Preparing for Exchange of Contracts – Who is responsible for insuring the property? 


It seems to have taken forever – but at last you are almost at Exchange of Contracts – the stage when your purchase is safe.

Your coneyancer-solicitor should now be in touch to confirm that the final version of the contract is ready for your signature – which means that exchange of contracts is imminent. However, you can’t afford to relax just yet.

By now your solicitor should have double-checked that everything is in order – most importantly the searches, the terms of the contract, the title and the funding. This is where a dozy conveyancer will suddenly discover some killer problem that should have been identified and neutralised yonks ago. And there only needs to be one dozy conveyancer in the entire chain to hold everyone up whilst desperate last-minute enquiries are made.

It’s worth casting an eye over the contract yourself when it duly arrives for signing, or when you pop down to your solicitors’ office to sign it (safer than by email because you can go through it with them face-to-face).

It’s not unknown for typing mistakes or the wrong information to appear in the text. Although wading through a contract can be a bit heavy going, before signing check that any ‘extras’ you’ve negotiated with the sellers are actually included – things like additional parking spaces or perhaps the use of a garage sited on a separate plot. If the property is being purchased jointly, for example with your partner, you will both need to sign.


Buildings insurance

Making sure the property is fully covered by buildings insurance is compulsory when you’re buying a property – and this is now your responsibility to arrange and pay for.

All mortgage lenders stipulate that the property must be fully insured in the buyer’s name from exchange of contracts. This may appear to be a slightly odd requirement given that the sellers will normally be occupying their home until completion, plus you haven’t even finished paying for the property yet. But the question is, what would happen if the house burned down in the period between exchange and completion? The answer is that legally a buyer may still be required to proceed with the purchase of the burnt-out ruin. So it’s essential that you’re covered.

Your new home needs to be insured for what it would cost to rebuild it – which is not the same as the purchase price (normally higher because it includes the value of the land the house is built on). The official rebuild cost for your property can be found in most mortgage valuation reports and some RICS Homebuyer surveys. This is calculated in accordance with the price per square metre for the type of property in the official BCIS reinstatement cost tables.

To work out the total gross external floor area of the building, surveyors measure the outer surface of the main walls for each floor of living accommodation. Outbuildings such as garages will then be added. The precise rebuild cost will obviously depend on the quality of the building, as well as its size, age and location. So a Listed period house will clearly be a lot dearer than a bog-standard 1950s semi. As a rule of thumb, rebuild costs commonly fall within the price range of £1,500 to £2,500 per square metre.

Given the care taken to accurately calculate rebuild costs, it’s a little surprising that you can simply pick up the phone and arrange buildings insurance cover just by stating the property’s age and the number of bedrooms. The problem with such shortcuts is that you risk either paying too much or else ending up with insufficient cover. This may not sound too worrying, but if it turns out that you’re underinsured, and you have to make a claim, your insurer could then refuse to meet the full cost of the works, no matter how small.

If you’re buying a flat or maisonette, the Freeholder of the block will normally be responsible for arranging cover, for which you will be invoiced to reimburse your share of the cost.




Our next blog – coming soon …….

Exchange and Completion


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