When is House Insurance activated?

T

TrundleAlong

Registered User
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Family member has signed contracts to purchase house. Vendor has not signed contracts yet.

Who is responsible for House Insurance and when should family member activate home Insurance?
 
Ravima said:
I think that they have an insurable interest once they have signed the contract.
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For sake of argument suppose contracts signed by both parties on 13 November which say new owners to take possession on 20 November

For me, this implies that the vendor is on the hook if they fail to hand over the house intact on 20 November. Likewise, the purchaser cannot take any steps to mitigate risk of things like theft, flood or fire until they have possession of the house on 20 November.

In any case insuring for an extra few weeks is peanuts in the scheme of any house sale. If you want a piece of mind then insure sooner rather than later.
 
Ravima said:
I think that they have an insurable interest once they have signed the contract.
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I agree with Ravima. Once the vendor holds a contract signed by the purchaser, the vendor can compel the purchaser to buy the property for the contract price. So, if the property is damaged between then and the completion of the sale, the purchaser might end up buying a property that is worth less than it was when the price was agreed. So the purchaser would want to be insured against the risk of damage to the property arising at any time after they deliver a signed contract.
 
Our solicitor advised having insurance in place once contracts were signed. But I can't remember if that was us signing or both signing!
 
Dr Strangelove said:
But presumably the vendor cannot compel the purchase of a house that has been burned to the ground.

Maybe there is some aspect of contract law I'm ignorant of here.......
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The classic position is that, if you have a contract to buy Blackacre, that includes all the buildings, structures, fences, etc standing on Blackacre. Or not standing, if they happen to be burned down/washed away in a flood/swallowed up by a sinkhole. Blackacre still exists; the contract is still good.

Therefore, risk passes to the purchaser soon as the contracts are signed; he needs to insure agains these risks.

However, the standard conditions of sale used in Ireland include a condition that says that vendor is liable to the purchaser for any loss or damage to the property between the date contracts are exchanged and the date of completion. So if there has been a fire the purchaser still has to buy the property, but the vendor has to pay compensation for the damage done by the fire.

But there are some exceptions - the vendor doesn't have to compensate for damage done by reasonable wear and tear during this period; doesn't have to compensate for damage resulting from the vendor's operations of removal from and vacation of the property; doesn't have to compensate for damage done by restrictions or obligations imposed by state authorities; doesn't have to pay for damage occasioned by the purchaser or their agent. Plus the compensation is capped at the total amount of the purchase price; the vendor never has to pay more than that.

So there's some scope their for arguing about how the damage was caused and/or who caused it, and whether the vendor is or is not liable to compensate the purchaser for it. And in a case where you are buying a heritage property that would cost more to rebuild than to buy, you would still be at a loss. For these reasons purchasers may prefer simply to insure the property themselves from the date of exchange of contracts, and the standard contract terms explicitly recognise the purchaser's right to do this.
 
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