You’ve just signed the contract for your brand new home. Then suddenly, a tree falls down and crashes into the roof or next door’s home burns down and causes fire damage to your walls. What happens now? Who pays for damage to property before settlement

Buying a property should be an exciting time, especially if you’re a first home buyer. But when your new home gets significantly damaged, it can make the entire process incredibly stressful. If your future home has been damaged before settlement, our conveyancers are here to answer all your questions.

Overview:

Damage to property before settlement

What happens if a property is damaged between contract signing and settlement?

If you’re buying a property, there comes a time when the vendor is no longer accountable for damage to it and it becomes your responsibility. This can vary depending on the state that you bought the property in, so it’s important that you speak to your conveyancer about the terms in your contract of sale, as well as the standard position in each state.

The rules in South Australia

In South Australia, the buyer becomes responsible for damage to the property when the contract is signed. The signing of the contract occurs prior to settlement, so in the event there is damage to the property before settlement, the buyer is the one that pays. 

However, it is important to note that your particular contract for sale may contain special conditions. So make sure you get your conveyancer to review your contract before you sign it.

What happens if a house is destroyed before settlement?

Unfortunately, if there is damage to property before settlement, including the house being destroyed, the buyer is still responsible in South Australia. After contracts have been signed, the risk passes to the purchaser.

Do I need home insurance before settlement?

Yes, absolutely! It is critical that you have adequate insurance, effective immediately upon entering a contract if you are the buyer, and to make sure you maintain your insurance until after settlement if you are the vendor.

While it is true that a buyer in South Australia takes responsibility for the repair of a property from the moment of signing a contract, it is prudent for vendors to maintain their insurance until settlement just in case the contract is not completed and risk falls back to them.

What about residential strata buildings?

Under strata schemes, the buyer isn’t responsible for buying building insurance because it is considered common property. However, it is recommended that the buyer take out contents insurance instead.

Can you get out of a contract before settlement?

Generally no, not once your cooling off period has expired. In South Australia, when signing a private treaty contract, buyers are given two clear business days during which they may make the decision to ‘cool off’ on the contract. 

If they sign a contract at 2pm on a Thursday, their cooling off expires on the following Monday at midnight. Friday is the next full business day after Thursday, and Monday is the second full business day. The vendor’s agent must be notified in writing of the intention of the buyer to ‘cool off’ on the contract. 

If there are other conditions in the contract that must be satisfied before the contract is considered unconditional, the inability to satisfy those conditions may result in the contract not reaching conclusion. For example if there is a condition that requires approval of finance, then as long as the purchaser has used their best endeavours to have finance approved, if approval is not given, the contract may not continue. In the case of purchasing at auction there is no cooling off period and the contract is an unconditional one.


Whether you’re buying or selling a property, you can turn to the expert conveyancers at Eckermanns for help. If you have any other questions about what happens if there is damage to property before settlement or about property settlement in SA, don’t hesitate to get in touch.

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