You are in the process of buying a house and have exchanged contracts but not yet completed – then the unthinkable happens, the house floods. What is the legal situation?
Solicitor Michael Dibben, head of conveyancing at regional law firm Brethertons LLP warns: “There will undoubtedly be people who are unsure of their legal position and they must urgently clarify the situation with their solicitors.
“Purchasers who have exchanged contracts may find they are contractually obligated to buy a property which they can’t move into for many months.”
Dibben suggests that if buyers have not taken out insurance they will need to urgently check with their lenders as they may have blanket insurance to cover damage caused by flooding.
But as Dibben explains: “As a general rule, the position will depend on the terms of the contract which purchasers have signed with the seller. Standard conditions of contract used by many solicitors say the property is at ‘buyer’s risk from the date of exchange of contracts’. As this date can be some weeks before completion, buyers need to check whether they need to take out insurance well before they actually move into their new home.”
If all else fails, it is likely that a seller would not yet have cancelled their own buildings/contents insurance until the day of completion, and purchasers would need to try to persuade the sellers to make a claim and ask the insurance company to transfer the benefit of the cover.
Dibben concludes: “If purchasers have not received clear legal advice about the legal position regarding insurance together with full details about the fact that a property may be located on a flood plain, litigation may well be the outcome.”
