Lawyers are warning property owners in Queensland to double-check their insurance ahead of the storm season or risk being left with a pile of rubble.
Slater and Gordon Queensland conveyancing lawyer Robert Kern said new property owners need to make sure they have correctly insured the property from the moment they sign the contract – or they could be “forced to buy a pile of rubble if the property is destroyed by cyclone or ravaged by fire”.
Mr Kern said the standard Queensland contract provides that the property is at the buyer’s risk from 5pm on the first business day after the contract date.
“This means that from that date, if the property is damaged in a natural disaster or burns down, it’s the buyer’s problem,” he said. “Therefore you still have to buy the home, even though there’s nothing left to buy.
“And if the bank refuses to lend the money, you’re potentially stuck in a contract you can’t complete.”
Mr Kern said the Insurance Contracts Act 1984 (Cth) provides that if a seller has insurance on the property and something happens, it is deemed that insurance will also cover the buyer – but that the buyer shouldn’t rely on this.
“Their insurance may have lapsed, not cover certain types of damage (such as flood) or be inappropriate for other reasons.”.
Mr Kern explained that the vendor was required to take ‘reasonable’ care of the property from contract date to settlement – meaning reasonable wear and tear is acceptable.
“The issues arise when there is major structural damage to the property and why buyers should always take out insurance before settlement, even if the contract is still subject to finance or building and pest inspections,” he said.
Mr Kern said the contract also does not require the seller to clean the property or have it spotless at settlement.
“This often disappoints buyers, who were expecting to move into a freshly cleaned home.”