When storms damage property before settlement
IN QUEENSLAND, extreme weather events are a regular occurrence and this raises a serious question around property sales and transfer of risk: “What happens if my house has sold but not yet settled and a cyclone damages or demolishes my house? Does the sale still go ahead and who pays for the damage?”
According to the standard terms of the REIQ contract of sale, risk transfers to the buyer at 5pm on the next business day. So, if the contract was signed at 2pm on Monday, April 10, the risk transfers to the buyer at 5pm on Tuesday, April 11. If the contract is signed on Saturday, the risk is transferred at 5pm on the following Monday (provided Monday is not a public holiday. If it is, then risk transfers at 5pm on Tuesday).
This means risk of damage to the property moves from the seller to the buyer, and thus the responsibility for repairs. Having said this, the seller still has obligation to maintain the property up until settlement.
So, as a buyer, when you have been advised that your offer has been accepted and signed by the seller it is prudent to arrange your insurance for the new property immediately. This is a simple process and can usually be handled over the phone with your insurance company.
In areas that are prone to cyclones it is also possible to include storm and cyclone contingency clauses into the contract, by negotiation.