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Residential property specialist Property floods between exchange and completion
In England and Wales, the period between exchange of contracts and completion is often considered the most critical stage of buying or selling a property. For the buyer and seller, minds focus on the binding completion day. However, with flooding never far from the news these days, what happens if the property floods between exchange and completion?
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Environmental search
It’s important to stress that a property’s risk of flooding should not surprise the buyer. The environmental search carried out by their conveyancing solicitor highlights flood risk from different causes. The search includes a detailed, colour-coded map of the immediate area, showing whether the risk is high, medium, low, or very low. It’s also very easy to check online for an area’s long-term flood risk.
See also: What happens if conveyancing completion is delayed?
Insure from exchange of contracts
From exchange of contracts, the buyer assumes all risk for the property. So, if the property floods – or otherwise suffers damage after exchange but before completion – the buyer:
- remains obliged to complete the purchase, and
- is liable for the damage.
Accordingly, buyers should arrange buildings’ insurance from the day of exchange. Beware that some insurers may exclude properties in high-risk areas, or significantly hike the premium. However, failing to secure adequate cover may expose you to significant financial loss.
Negotiation
Despite a buyer’s legal obligation to complete, there’s no reason why they cannot raise concerns with the seller if flooding causes extensive damage, rendering the property uninhabitable or reducing its value. However, although negotiating with the seller for a reduction in the purchase price or financial compensation is an option, sellers are not legally required to agree.
However, while the risk technically shifts to the buyer at exchange, sellers should maintain their own buildings insurance until completion to avoid disputes. Essentially, this is a fallback option in case (rarely) one party contests liability.
See also: Surface water runoff: the law
In conclusion
If a property floods between exchange and completion in England and Wales, the legal principle is clear: the risk transfers to the buyer upon exchange. While this underscores the importance of securing comprehensive insurance, proactive communication with solicitors and insurers is crucial in managing such situations. Whether you are the buyer or the seller, by understanding your rights and responsibilities, you can better navigate this challenging scenario and protect your investment.