WARNING - Insurance from exchange of contracts

stuartmc_2

This is just a quick reminder to anyone buying a house that you must insure it from exchange not from completion. My daughter has just learned this lesson the hard way. 

I have always thought and in fact have had my house insurance start on the day of completion and transferred over the existing policy to the new house. On her first house purchase she has found out that it is from exchange. We have had a hot water pipe burst between exchange and completion causing extensive damage that we are now responsible for. Although the seller has their own insurance it appears not to cover this. 

We now need to find an insurer that will cover the buildings while the repair work is undertaken, any advice for who might offer this would be appreciated. 

pinkteapot

Hmm.... Has the seller carefully checked their policy, or are they just washing their hands and not wanting to claim? Our home insurance is a bog standard policy with Quote Me Happy and includes: 

"Selling your home ✓ ✓ ✓ Your buildings cover will extend to protect the buyer of your home if it is damaged by an insured event between exchange of contracts and completion of the sale. This cover only applies if they don’t have other insurance to cover the damage."

We've had the same in other policies with previous insurers - I think this included Admiral and possibly Direct Line. 

You're right of course - the buyer should insure from exchange, but it may at least be worth a begging ask to the seller to look into it more. I'd understand if they don't want an insurance claim on their record that they have to declare in future though. 

For new insurance for a house undergoing repairs, try asking on the DIY or Insurance boards if you don't get any joy here. 

Is your daughter buying with a mortgage? If so, the solicitor normally asks for proof of insurance from exchange as it's a condition of all mortgages, so far as I'm aware. We've always had to take out buildings insurance from exchange and send the solicitor the certificate. 

One aside to FTBs reading this thread: The exception to the insure-on-exchange rule is new-builds. Liability there stays with the builder until completion. 

eddddy

stuartmc_2 said:

I have always thought and in fact have had my house insurance start on the day of completion

The situation changed around April 2011, when conveyancers started using the 5th Edition of the Standard Conditions of Sale.

Prior to that, the 4th Edition made it the seller's responsibility to insure. (Maybe you haven't bought a house since 2011.)


It's surprising that your daughter's solicitor didn't make it very clear that your daughter needed buildings insurance from exchange. Is your daughter buying with a mortgage? If so, the solicitor usually asks to see a copy of the insurance.



This is probably grasping at straws - but how come a hot water pipe burst? Was the seller negligent?

For example,

• Was it that the heating was turned off in an empty house in in sub-zero temperatures, and a heating pipe froze and burst? Was the water turned off at the stop tap?

• Did the sellers act reasonably in dealing with the burst pipe? If the house was empty, were they inspecting it reasonably frequently?

The seller still has a duty of care between exchange and completion - so they should act reasonably. If they acted negligently, your daughter can potentially claim from them for the damage.

But like I say - that may well be grasping at straws. And it might involve a nasty, difficult fight.

KittenChops

Our buildings insurance (Halifax) has a clause something like "we will insure between exchange & completion if the buyer has not insured it"
And as pinkteapot said, I remember reading an article about a loss arising between exchange & completion where both parties had buildings insurance in place, and instead of covering it 50/50 as I expected they would, the seller's insurance successfully argued that the buyer's insurance should cover it as their own policy was in effect a "back up" policy in case the buyer had not insured the property.  I will try & find it...

movilogo

It is solicitor's responsibility to remind buyer to insure it upon exchange.
While the seller can claim on their insurance, they are unwilling to do because they have to declare this claim in their subsequent insurances which would up their premium.

Noneforit999

Our solicitor informed us it was our responsibility to insure between exchange and completion, it was written in one of the documents....which I read. 

Flugelhorn

Our solicitor noted that we were unlikely to be able to get insurance as buyers as the vendors wanted 8 weeks between exchange and completion and apparently most companies won't cover you not being resident for that length  time - so she wrote into the contract that the vendors were responsible for insurance. 

youth_leader

So sorry this has happened to your daughter on her first purchase.  

MikeJXE

Noneforit999 said:

Our solicitor informed us it was our responsibility to insure between exchange and completion, it was written in one of the documents....which I read. 

I agree

I'm 80 odd and 10 homes, my solicitor has always told me insure at exchange 

I don't get why this problem is cropping up so often, yesterday on another thread someone was advised to insure at completion which is totally wrong

I'm not even sure why the question is even asked, surely the advice is flagged up in correspondence between solicitor and client in first contact and immediately before exchange 

propertyrental

It'sin the contract she would have signed, and if she's getting a mortgage the lender would have insisted on the solictior seeing evidence of insurance at Exchange.

Even if no mortgage, any half decent solicitor should have highlighted the need.

Flugelhorn said:
Our solicitor noted that we were unlikely to be able to get insurance as buyers as the vendors wanted 8 weeks between exchange and completion and apparently most companies won't cover you not being resident for that length  time - .....

Most policies define 'unoccupied' as either 30, 45, or 60 days. 60 days would cover an 8 week period. Just.

So bear that in mind when shopping around.

Flugelhorn

propertyrental said:

It'sin the contract she would have signed, and if she's getting a mortgage the lender would have insisted on the solictior seeing evidence of insurance at Exchange.

Even if no mortgage, any half decent solicitor should have highlighted the need.

Flugelhorn said:
Our solicitor noted that we were unlikely to be able to get insurance as buyers as the vendors wanted 8 weeks between exchange and completion and apparently most companies won't cover you not being resident for that length  time - .....

Most policies define 'unoccupied' as either 30, 45, or 60 days. 60 days would cover an 8 week period. Just.

So bear that in mind when shopping around.

Quite - it could have just covered it but the alternate was simpler than me chasing around, also covid hit and the  8 weeks nearly became an awful lot longer.....