Risk of damage between exchange and completion (SCS 5th ed, condition 5.1.1)
Tomasz Kowalski exchanged contracts to buy a detached house in Exeter for £410,000. The contract incorporates the Standard Conditions of Sale (Fifth Edition, 2018 Revision) without amendment, and no special condition deals with insurance. The seller's buildings insurance is not required by the contract to continue. Tomasz did not arrange his own buildings insurance, intending to do so from completion. A week before completion, a fire caused by a lightning strike seriously damaged the house.
Which of the following best describes Tomasz's position?
Choose one answer to see the reasoning.
Worked answer
Correct answer D: The property was at Tomasz's risk from exchange, so he must complete at the full price, with no claim on the seller's insurance unless the contract required it to be kept in force.
THE RULE TO REMEMBER
Under SCS 5.1.1 the property is at the buyer's risk from exchange, so the buyer should insure from exchange; the seller need not insure and LPA 1925 s.47 is excluded.
Risk of damage between exchange and completion (SCS 5th ed, condition 5.1.1)
Condition 5.1.1 of the Standard Conditions of Sale (Fifth Edition) provides that the property is at the risk of the buyer from the date of the contract. Condition 5.1.2 states that the seller is under no obligation to the buyer to insure unless the contract provides that the seller's policy is to continue in force, or the property is let on terms requiring the seller to insure. Neither applies here. Condition 5.1.6 excludes s.47 of the Law of Property Act 1925, so Tomasz has no statutory right to the seller's insurance proceeds. The fire therefore does not entitle him to rescind, renegotiate or withdraw: he remains bound to complete at £410,000, and his loss is uninsured because he did not insure from exchange. This is why a buyer's solicitor should ensure buildings insurance is in place from exchange whenever the Standard Conditions apply unamended.
Why A is wrong: Under the fifth edition of the Standard Conditions risk passes to the buyer on exchange, not on completion.
Why B is wrong: No condition of the fifth edition requires the seller to transfer the property in the same physical state as at exchange; the risk is the buyer's.
Why C is wrong: Damage to the property does not frustrate a contract for the sale of land, and the Standard Conditions expressly allocate the risk to the buyer.
Why E is wrong: Condition 5.1.6 provides that section 47 of the Law of Property Act 1925 does not apply.
A little more practice done.
Related questions
Using the buyer's deposit on the seller's related purchase (SCS 5th ed, condition 2.2.5)
Which of the following best describes the position under the Standard Conditions of Sale?
Failure to complete and the notice to complete (SCS 5th ed, condition 6.8)
Which of the following best describes the effect of the notice to complete?
Calculating contractual compensation for late completion (SCS 5th ed, condition 7.2)
How much compensation, if any, is payable under condition 7.2, and by whom?
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