Exchanging and home insurance on a house not yet built

c_ellis92

Hey, hoping for some advice!

We had an offer on a house accepted back in June, 2021. The vendors of the property are moving to a new build and the developers are requesting we exchange even though the property is not completed. As it stands today (January 2022) the new build only has half a roof. The vendors were clear that they were not willing to move until the new build was complete and at the time we accepted this term. Luckily for them we were in no rush and was willing to wait as we're first time buyers and still living at home with our parents.

We are being told that if we are to exchange now that we must sort out home insurance. As it stands, the new build property won't be anywhere near ready in the next three months. Which is extremely frustating as we were originally told that we'd be in by the end of November (early December), but with the shortage of materials and labour this was pushed back and we were then told the house would be ready by 31st January. Having taken a drive to the house I cannot see this happening. Attaching images.

How is this right to take out home insurance when we could be liable for a house that we're not living in? Say we exchanged today and we don't move until April why should we pay for home insurance when we're still at home with mum and dad.

Also, how can the developer expect us to exchange on a property that isn't even built?

Any advice will be greatly appreciated.

eddddy

One solution is to add a term to the contract that your sellers are responsible for insuring the property you're buying until completion.

You can discuss that possibility with your solicitor.


(On a different topic - what's the status of your mortgage offer? If your offer was accepted in June 21, has the mortgage offer expired? If you have a new mortgage offer, do you have a long-stop date in the contract, in case the new offer expires?)

Alter_ego

You will be exchanging/insuring on the house you are buying not the new build. If I understand you correctly. You would still be commited to buy even if the house burnt down

user1977

I'm confused - your vendors are buying the newbuild property, not you, yes? In which case the developers aren't asking you to exchange on anything, it's your vendors who are asking you to exchange on your purchase of a property which is already built? You take the risk of damage from exchange, this is normal. 

ciderboy2009

I would also make sure that your solicitor includes a 'long stop' date in the contract.  This is a date when you can pull out without any penalties if the sale hasn't completed.

Without this you could be waiting for years and be bound to purchase.

Flugelhorn

Our solicitor advised us we should not agree to insure the property after exchange as the vendors wanted 8 weeks exchange (I know - dire, also covid started in the middle of it all) - the insurance companies would not want us absent from the property for more than 28 days etc etc. Clause was put into contract to ensure that the vendors insured it until completion

tinytiddles

We bought a new build 18 months ago and the solicitor’s report made it very clear that the vendor (developer) would be responsible for insuring the property 100% until completion of the sale. However when I previously bought a pre-loved home then yes I was required to get my home insurance going as “on-risk” from the date of exchange of contracts. As others have said, you’re committed to buy even if the place burns down or disappears down a hole. 

c_ellis92

eddddy said:

One solution is to add a term to the contract that your sellers are responsible for insuring the property you're buying until completion.

You can discuss that possibility with your solicitor.


(On a different topic - what's the status of your mortgage offer? If your offer was accepted in June 21, has the mortgage offer expired? If you have a new mortgage offer, do you have a long-stop date in the contract, in case the new offer expires?)

That’s good to know, thanks. We found a better mortgage offer in October so that one now expires in April. I’ll need to speak to the solicitors re. long stop date. Hadn’t heard of that before. 

c_ellis92

user1977 said:

I'm confused - your vendors are buying the newbuild property, not you, yes? In which case the developers aren't asking you to exchange on anything, it's your vendors who are asking you to exchange on your purchase of a property which is already built? You take the risk of damage from exchange, this is normal. 

That’s correct. Our vendors are buying the new build.

Can they exchange on the new build without us exchanging on their house? Or do we need to exchange at the same time? Reason I ask is because I still can’t believe we’d have to be liable for damage on a house where we might not be in for another 4 months minimum 

p00hsticks

c_ellis92 said:

user1977 said:

I'm confused - your vendors are buying the newbuild property, not you, yes? In which case the developers aren't asking you to exchange on anything, it's your vendors who are asking you to exchange on your purchase of a property which is already built? You take the risk of damage from exchange, this is normal. 

That’s correct. Our vendors are buying the new build.

Can they exchange on the new build without us exchanging on their house? Or do we need to exchange at the same time?

They can, but exchanging contracts means that you are then legally comitted to the purchase. If they need the money from the sale of their existing house in order to but the new one, then they'll need to exchange on both properties at the same time, in order to avoid the possibility of you later pulling out and them being left unable to complete on their contract for the new build.

c_ellis92

tinytiddles said:

We bought a new build 18 months ago and the solicitor’s report made it very clear that the vendor (developer) would be responsible for insuring the property 100% until completion of the sale. However when I previously bought a pre-loved home then yes I was required to get my home insurance going as “on-risk” from the date of exchange of contracts. As others have said, you’re committed to buy even if the place burns down or disappears down a hole. 

Would that still apply even if we’re waiting for another 4 months and not yet moved in? Seems ludicrous to me.