Insurance Responsibilities in Property Contracts

When purchasing a property, it is important for Buyers to understand their responsibilities and risks concerning insurance coverage. This overview highlights the key considerations for ensuring proper insurance is in place from the moment a contract is signed until settlement. Additionally, it outlines the insurance obligations for different types of properties, including strata and low-rise developments, to help Buyers navigate their responsibilities effectively.

When does the risk transfer to the Buyer in a property contract?

A Property is at the Buyer’s risk from 5pm on the first business day after any Contract date.

What obligations does the Seller have regarding the property until settlement?

The Seller has an obligation until settlement to take reasonable care of the Property.

What happens if the property is damaged between the contract date and settlement?

If the Property is damaged between the Contract Date and Settlement (e.g. fire or vandalism) a Buyer is still required to settle in accordance with the Contract (unless it is so destroyed or damaged as to be unfit for occupation).

Should a Buyer rely on the Seller's insurance for property damage before settlement?

If damage occurs, a Buyer may in some circumstances gain the benefit of the Seller’s insurance. However Buyer’s shouldn’t rely on this as:the Seller may not take out insurance; the Seller may cancel its insurance; the event that causes the damage may not be covered; orother factors may preclude recovery.As such, a Buyer should arrange for insurance cover for the home/building, contents and public liability immediately on entering into a Contract, so that it is in place before the Property is at their risk.

Strata and multi-level buildings, such as apartment blocks

What are the insurance responsibilities of the body corporate and lot owners in a strata property?

The Body corporate is responsible for insuring the common property, body corporate assets and having public liability insurance for the common areas.The Body corporate is also responsible for insuring the building structure.  Lot owners will share the cost of insurance (based on the interest schedule lot entitlements for the scheme).

Lot owners are responsible for insuring the interior of the lot (we recommend home contents insurance and public liability insurance for the interior of the lot).

Who is generally responsible for various maintenance costs?

For Low-rise developments, such as townhouse complexes:

• The Body corporate is responsible for insuring the common property and body corporate assets and having public liability insurance for the common areas.
• The Body corporate is also responsible for insuring the building structure only where a building erected on a lot shares a common wall/s with a building erected on an adjoining lot.  
• Lot owners will share the cost of insurance (based on the respective replacement values of the building erected on each lot).
• The Lot owner is responsible for insuring the building structure where the building erected on the lot does not share any common walls (although the body corporate can obtain insurance if the body corporate committee resolves to establish a voluntary insurance scheme).
• The Lot owner is responsible for insuring the interior of the lot (we recommend home contents insurance and public liability insurance for the interior of the lot).