How Cyclones can Impact Contracts of Sale

With a severe weather event expected to hit South East Queensland in the coming days, many insurance companies have implemented an insurance embargo. This means homeowners and prospective buyers won’t be able to take out new policies until the event passes.

Under a standard Contract of Sale, buyers must have insurance in place once the contract is signed, as the property is at their risk. However, with the current insurance embargo in place, we recommend adjusting the standard contract terms for any contracts being negotiated or executed right now. This way, the property remains at the seller’s risk until settlement.

Even if the buyer already has insurance, sellers should not assume everything is covered. If the property gets damaged and becomes uninhabitable, the buyer can terminate the contract under the Property Law Act, even with an unconditional contract. Therefore, it’s crucial for sellers to maintain their own insurance as well.

If settlement is due during a weather event like a cyclone, the standard Contract of Sale includes a provision that delays settlement until after the event passes. Once the parties are able to meet their obligations, a new settlement date will be set. This provision protects both buyers and sellers from breaching the contract due to unavoidable delays.

If you’re currently negotiating or have already signed a Contract of Sale and have concerns about how insurance issues or settlement delays might affect you, get in touch with us today!

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