completion. Instead, the developers cover the property on their own contractors all risks insurance policies.

There are several reasons for this course of action. These reasons mean that it is far simpler for the developer to provide their own cover for the property rather than having to rely on cover provided by the buyer.

The property being purchased may still be unfinished and therefore insurance is more difficult to obtain by the buyer. Additionally, the developer may not allow the buyer access to the property (due to ongoing development / machinery movement etc) to visit the property in order to comply with the terms and conditions of their unoccupied property insurance policy. One of the last tasks for the developer, once the properties have been finished is the road surfacing and completing of the pavements/ walkways. Having individual homeowners inspecting their own properties prior to this work being carried out is a recipe for disaster, reinforcing the need for the developer to have their own policy in place between exchange and completion of contracts.

As mentioned, many developers provide their own cover on their own Contractors All Risks business insurance policy. There are always exceptions to the rule and these are usually the very small developers who are building and 1, 2 or 3 houses. UnQuote

I think that I may need to speak to my solicitor again. I think that she is just being ultra cautious.

D_M_E

Phone the insurance company for your current buildings insurance and tell them about it and ask can it be added temporarily to your current policy for cover.

They might say yes and add it for a few quid or even for free.

System

D_M_E wrote: »

Phone the insurance company for your current buildings insurance and tell them about it and ask can it be added temporarily to your current policy for cover.

They might say yes and add it for a few quid or even for free.

Thanks - I will give a try.

G_M

Not sure I'd bother. The risk is the seller's.


Are they a large developer, or a small family builder (who might be bankrupted by the property burning down uninsured...)?

System

G_M wrote: »

Not sure I'd bother. The risk is the seller's.


Are they a large developer, or a small family builder (who might be bankrupted by the property burning down uninsured...)?

It is a mid size builder in Shropshire that has been in business over 20 years and currently building on 4 sites. I have spoken to my present home insurer and they are just not interested in covering a property under construction. Even exchange2completion doesn’t cover new builds. I have asked my conveyancer to speak to one of her partners. I think that the confusion here is that insurance is normal if the property has a mortgage. My last mortgage was with the Halifax and I think that they insured the property from exchange (at cost).

If the builder goes bust before the property has been finished, then my deposit is covered by the NHBC.

G_M

On 'normal' purchases (not New Builds) it is standard for the buyer to take the risk, and insure, from Exchange.


On New Builds, where the seller is still building the property, the seller keeps the risk and insures.

System

G_M wrote: »

On 'normal' purchases (not New Builds) it is standard for the buyer to take the risk, and insure, from Exchange.


On New Builds, where the seller is still building the property, the seller keeps the risk and insures.

Thanks. That’s my understanding but the legal executive doing my conveyancing had a different view. I will wait to see what her senior advises.