Following on from this thread: http://singletrackworld.com/forum/topic/buying-a-house-with-a-long-delay-between-exchange-and-completion

I’ve just found out that we’ll need to insure the house that we’re buying from the time we exchange until we actually get to move in. This can’t be right can it? I won’t sign a contract until completion so why on earth should I insure something that someone is going to sell to me at some point in the future? It’s surely the seller’s job to make sure that the house is in the condition we agreed at exchange until the moment I take possession?

This is the first time I’ve bought in England but can’t remember if it’s the same in Scotland but I definitely didn’t insure a place before I moved in.

Yes, get the insurance. The point is you are committed to buying from the point of exchange even if it falls over in the meantime. At least that’s what I was told when in the same position. The cost is peanuts anyway.

If you “won’t sign a contract until completion” then what do you think you are actually exchanging anyway? Christmas cards?

you might want life cover etc from when you buy the place, but I can’t see any reason you need insurance on the house. If it gets burned down surely its on the owners to pay back any deposit/compensation to you?

I bought a newbuild off plan, and didn’t have any insurance till completion (almost 1 year after exchange).

Yes, you’re best to insure it. If the owners cancel their insurance and then it burns down you’d still have to legally buy it!

I won’t sign a contract until completion

You actually sign the contract at exchange [of contracts].

Oops, sorry Capt.

It will almost certainly be a condition of the mortgage that you have the building insured from exchange.
You’ll have to prove it. I’m certain I had to forward a policy number.

Yep, your mortgage company will need it to be insured. Its easiest just to get the mortgage companies insurance if they provide it, both times I moved it was a pain getting the right paperwork so M&S could cover it during exchange.

Normally, the mortgage company will provide buildings cover and allow you to cancel when you move in and so you can use your chosen insurer.

It is the legal norm that the purchaser insure from exchange. Most buildings insurance policy would be void for the vendor from exchange. My parents just came across this bit (they are the potential vendors, developers asking to buy and didn’t want to insure as they intend to demolish anyway…. Bit of advice from their solicitor and some calls to their insurers, and the developers are told to get insurance)

Yeah, you need to insure the risk as above points out from exchange.

Although, check with your existing insurance as they may well cover this period – I’ve just completed and I’m doing some decoration before I move in and I got 30 days grace where the insurance covered both properties.

Edit: having just read your first link that won’t be much use to you… but there must be really compelling reasons to accept to exchanging with a completion date so far away to offset the extra cost – I’d be putting the exchange back personally.

Most insurance covers exchange and completion time scale free. From exchange it is your policy covering the building. The seller has every right to cancel their existing cover. If the property burns down and you have exchanged with no insurance cover…..you are buying rubble!!!

Is this something new? Or just another cost that’s turned up recently.

Never heard of it and bought houses in both England and Scotland.

^^ No it’s has been the case for my 25 years working with mortgages.

Oh and it’s not a cost as most insurance provides exchange to completion free of charge but of course no one provides something for free forever so there will be time limits

Was same for us…. Once exchanged it needed to be insured for bricks and mortar/rebuild costs. Which was a proper faff as our insurance company had never ever ever had this before apparently. We ended up with 2 policies that year, one for Home, one for contents as we were renting a place for 3 months…

It was a bit daft… but sometimes you just have to live by their rules.

‘Never heard of it and bought houses in both England and Scotland’

You’ve probably always taken the mortgage providers insurance for the next year so its never flagged as an issue.

I think ours was just covered for some fairly nominal (in the scheme of things, for 4 weeks insurance it was probably a lot) fee by the mortgage lender. We only had to have our own in place on completion.

Yep we had to do the same last year when we got ours, once the first payment went out I was pretty much on the solicitors case every day to get the completion sorted.

Turns out the sellers where dragging there heels as they moved to Ireland and my timescales didn’t meet there’s. Luckily? I had one of those solicitors that if the sale fell through I get the next set of fee’s wiped out so they worked to our timescales, last thing they wanted was to work for free the second time round.

Thanks everyone, I have a few phone calls to make now to sort all this out. A lot of this is new to me as I’ve always had a solicitor who advised more and took more control over the process (may be a Scottish thing or that I was just lucky).

@thecaptain: I was just going with what my solicitor told me but, now I think about it and have done some reading, I guess that make sense.

@nickdavies: The sellers are buying a new build so I’m assuming that they want a bit of assurance before they commit. I have no idea why we are exchanging so early really, I just assumed it was normal down here. I’ll get our solicitor to query though. We weren’t that worried about the delay to actually moving in – they have a young family so we’re just being nice (too nice maybe).

Another reason to just go for it asap – none of this daft two weeks between exchange and completion.

I don’t know about scotland but in England the thing I don”t like is solictors waiting until exchange before you can draw funds down. Some mort co’s reserve the right to change their minds until you draw down, which means you may have exchanged and then be left with no mortgage. So on our last house we insisted on funds draw down before we were prepared to exchange. Then we completed 4 days later.
So from that point of view the time between exchange and complete seems silly. However, the vendors do need time to arrange their affairs and may not want to commit until exchange. Difficult balance that is often not helped by estate agents..

You need it from exchange. Imagine you’d agreed to buy my house – what you’re actually going to buy is the plot of land it sits on, and the fact there’s a house on it is really just convenience.

We exchange, it burns down and you haven’t got insurance. You are still committed to buy (admittedly, you could pull out with significant damages).

I, however, have got insurance and take the money, leaving you with a smoking ruin that you own and no money to build a new house. I have your money, and x thousand from the insurance company.

I, however, have got insurance and take the money, leaving you with a smoking ruin that you own and no money to build a new house. I have your money, and x thousand from the insurance company.

Weeeeell, not quite. Castellain v Preston 1883.

However, the better safe than sorry approach would be that the buyer puts buildings cover in force from exchange.

Weeeeell, not quite. Castellain v Preston 1883.

Yet if I sell a car, and that crashes leaving my road, my insurance picks up the bill unless I have cancelled it.
Also, would you not be in breach of contract (to provide building as described on that plot), therefore you sue the vendor?

Contracts don’t usually specify the state of the property in any detail. And even if you did think you could probably sue the vendor successfully, it’s a hell of a risk to take with (say) half a million pounds to save a hundred quid in short-term insurance. What if they are/become bankrupt?

@Flaperon – but surely that means that, using the same arguement, the seller can make any alterations (knock a couple of walls down, convert the spare room into a dungeon etc.) they wish in the gap between exchange and completion?

If that’s the case then property law needs a big shake up! I’d have thought that legally I’m entering into a contract to buy a house and plot of land in the condition that it was advertised for sale. If it’s not in that condition when I move in then it’s breach of contract.

Yet if I sell a car, and that crashes leaving my road, my insurance picks up the bill unless I have cancelled it.

Correct, but that’s not related to the issue in C v.P. The car thing is due to statute, the Road Traffic Act 1988, i.e., a law in the “proper” scheme of things as it’s an act of parliament, etc.
C v. P is in tort; it’s a decision in civil court but not a written down “law” and it relates to your rights following a loss – you must not benefit (i.e., win) after a loss. Compensation puts you back in the same position and no better, so Preston was sued by the insurance company to recover the amount he’d been bettered by, which was the amount of the claim.
And yes, your insurance company are entitled to sue you for their damages if you fail to cancel a motor insurance policy and then a claim arises in the way you said. Whether they would do depends on the company you chose and a whole host of other things, but that’s one for an entirely different thread…