Buying a property is one of the biggest financial commitments most people will ever make. Yet many Queensland buyers are surprised to learn that they can become responsible for the property long before settlement takes place.
In Queensland, under most standard residential contracts, the property is at the buyer’s risk from 5:00pm on the first business day after the contract date. This means that if the property is damaged by fire, storm, flood, vandalism or another unexpected event before settlement, the buyer may still be required to proceed with the purchase.
What does “at the buyer’s risk” mean?
Many buyers assume that because the seller remains the legal owner until settlement, the seller is responsible for any damage that occurs before settlement. Unfortunately, that is not usually the case.
The standard Queensland contract provides that the risk passes to the buyer shortly after the contract is signed. As a result, if the property suffers damage during the settlement period, the buyer could inherit the problem along with the property.
This can be particularly significant in Queensland where severe weather events, flooding, hailstorms and cyclones are common occurrences.
Check out the below link for a real-world example of a local property that sprung a leak just days before settlement was scheduled leaving the purchasers reeling: Buying a house in Australia: Couple’s dream home turns into a nightmare amid shock discovery days before moving in | 7NEWS
Can a buyer cancel the contract?
Not necessarily.
Many buyers assume that if a property is damaged before settlement they can simply walk away. In reality, the position is often far more complicated.
While there may be limited rights available where a property is so extensively damaged that it becomes unfit for occupation, buyers are generally still required to complete the purchase despite damage occurring before settlement.
This is why relying on the seller’s insurance can be risky.
When should insurance be arranged?
The safest approach is to arrange building insurance as soon as possible after the contract is signed.
Waiting until finance approval, settlement, or key collection could leave a period where the property is at your risk but uninsured.
Many lenders also require evidence of building insurance before settlement can occur.
How Lynch Law can help
At Lynch Law, we ensure our conveyancing clients understand their obligations from the moment a contract is signed. One of the first pieces of advice we provide to buyers is to arrange appropriate building insurance immediately so they are protected throughout the settlement period.
A property purchase should be exciting, not stressful. Understanding when risk passes and having the right insurance in place can help avoid an unexpected and potentially costly surprise before settlement.
If you are buying property in Queensland and would like assistance with your conveyancing matter, contact our team today.
