24 August 2022
Disclosure to your insurer when buying a property
When you find a property that you are interested in, one of the first things you must think about is insurance.
It may take longer to organise insurance depending on the condition, type, age of the property and any potential natural hazards. It is therefore important not to leave this until the last minute and place your property purchase in jeopardy. It is also important that you disclose material information relating to the property to your insurer.
Earthquake Commission Claims (EQC)/Private Insurance Claims
You should check whether the property has had any EQC or private insurance claims. The sale and purchase agreement should record the claims lodged for the property, or you can obtain this information from the real estate agent. You can also use Canterbury Maps online property search to check whether any EQC claims have been lodged for the property.
You will need to check the status of these claims and whether the claims are capable of being assigned from the seller on settlement. If the claims are going to be assigned to you on settlement, you will need to speak to your lawyer about the limits on any benefits you may receive as a result of the assignment. If the private insurance claims cannot be assigned to you on settlement, then you will not be able to make a claim for any further damage discovered for those events.
You should disclose to your insurer any claims that have been made relating to damage to the property and advise the status of these claims and whether these will be assigned to you on settlement. If the seller has received a payment for damage and repairs have not been made, then it is likely that your insurer will exclude cover on this particular part of the property.
Properties in New Zealand are at risk of different natural hazards. It is important that you find out if any natural events could impact the property you are buying. This includes landslips, flooding, earthquakes, tsunami, fault lines and other hazardous activities.
You can find out whether the property is subject to any natural hazards from the local council website free of charge or you could order a Land Information Memorandum (LIM) report from the local council.
If there are any natural hazards which the property is subject to, this information should be disclosed to your insurer.
A LIM report will also include information on any permits and building consents that have been issued for the property and whether those consented works have a Code Compliance Certificate. The LIM report will only contain information known to the council. If unauthorised additions or alterations have been undertaken, this will not be recorded in the LIM. It is therefore important that when you inspect the property, to check that there had not been any additions or alterations that are not contained in the LIM.
If there are unconsented additions or alterations that do not have a Code Compliance Certificate issued, this should be disclosed to your insurer.
Failure to disclose information that you are aware of means that there is a risk that your insurer discovers this in the future and declines your claim or, in a worst case scenario, your whole insurance policy can be voided from the start of the insurance.
If you have not been able to organise insurance prior to making an offer, you must ensure that you add an insurance condition to your sale and purchase agreement. To ensure you have an appropriate insurance condition and EQC clause in your agreement, you should have the agreement reviewed by a lawyer before you sign it.
Our property team at Saunders Robinson Brown are experienced in dealing with wide range of property and insurance matters and would be happy to assist you with this.
The above information is of a general nature only. The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to their specific circumstances.