The moment Aarifa and Adam stepped foot into their new home was supposed to be a memorable one. However, it quickly turned into a nightmare. Ceilings lay scattered across the floor, electric cables hung from exposed rafters, and water was pouring through two storeys of the property. Unfortunately, the couple only discovered the extent of the damage after collecting the keys, as the vendor lived abroad and hadn’t noticed. The estimated cost of repairs amounted to £100,000. This incident occurred in December, and since then, Aarifa, Adam, and their two young children have been forced to live with relatives while continuing to pay over £17,000 in mortgage, utilities, and council tax bills. Both the vendor’s insurer and their own insurance company refused to accept liability for the damage, leaving the family in limbo.
“Our lives came to a standstill,” Aarifa says. “We had to put our belongings in storage, cancel school transfers for our children, and move in with my in-laws, an hour away, because we couldn’t afford to rent on top of our mortgage. Our insurer claims they are not responsible, and we haven’t heard anything from the vendor’s insurer since they lodged a claim in December.”
This unfortunate situation highlights a little-known legal predicament that buyers face between the exchange of contracts and the completion day, which typically occurs two weeks later. Following changes to the national conditions of sale drawn up by the Law Society, buyers become legally responsible for the property upon contract exchange, even though the seller remains the owner and responsible for its upkeep. This amendment requires buyers to have suitable insurance in place as soon as the contract is signed. Sellers are no longer obligated to maintain coverage, although some choose to do so. As a result, disputes between insurers often delay claims. Additionally, purchasers are no longer able to withdraw from a contract if the property is destroyed before completion day. Previously, sellers had to hand over the property in the same condition as when contracts were exchanged.
In the case of Aarifa and Adam, they completed the purchase of the property before discovering the damage. Even if they had noticed it after the exchange and the seller had refused to contribute to repairs, they would have been compelled to proceed with the purchase and cover the costs themselves.
When they exchanged contracts a week before Christmas, Aarifa and Adam had insured their future home with RSA. However, RSA refused their claim, arguing that the pipe must have burst the day before the exchange when neighbors reported hearing a burglar alarm and weather records showed freezing temperatures. This would have made the vendor’s insurer, Chiswell, liable for the repairs. Yet, Chiswell, which is a part of Simply Business, insisted that there was no evidence the damage occurred during its coverage period. Since the property was vacant, the timing of the burst pipe couldn’t be confirmed. Unfortunately, this left the family feeling abandoned.
“Simply Business conducted a site visit at the end of February, but we have heard nothing since then, despite emphasizing the urgency of the situation,” says Aarifa. “We can’t start repairing the damage in fear of invalidating our claim. Without our parents’ help, we don’t know how we would afford temporary accommodation costs along with the mortgage for such a long time.”
Complicating matters, Aarifa and Adam were not the policyholders for the Simply Business policy, so they had to rely on the vendor to handle the claim from overseas. Moreover, because they were not the policyholders, they were unable to lodge a complaint with the Financial Ombudsman Service regarding the company’s mishandling of the case. Only after The Observer intervened did the two insurers engage in discussions. Eight months after the flood, they agreed to share the repair costs and cover rental and storage expenses, allowing the family to move into more suitable accommodation.
Simply Business states, “We understand that this has been a particularly difficult period for those affected, and we can confirm that although our underwriter HDI believes it does not have any legal liability for the claim under the terms of its policy, both insurers have cooperated to settle this complex claim.”
RSA Insurance adds, “We acknowledge that this must have been a challenging situation for the customers, and their experience fell short of the service we aim to provide. We were committed to resolving this issue and are pleased to announce that, following discussions with the seller’s insurance company, we have a resolution in which we agreed to share the cost of the claim.” RSA has offered £1,500 in compensation for the delays.
Conveyancing solicitors argue that the revised rules for property sales place the burden of responsibility on buyers, even though they have no control over the property’s condition. “Almost all buyers are unaware that they will be expected to complete and pay the full price for a severely damaged property if it is harmed between the exchange and completion,” says Antonia Brandes, a partner at the legal firm Gunnercooke. “Under previous rules, buyers could back out of the contract if the property became uninhabitable after the exchange. Requiring buyers to obtain insurance is like putting a bandage on an amputation.”
According to Brandes, while the national conditions of sale are not mandatory, most conveyancing firms have adopted them. She advises buyers to demand that the responsibility for risk is transferred to the seller before signing the contract. “Solicitors may push back, but sellers are unlikely to risk losing the sale by refusing,” she explains.
The Law Society admits that buyers are unable to comply with insurers’ requirements to take reasonable care of the property while the seller remains in control, in a statement provided to the Observer. However, it adds that the old rules were contrary to common law principles and unpopular with sellers. “Ultimately, the parties are free to negotiate any contract terms they may agree. The standard conditions of sale are just a baseline of suggested provisions,” the Law Society states.
Aarifa and Adam still face several more weeks of waiting as surveys are conducted and repairs get underway. They express that months of battling with insurers while living out of suitcases have left them emotionally drained.
“We arrived, excited to move into our new family home, only to step into a nightmare,” laments Aarifa. “It was one of the most traumatic days of our lives.”
(Note: Some information has been omitted for the sake of brevity and relevance to the prompt)
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