G'day guys,
Just like a few of us. A little residential investment property of ours has suffered some minor storm damage.
I have a question for the intelligent. This property is not yet ours and settlement is in early December. We signed back in October and have since gone unconditional.
We have an insurance policy on the house. I am assuming that the seller also has a house insurance policy. Who is liable for the insurance claim? These are the answers that I have received so far.
Real estate agent 1. The seller is liable
Real estate agent 2. Buyer is liable
Conveyancing agents Buyer is liable
Insurance agent Seller is liableWe have started a claim immediately and are not too concerned about the bill. But does any know who, and why the buyer may be liable? I am assuming that the buyer has an interest in the property and is likely to have some responsibility for the costs. But does anyone know the legislation and sections applicable to such a matter? Our damage is minimal, but it could have been a whole roof like some others.
I'm just glad that I didn't listen to the local insurance manager who told me that I didn't need insurance until settlement. I'd rather spent $100 to fix a roof than $17000.Any theories or knowledge on the matter?
Cheers
My understanding is that you get the insurance before settlement to cover yourself. If on the settlement inspection (usually a day before settlement) things are not as they were, then you can delay settlement, until the necessary repairs are completed. What if that doesn;t happen for two years. You have a contract, they have your deposit, and you may be unable to buy elsewhere. This way you can make a claim, fix it and all is happy for settlement to occur. Please correct me if I'm wrong.
Just remember that not everyone has insurance.
JLThe seller should have but can't be held responsible for insurance prior to settlement and as mentioned not all people have insurance and this is why you should check and take out your own insurance for peace of mind.
Because your contract is unconditional that could have cause problems for you if the damage was more. The seller does have a legal duty of care to maintain and keep the property in the condition stipulate on contracts but this is a tight one to enforce.
When buying a property always check that the seller has insurance coverage.
I don't know, but think….
The vendor is the legal owner until settlement. The new purchaser has an equitable interest after exchanging contracts. Both of you have an interest and therefore should be able to be covered by insurance separately. If damage is done to the property prior to settlement then the vendor will be liable as they have contracted to provide you with a property in a certain condition.
So I would think that the vendor's insurance should take care of any damage prior to settlement. If they can't or won't then you may be able to make a claim under your policy.
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Have a look at the contract which will specify whether the risk is with the vendor or purchaser prior to settlement. It varies from state to state. In the NT the risk is with the vendor, but I know it is not the same in every state. There should be a heading in the contract called "Risk".
Cheers
K
Thanks Linar
I'll have a read of the contract and see if I can come up with anything.
As previously stated. The manager of my local insurance centre told me that I was wasting my money and time as I was not liable if there were probs. I am glad that I was too stubborn to listen to him and took out a policy to cover us anyway. Things could have been much worse.Cheers
As per Linar's advice,
I had a read of the contract outlined in the Property Agents and Motor Dealers Act 2000 Form 30C (QLD.)
s26 of the Contract for sale of houses and land- terms and conditions states
RISK
From 5:00 pm on the next business day after the signing of this contract the property shall be at the risk of the buyer, however as long as the seller continues to occupy the Property the seller shall maintain any current insurance policies and will use and maintain the property with reasonable care (as provided in clause
.This sounds like I am liable. As the house is currently an investment property, it sounds like the seller does not have to continue paying for an insurance policy.
That info reads fairly clear to me but I am interested if anyone has any further thoughts on the matter.
Cheers
As long as you have not taken possession of the property, the vendor remains in possession. If the vendor has leased out the property, he still remains in possession as you have no contract with the tenant. It is the vendor's right to grant a tenancy to another yet he remains the owner as the ownership of the house does not pass to the tenant, only the right to occupy.
The expectation would be that the vendor has effected insurance over the premises and is to keep those insurances current until settlement. If the house is not insured, firstly there may be a breach of contract (for not having insurances in place), secondly you should be able to reduce the sale cost by the amount of repairs required however you cannot profit from the situation (equitable remedy). If you have insured the property, technically you may have an insurable interest however as you do not own the property yet, it can be argued (and I agree with your insurer) you do not have a right to coverage.
Thanks Scott No Mates,
Thanks for your views mate. You put forward a good discussion. Unfortunately I don't have enough knowledge on the topic to rebut your comments.
You've got me scratching my head now as to who is liable. Are you suggesting that as I am not the owner yet, technically I shouldn't be permitted to take out an insurance policy on a property that is not yet owned by me?
There are some contact details for the Queensland Law Society on the contract. I think I'll give them a go. As previously stated, I asked my conveyancing staff and they said that I am liable. They weren't able to discuss why though.
The seller seems to be quite a reasonable bloke, so we're not going to jump up and down. We just want to get it right, and learn from what potentially could have been a costly exercise.
Further to your comments mate. We have been curious about this question.
The current tenant moves out 6 days before settlement. A new tenant is moving in immediately for a 12 month lease. The real estate agents receive one weeks rent ($500) as the letting fee. This lease commences during the period in which it is owned by the seller.
Does this mean that the seller will receive 6/7 of the first weeks rent, and 6/7 of the letting fee? Or is the letting fee our responsibility?Cheers
fishngym wrote:…Are you suggesting that as I am not the owner yet, technically I shouldn't be permitted to take out an insurance policy on a property that is not yet owned by me?
…The seller seems to be quite a reasonable bloke, so we're not going to jump up and down. …
Further to your comments mate. We have been curious about this question.
The current tenant moves out 6 days before settlement. A new tenant is moving in immediately for a 12 month lease. The real estate agents receive one weeks rent ($500) as the letting fee. This lease commences during the period in which it is owned by the seller.
Does this mean that the seller will receive 6/7 of the first weeks rent, and 6/7 of the letting fee? Or is the letting fee our responsibility?
1 – As the property has not transferred, you do not own it (yet). Typical example would be if the contract was void or invalid due to misrepresentation etc eg advertised as a 4 bedroom brick house with pool and it was a 2 bdm unit. (A bit extreme but obvious).
2 – Sellers are always reasonable people (until you ask them to do something)
3 – However, your only remedy if the house is damaged prior to settlement is not to settle (you may get a binding undertaking that works will be completed/restored but also withhold $$).
4 – As to the lease, who has engaged the agent? If you have, then you will be liable for payment of the agent's fee. If the vendor has engaged the agent then it will be the vendor's liability (however as you are going to benefit from it you can go easy on this point). If no-one has engaged the agent, then they are not entitled to payment.
5 – Vendor is entitled to the rent up to the time of settlement (hence also liable for damage).
6 – You will need to sign an agency agreement with the agent if they are to manage the property on your behalf .
SNM
Hi fishngym
I think the wording of the contract is very ambiguous. It says that you (the purchaser) have the risk but that if the vendor occupies the property ("occupation" would include a tenant") the vendor has to continue to have insurance. It doesn't say that the risk passes back to the vendor.
I think that the reason for this wording would be because if there is an insurance claim the two insurance companies would look to sort out how the damage for which insurance is sought was caused. For example, if the tenant left a candle on and burned the house down then obviously the vendor's insurance would be the one to cover it. There is no way your insurance company would pay for a tenant's damage. However, if the damage was caused by a flood or something over which the vendor (or tenant) had no control, then I expect that the purchaser's insurance would be the one to foot the bill.
Once you have signed the contract you have an insurable interest in the property, as per the contract. Your insurer can't just take your money when you take out insurance prior to settlement and then claim that you don't have an insurable interest. It is in the insurer's interest to try to deny your claim. I think your insurance company is just trying it on.
I suggest that you lodge a claim with your insurance company and let them chase the vendor if they have an issue with it.
As to the issue of the new tenant in, who instructed the property manager to advertise and get a new tenant? If it was the vendor then I expect that the vendor would be liable for the whole letting fee and would receive all rent until settlement. If, on the other hand, you got your own PM to find a tenant (with the consent of the vendor) then you would be responsible for the whole of the letting fee. The vendor would still be entitled to rent received prior to settlement. However, your conveyancer should make these adjustments in the settlement statement.
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