By Christine Martin
With the upcoming Summer season (and the further possibility of natural disasters) it is worthwhile to again stress the importance of explaining to both vendors and purchasers in a Contract who carries the risk in the property from the date the Contract is signed.
In Queensland under general law the property is at risk of the purchaser from the date the Contract is formed. The purchaser therefore bears the risk for any loss, destruction or damage to the property.
There is no obligation on the vendor to insure the property and the vendor is merely obliged to use the property with reasonable care until completion.
The REIQ Contract in Queensland has incorporated the general law as outlined above with only one exception in that the risk passes to the purchaser on the first business day after the Contract date.
(It is important to remember that in New South Wales the general law has been reversed by the Conveyancing Act 1919 in that the risk does not pass until the earlier of completion or possession).
In Queensland purchasers may find some protection under the Property Law Act. Section 64 of the Act allows a purchaser of a residential dwelling to rescind a Contract prior to completion or possession where the dwelling is destroyed or damaged to the extent that it is unfit for occupation.
It is strongly recommended that purchasers should be made aware of the risk prior to them signing a Contract and it should be recommended to them to take out the appropriate insurance promptly on signing of a Contract.
If the passing of risk is not acceptable to a purchaser, necessary amendments should be made to the Standard Conditions of the Contract by way of Special Conditions to deal with the passing of risk and the right to terminate the Contract should any damage occur.
Please do not hesitate to contact our Property and Commercial Department Manager Christine Martin on 07 5506 8245 or email email@example.com should you require any further assistance on this issue.