Buying a Property? Ensure You Insure

If you are buying or thinking about buying real property, whether it is residential or commercial, a unit, house or commercial building, insurance should be high on your list of matters to consider before you sign a contract.

Most contracts for the sale of real property provide that the property is at the seller’s risk until 5.00pm on the next business day after the date of the contract. At that time, the risk passes to the buyer. These are standard terms of the REIQ Contracts for Houses and Residential Land, Residential Lots in a Community Titles Scheme, Commercial Land and Buildings and Commercial Lots in a Community Titles Scheme, which are used by a lot of real estate agents for Queensland properties.

You would probably be aware that the Contract Date is the date that the Contract is signed by the last party to sign it. Usually, this is the Seller. If, for any reason, the Buyer does not find out the Contract has been signed by the Seller until a few days later, risk may have passed to the Buyer before the Buyer even finds out that the Contract has been signed.

The person who bears the risk for the property is responsible for the costs of repairing any damage to the property or reinstating the property if it is destroyed. This means that if, as a buyer of real estate, the property is destroyed or damaged after the Contract Date and before you complete your purchase, you could be receiving, at settlement, a lot more than you thought you had bargained for.
It is for these reasons that we recommend that all buyers of real estate ensure they have their insurances in place when they sign the Contract.

If you are purchasing a lot in a Community Titles Scheme, the Body Corporate may either have, or be required by law to have, building insurance and public liability insurance for the common areas. Nevertheless, you still need to effect your own public liability insurance for the interior of the building and your own insurance for the contents of the building, which includes things like curtains and blinds, floor coverings and fitout such as the kitchen, which may not be or be required to be covered by the body corporate insurance.

Even if the body corporate does appear to have building insurance, we generally recommend that you effect your own building insurance to cover the building until you are able to obtain a copy of the body corporate’s insurance policy and Certificate of Currency and confirm for yourself that the body corporate is appropriately insured.
If you are purchasing a house or commercial building, you should be taking out insurance for the building, contents and also public liability when you sign the Contract.

The Property Law Act does allow a Buyer to avoid a Contract and obtain a refund of their deposit if a dwelling house is damaged or destroyed either before the settlement date or before the buyer obtains possession of the property (whichever is the earlier), and as a result of that damage or destruction, is unfit for occupation as a dwelling house. However, we cannot predict whether or not a property is going to be damaged or destroyed at all, let alone whether the circumstances of such damage or destruction would be of such a nature as to allow a Buyer to terminate the Contract under the Property Law Act.

It is clear that the risk to a buyer is such that they should ensure they insure!