Buyer Insurance Responsibilities in Property Transactions: What You Need to Know

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?

The standard residential contract generally provides that it is the Seller’s responsibility to protect the Property up to settlement.

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 and pass on the Property to the Buyer at settlement in the same condition as it was on the day of sale.

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, Buyers 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; or
• other factors may preclude recovery.

As such, it is always in the Buyer’s interest to purchase insurance over the Property from the moment of contract exchange, to avoid unnecessary complications, if anything were to happen prior to settlement.

We recommend the Buyer to arrange 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.

If you are obtaining finance for your purchase, your lender will generally also ask for proof that the Property is insured before they will provide settlement funds.

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).