Building insurance mandatory?

p00hsticks

GrumpyDil said:

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

But in legal terms by the same token isn't the seller also obliged to deliver the property to the buyer at completion in the same state that it was in at exchange ?

MalMonroe

My answer to your question is YES.

I would never, ever leave anything without insurance for any length of time, not even a day. Buildings or contents, pets, car, anything. Ever.

There was a post on one of the boards on here very recently where a couple had bought a house and on the day they moved in they opened the front door to be greeted by a major flood. They had not taken out insurance as they were preparing to do it when they moved in. There was damage to the building as well as contents left by the vendors (carpets, etc.). An expensive lesson learned because the house was in their name but it was not insured in anyone's name.

Another example, last month a flat near where I live was gutted by fire - the landlord had building insurance but unfortunately, the tenants had no contents insurance. 

I'd pay whatever was necessary to ensure my property and contents were covered, whether it was a legal requirement or not. I'm sure you can get short term policies for that kind of cover anyway. It is well worth it just for the peace of mind - a lot can happen in two months and it's far better to be safe than sorry. People often think it won't happen to them but sometimes it does. And it's devastating.

badmemory

Don't even consider not paying it, it would be far too big a risk!  Just be grateful that you are not obliged to buy it via your mortgage as it used to be.  I am still fully insured & paying less than half what I did when it had to be with the building society over 20 years ago.

Aretnap

p00hsticks said:

GrumpyDil said:

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

But in legal terms by the same token isn't the seller also obliged to deliver the property to the buyer at completion in the same state that it was in at exchange ?

Not really. There's an implied duty on the part of the seller to take reasonable care of the property. But if something happens which is outside the control of the seller (eg storm, flood, many fires) then in theory it's the buyer's problem. The buyer has to complete anyway, and claim on the insurance which they (presumably) took out on the property at exchange.

In practice of course there's a risk that they will refuse to complete, there's a fish that they're bank will refuse to release mortgage funds to complete on a pile of smoking rubble. And while you could try to take them to court to force completion, at best this is going to mean delays and costs and are worst if they don't have the funds then it ain't happening whatever you do. Given that the cost of a few weeks home insurance is a rounding error in the context of a house sale I would not risk going without.

user1977

p00hsticks said:

GrumpyDil said:

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

But in legal terms by the same token isn't the seller also obliged to deliver the property to the buyer at completion in the same state that it was in at exchange ?

If that were the case then we wouldn’t be talking about the buyer insuring from exchange, because they wouldn’t be carrying any of the risk.

it does strike me as one of the dafter points in English conveyancing practice. In Scotland we usually provide for either party being entitled to pull out if there is significant damage to the property by an insured risk, so need for the buyer to insure before they’re the owner.

Troy_af

user1977 said:

Troy_af said:

Im not sure if this is a legal requirement from your lender as it is when buying a new property?

Not sure what you’re getting at? It’s a requirement of your mortgage lender throughout the duration of your mortgage. So if your old house is still mortgaged, yes of course you need to renew the insurance.

Why are you considering not renewing it? You do realise you cancel it after completion of the sale and get a pro rata refund of the premium (minus an admin fee)?

Thanks.

I wasn't aware of this. If it is as simple as just canceling after completion, then that's what I'll do. I wasn't aware that I'd get a refund. I didn't want to pay for a whole year of insurance, for only say a couple of weeks.

Smithcom

GrumpyDil said:

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

Although in practice, if for example the house burnt down due to the seller's negligence, the purchaser would have a claim against the seller.

So my view would be to keep insurance in place and as Rodders53 says, in the unlikely event of a claim being made, leave the insurance companies to fight it out. 

 'The risk' does not transfer to the purchaser on exchange. If that was the case, the vendor could cease insurance upon exchange.   It seems clear to me that 'a risk' transfers to the purchaser upon exchange.   'The risk' transfers to the purchaser upon completion, when the vendor no longer has a financial interest in the asset.  

In the event of a claim being made between exchange and completion, much would depend on the severity of the damage.   If the house burnt down, there is no way that the mortgage lender (if there is one) would release/authorise funds to complete the purchase on a house that no longer exists.  And even in the absence of a mortgage lender, I suspect that most purchasers would not complete if the house was no longer there.   Such a dilemma would probably be as much of a legal issue as an insurance one, as the purchaser could lose their deposit.  

As far as I know, your Mortgage Lender is entitled to withdraw their Mortgage Offer at any time before completion (even after exchange of Contracts).  

SC

Aretnap

Smithcom said:

GrumpyDil said:

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

Although in practice, if for example the house burnt down due to the seller's negligence, the purchaser would have a claim against the seller.

So my view would be to keep insurance in place and as Rodders53 says, in the unlikely event of a claim being made, leave the insurance companies to fight it out.  

In the event of a claim being made between exchange and completion, much would depend on the severity of the damage.   If the house burnt down, there is no way that the mortgage lender (if there is one) would release/authorise funds to complete the purchase on a house that no longer exists.  And even in the absence of a mortgage lender, I suspect that most purchasers would not complete if the house was no longer there.   Such a dilemma would probably be as much of a legal issue as an insurance one, as the purchaser could lose their deposit.  

As far as I know, your Mortgage Lender is entitled to withdraw their Mortgage Offer at any time before completion (even after exchange of Contracts).  

It's a while since I last bought a house, but when I did, as well as the potential lost deposit I distinctly remember a clause in the contract saying that if I didn't complete on the agreed date, I had to pay X% of the agreed sale price for every day that I didn't complete. I don't recall any exceptions along the lines of "unless the house has burned down and the mortgage lender won't release the money".

Of course regardless of the legal situation, if my mortgage lender wouldn't release the money I couldn't complete regardless of what the contract said. Nor could I have kept up paying X% per day for very long, so those clauses would have been cold comfort to the seller. Not sure how that situation would work out  in practice but I can see it would get very messy very quickly, doubly so if adequate insurance was not in place...

Smithcom

Aretnap said:

Smithcom said:

GrumpyDil said:

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

Although in practice, if for example the house burnt down due to the seller's negligence, the purchaser would have a claim against the seller.

So my view would be to keep insurance in place and as Rodders53 says, in the unlikely event of a claim being made, leave the insurance companies to fight it out.  

In the event of a claim being made between exchange and completion, much would depend on the severity of the damage.   If the house burnt down, there is no way that the mortgage lender (if there is one) would release/authorise funds to complete the purchase on a house that no longer exists.  And even in the absence of a mortgage lender, I suspect that most purchasers would not complete if the house was no longer there.   Such a dilemma would probably be as much of a legal issue as an insurance one, as the purchaser could lose their deposit.  

As far as I know, your Mortgage Lender is entitled to withdraw their Mortgage Offer at any time before completion (even after exchange of Contracts).  

It's a while since I last bought a house, but when I did, as well as the potential lost deposit I distinctly remember a clause in the contract saying that if I didn't complete on the agreed date, I had to pay X% of the agreed sale price for every day that I didn't complete. I don't recall any exceptions along the lines of "unless the house has burned down and the mortgage lender won't release the money".

Of course regardless of the legal situation, if my mortgage lender wouldn't release the money I couldn't complete regardless of what the contract said. Nor could I have kept up paying X% per day for very long, so those clauses would have been cold comfort to the seller. Not sure how that situation would work out  in practice but I can see it would get very messy very quickly, doubly so if adequate insurance was not in place...

That's why both buyer and seller need to insure the house to protect their individual interests in the property.

What would happen in practice would be down to the lawyers/lender/insurers/buyer/seller.   The lender's position may well shape the way forward.

SC

Postik

I had this same issue.  I didn't really want to pay for 12 months of cover on my existing house when I was completing on a new house some 2 months later.

I had a chat with my insurance company and they said they would cover both my existing house, and the new house after exchange, until I completed.  After completion they transfered the policy entirely to my new house.  They even gave me an £8 refund as the new house was slightly cheaper to insure.