Keep under cover

Most homeowners are aware of the importance of house insurance that covers the cost of repairs to the building.

But, says Martin Schultheiss, CEO of the giant Homenet real estate agency group, it is a detail that may easily be overlooked in the transition phase when property is bought and sold.

“Problems can arise in the period between occupation and taking transfer of a new home if the date when the risk passes from the seller to the buyer is not clearly spelt out in the sales contract,” he says.

“For instance, if both parties just assume that the other is liable to insure the property in the interim period, lengthy and complicated legal wrangling may ensue if the building suffers any damage. It is therefore imperative to stipulate in the agreement precisely on which date the risk passes from the seller to the buyer.”

If agreement is reached that the seller carries the risk until transfer of ownership, he would have to ensure that the entire building is ensured at full replacement value – otherwise he may end up being liable for expensive repairs to a home he no longer occupies.

On the other hand, if the liability passes to the buyer on occupation and he fails to adequately insure the buildings, he may find that he is saddled with expensive repair bills on a property that he does not yet own.

Schultheiss says, however, that it is possibly simpler to stipulate that the risk passes to the buyer only on transfer. “There is usually risk insurance attached to a buyer’s new home loan that only becomes effective on transfer of the property and this way the buyer will not have to take out special insurance to cover the interim period.”

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