You have signed a contract to purchase a beautiful house on the beach, your bank has approved your finance application and your Building and Pest reports were glowing.
The day before settlement you are watching the news: a category 5 cyclone is making its way towards the coast – right towards the property you intend on purchasing. At best, the house is going to cop some damage; at worst, it will be completely destroyed.
Given the recent weather events, Tropical Cyclone Owen in North Queensland, a common enquiry we receive is: who is going to pay for the damage, the Buyer or the Seller?
The standard terms of the typical REIQ Contract for Houses and Residential Land provide that the property is at the Buyer’s risk from 5:00pm the day after the Contract Date. If the storm comes, the Buyer is liable for any damage to the property that may occur from the day after the contract is formed.
It is for this reason that you should always insure the property that you intend on purchasing as soon as possible after signing the contract. Don’t leave it too late, no insurance company will insure your property once a cyclone or severe storm is forecasted.
If you find yourself experiencing the above situation as a Seller, you are not off the hook. Although the Buyer is at risk for the most part, it is extremely important that you maintain insurance over any dwelling on your property until settlement. This is because once a dwelling house is so destroyed or damaged as to be unfit for occupation, the Buyer may rescind (take back) the contract. That leaves you with a destroyed house and no contract. With an adequate insurance policy, you will at least be entitled to the benefits.
Whether you are buying or selling, insure your property. You can never be too careful!
If you have any questions regarding your property or one that you are looking to purchase, call our property law team on (07) 4771 5664 or email firstname.lastname@example.org.