This information has been provided by
Australian law firm, Australian Conveyancing Services and is applicable in New South Wales
only.
The Conveyancing Act in New South Wales states that the risk for the property between Buyer and Seller (after the exchange but before settlement) does not pass to the purchaser
until:
Following exchange, you have a financial interest in the property so it's wise to get
the property (improvements and fixtures) insured
straightaway.
completion (the date of
settlement) or
If the Buyer takes
possession of the property before settlement, then that
earlier date.
Some further Insurance
Tips:
If
you are getting finance, then your mortgagee will often
require you to arrange a Certificate of Insurance before
settlement. Make sure that it is a Certificate
(not a cover note) and that the insurance is paid.
Also get the Insurer to note the mortgagee as an
interested party on the Certificate.
Make
sure the Insurance is in the name or names of all the
actual Buyers (as noted on the Contract).
Insure for the full insurable value of the property (namely the value of the improvements). If you are unsure as to this value, take the market value of the property as a whole, and deduct the value of the land or use the replacement value
Check that your policy covers you for public risk. Most policies of insurance on residential homes have this as an extension. You will be glad that you did, if you are unfortunate enough to have a visitor suffer an accident or injury on your property, which may be as a result of your negligence.
If the property is damaged
between the date of the contract and the settlement (or
early possession date) then the Buyer may:
seek a reduction of the purchase price on completion by the amount which is “just and equitable in the circumstances”. There is no formula for determining that amount so it would be up to the parties to negotiate, or
referred to arbitration under clause 7 of the standard contract. However, even if the purchase price is not reduced on completion, the purchaser's right continues and a proper amount may be recovered from the
Seller as a debt after
settlement.
Where the damage is substantial, the buyer has an
extra option – they may terminate the contract by giving notice in writing. ‘Substantial damage’ means damage which renders the land (a term which includes buildings and other fixtures)
'materially different from that which the buyer contracted to buy'.
