Buildings Insurance During a House Sale

Buildings insurance is one of the most commonly misunderstood aspects of selling a property. Sellers often assume their policy simply "transfers" to the buyer on completion day, or that they can cancel their cover as soon as contracts are exchanged. Neither is correct, and getting it wrong can leave you exposed to significant financial risk at the most critical stage of the sale.

This guide explains who is responsible for buildings insurance at each stage of the sale process, what your obligations are between exchange of contracts and completion day, and how to handle the handover without leaving gaps in cover.

Who bears the risk of property damage during a sale?

Under English law, the default position is set out in the Law of Property Act 1925 (section 47). From the moment contracts are exchanged, the risk of damage to the property passes to the buyer. This means that if a tree falls on the roof the day after exchange, the buyer is still legally obliged to complete the purchase at the agreed price, even though they do not yet own the property.

This default rule surprises many sellers and buyers alike. It exists because exchange of contracts creates a binding agreement: the buyer has a right to the property and, with that right, takes on the risk. The logic is that the buyer should be motivated to insure an asset they are contractually committed to purchasing.

How the Standard Conditions of Sale modify the default

In practice, the majority of residential property transactions in England and Wales use the Standard Conditions of Sale (5th edition). Condition 5.1 modifies the default position in an important way: the seller retains the risk of damage until completion, provided the seller is able to hand over the property in substantially the same physical state as it was at exchange.

Under this condition, if the property suffers significant damage between exchange and completion:

• The buyer can rescind the contract (pull out of the sale) if the property is no longer in substantially the same state.
• The buyer can require the seller to assign the benefit of any insurance claim to them, so they can complete the purchase and use the insurance proceeds to fund repairs.
• If the damage is minor and the seller can still deliver the property in substantially the same condition (perhaps after a quick repair), completion proceeds as normal.

The key point is that the contractual conditions in your sale may differ from the statutory default. Your solicitor should confirm which conditions apply and explain the implications. For a full overview of what happens during this period, see our guide on what happens between exchange and completion.

Your insurance obligations as the seller

Regardless of which set of conditions governs the risk, sellers should maintain their buildings insurance right up to and including completion day. There are several reasons for this:

Mortgage lender requirements

If you have a mortgage on the property, your lender will almost certainly require you to keep buildings insurance in place until the mortgage is redeemed. The mortgage is not redeemed until your solicitor sends the completion funds to the lender on completion day. Cancelling your insurance before that point would put you in breach of your mortgage conditions.

Protection if the sale falls through

Although it is rare for a sale to collapse after exchange of contracts, it does happen. The buyer might fail to obtain their mortgage funds in time, or a serious title defect might emerge. If the sale falls through and you have already cancelled your buildings insurance, you would own an uninsured property \u2014 potentially one that has suffered damage in the meantime. Keeping your policy active until completion is a small cost for significant peace of mind.

Standard Conditions of Sale obligations

If the Standard Conditions of Sale apply and the seller retains the risk until completion, having active insurance is not just prudent \u2014 it is essential. Without cover, any damage during this period would fall on you as the seller, and you would be unable to assign the benefit of an insurance claim to the buyer because no claim would exist.

The buyer's insurance obligations

Buyers should arrange buildings insurance from the moment contracts are exchanged, not from completion day. This is true regardless of which contractual conditions apply, for several reasons:

• Under the statutory default (Law of Property Act 1925), risk passes to the buyer at exchange. If the buyer has no insurance and the property is damaged, they bear the full cost.
• Most mortgage lenders require the buyer to have buildings insurance in place from exchange as a condition of the mortgage offer. Failing to arrange this can put the mortgage offer at risk.
• Even under the Standard Conditions of Sale, where risk remains with the seller, the buyer has a strong practical interest in having cover from exchange. If the seller's insurance does not fully cover the damage, or if the seller disputes their obligation, the buyer needs their own fallback.

In practice, this means that between exchange and completion, both the seller and the buyer typically have buildings insurance running on the same property. This double cover is intentional and provides protection for both parties.

What happens on completion day

On completion day, ownership of the property transfers from the seller to the buyer. From this point:

• The seller's obligation to insure ends. You should contact your insurer on completion day or shortly after to cancel your policy. Many insurers offer a pro-rata refund for the unused portion of your annual premium.
• The buyer's policy becomes the sole cover on the property. If the buyer arranged insurance from exchange (as they should have), there is no gap.
• Your mortgage is redeemed using the completion funds, so the lender's requirement for insurance falls away.

Do not cancel your buildings insurance before completion, even if completion is expected to happen that day. Delays on completion day are not uncommon \u2014 funds can arrive late, chains can stall \u2014 and cancelling your policy before you have confirmed that completion has taken place would leave you uninsured if something goes wrong.

Buildings insurance does not transfer with the property

A common misconception is that the seller's buildings insurance policy automatically transfers to the buyer. It does not. Buildings insurance is a personal contract between the policyholder and the insurer. When you sell the property, the policy ends. The buyer must arrange their own separate policy with their own chosen insurer.

This is particularly important for properties with complex insurance arrangements, such as:

• Properties insured through Flood Re (the government-backed reinsurance scheme for high-flood-risk homes).
• Properties with non-standard construction that require specialist insurers.
• Properties with a history of subsidence where insurance terms include elevated excesses or monitoring conditions.
• Listed buildings or properties with thatched roofs that require specialist cover.

If your property falls into any of these categories, it is helpful to provide the buyer with details of your insurer and policy terms early in the process. This gives the buyer time to investigate their options and avoids a last-minute scramble that could delay exchange. If you have experienced difficulties with insurance due to fire or flood history, our guide on selling a house after fire or flood covers the specific considerations.

Declaring insurance on the TA6

The TA6 Property Information Form asks several questions about your buildings insurance in Section 6. These questions cover:

• Whether the property is currently insured.
• Whether any buildings insurance claims have been made on the property.
• Whether any claim has been refused.
• Whether any insurer has imposed special terms, cancelled a policy, or declared one void.

You must answer these questions honestly and completely. Our dedicated guide on TA6 insurance claims and what to declare explains exactly how to handle Section 6, including example answers for common scenarios such as flood, subsidence, and storm damage claims.

The information you provide on the TA6 directly affects the buyer's ability to obtain buildings insurance. If your answers reveal a history of claims or special terms, the buyer's insurer may require additional information, charge a higher premium, or impose special conditions. Disclosing this early \u2014 rather than allowing it to surface during the buyer's own insurance application \u2014 keeps the sale on track and demonstrates good faith.

Insurance timeline: a practical summary

The following table shows who should have buildings insurance at each stage of the sale process:

Common mistakes sellers make with insurance during a sale

Based on the issues that most frequently cause delays or disputes, here are the mistakes to avoid:

1. Cancelling insurance before completion. This is the most dangerous mistake. Even if exchange has happened and completion is imminent, keep your policy active until completion is confirmed.
2. Assuming the buyer will be covered by your policy. Your policy is personal to you. The buyer must arrange their own cover, and you should not allow them to rely on yours.
3. Failing to disclose claims on the TA6. Omitting insurance claims from Section 6 of the TA6 can lead to post-completion disputes and misrepresentation claims. Declare everything.
4. Not telling the buyer about insurance difficulties. If you have struggled to obtain buildings insurance \u2014 for example, because of flood risk or non-standard construction \u2014 warn the buyer early so they can investigate their options before exchange.
5. Forgetting to claim a pro-rata refund. Most annual policies offer a refund for the unused portion of your premium when you cancel. Contact your insurer promptly after completion to arrange this.

What to do if the property is damaged before completion

If your property suffers damage between exchange and completion, the steps you need to take depend on the contractual conditions:

1. Notify your solicitor immediately. Your solicitor will review the contract to determine whether the Standard Conditions of Sale apply and who bears the risk.
2. Notify your insurer. Even if the buyer technically bears the risk, you should report the damage to your own insurer. You may be required to assign the benefit of any claim to the buyer under condition 5.1.
3. Notify the buyer's solicitor. The buyer is entitled to know about the damage. Concealing it would be a serious breach of good faith and could expose you to legal action after completion.
4. Assess whether completion can proceed. If the damage is minor, completion may proceed with an agreed price reduction or with the seller making repairs before completion. If the damage is severe, the buyer may have the right to rescind.

Your solicitor and insurer are your two most important contacts in this situation. Do not attempt to handle it alone or delay reporting the damage in the hope that completion will happen before anyone notices.

Leasehold properties: additional considerations

If you are selling a leasehold flat, the buildings insurance arrangements are different from freehold sales. Typically, the freeholder (or their managing agent) arranges buildings insurance for the entire building, and leaseholders contribute through their service charge. In this case:

• You do not need to arrange or cancel buildings insurance yourself \u2014 it is the freeholder's responsibility.
• The buyer's solicitor will want to see evidence that the building is adequately insured, including the insurance schedule, the level of cover, and the identity of the insurer.
• You should provide the most recent insurance certificate as part of the leasehold information pack.
• If the building has a history of claims (subsidence, flooding, fire), this information should be disclosed on the TA6 to the extent you are aware of it.

Some leaseholders also arrange their own contents and improvements insurance to cover internal alterations and fittings. This is separate from the building policy and is the leaseholder's personal responsibility.

Sources

• Law of Property Act 1925, section 47 \u2014 legislation.gov.uk
• Standard Conditions of Sale (5th edition), condition 5.1 \u2014 Law Society of England and Wales
• Law Society Conveyancing Protocol, 5th edition \u2014 lawsociety.org.uk
• Law Society of England and Wales \u2014 Property Information Form (TA6), 4th edition, 2020
• Association of British Insurers \u2014 Buildings insurance guidance for home movers: abi.org.uk
• Flood Re \u2014 How Flood Re works for homeowners: floodre.co.uk
• RICS \u2014 Home insurance: what you need to know when buying or selling: rics.org
• UK Finance \u2014 Mortgage conditions and insurance requirements: ukfinance.org.uk

Related guides

• Chancel Repair Liability Insurance Explained

Frequently asked questions