Forced to Buy a Burnt-down Property

L[Deactivated] on 21/03/2022 - 09:52
Last edited 23/03/2022 - 15:24

Hi all,

I am new and joined because I am in a bit of trouble.

I bought a house, and I thought I was lucky enough to win the auction.

However, two weeks after the auction, before the settlement date, the owner had an accident in the kitchen and burnt down almost the entire kitchen. All the cabinets, some walls, and some part of the roof. There is basically a hole on the roof and signs of smokes everywhere. Walls between the kitchen and living room is half gone, the window is broken, and water damage from the fire engine is on every part of floorings and walls. The damage so extensive they moved out straight away.

Now, here is my problem starts.
I then called the real estate agent to cancel the deal. They said they will try their best, calling the owner and see what they can do.
The agent said the owner didn't answer their phone and told me to call my solicitor.

I called my solicitor to cancel the deal obviously.
Here is what he said:
Have you got building insurance? I said no of course, because I haven't settled on it.
My lawyer said the once I won an auction, it is my property, and I have to settle on it, no matter what.
I said, what the F, BS is this??? It is obvious to me that the house is not at all in the same condition it was when it is sold to me. My lawyer said he need to discuss with his colleagues for whatever other legal avenue available. Worse come to worse, he said I lost my 10% deposit. However he also said that if the house then sold at lower price (which is 100% definitely), I may have to pay for the difference. I said again all the swear words known to me. This could costs me hundreds of thousands, plus I can't live there, what am I gonna do with this?

I don't know yet if the owner has building insurance, or if their insurance companies can pay me out.

Sorry for all the rambling, but I just can't.

Edit: 11:41am
Seller's solicitor told mine that the owner have insurance. However it is unclear what will. happen after. I'm a little relieved now.

Edit 11:53 AM:
It seems that the seller meant was content insurance, not building insurance, however it still isn't very clear, and they seek clarification.

Edit 12:05 AM:
Apparently police is investigating this because it involves significant material damage.
Idk what this mean to me tbh.

Edit 2:57 PM:
They definitely have building insurance. However I think perhaps it is still best to back out of the sale, let them deal with the payout and sell it to someone else who can rebuild it. Otherwise, it can be messy for me waiting for them to sort their insurance and transfer the payout to me.

Edit 23/03 3:19 PM:
Vendor's solicitor seems to hold on to the 'unconditional' rule. My instruction to the lawyer is clear, do not settle no matter what. I have told the bank's lender too, and they don't seem to know what to do? I don't know what the vendor want, my solicitor thinks it could be that they want to hold on to insurance payout and full payment too. My solicitor thinks it may gone down to court, but i am more likely to win. I hope this doesn't go on too long, I need a place to live…

Home & Garden

Comments

  • 6000SUX on 21/03/2022 - 14:07
    +14

    Mate - firstly i feel for you for what must be a very stressful situation.
    It is a shame that some (not all) people have a know-it-all mentality with the belittling comments.

    Personally if it was me - I'd be going with a more senior lawyer in your lawyers firm and going there in person to see them. Dont pick up the phone. Dont email them. Go in person. This is pretty serious.
    If that doesnt work out - i'd be going to another law firm altogether. This does sound like a situation where you may well need to spend cash to sort out your situation, are at least get the best advice/help. While i also appreciate now isnt the time where you have a shedload of cash free.
    But hey - this is practically echoing whats already been said - so nothing new here.

    Good luck with it all bud.

    • dufflover on 21/03/2022 - 20:27

      This is a decent sounding idea. The particular person sounds like an idiot for sure but just firing them you'd probably still have to pay some fees for "time and services already rendered" or some crap like that. If the firm is big enough to have bosses take it to them and you might be able to get it all done for what it would've originally cost you.

    • WT on 22/03/2022 - 08:07
      +1

      I think what has happened is the junior/fresh lawyer has all this day to day, sht kicker stuff, something goes wrong he goes to a more senior lawyer but didnt explain it well or they were busy and didnt listen.

      A partner probably wont get involved as it is a good learning experience for their staff. Unfortunately thats the way it is in a lot of industries and will come at the expense of the clients stress. Even if you insist on someone more experienced in the firm to take over, it probably wont happen. I think best case a more senior lawyer will help behind the scenes, more then likely though he will be left to figure/learn for himself. Laywers dont want an idiot working for them

  • Carmen Sandiego on 21/03/2022 - 14:07
    +3

    Just found this - Even as an Insurance Broker, that surprised me.

    I know 100% for VIC, you need to have it by the time of settlement but, not before. And it can only get removed if you pay off enough of the mortgage and become majority owner of it (I would say you'd still need it but, I know $1.5K+ is a lot of money every year).

    • netjock on 21/03/2022 - 16:09
      +1

      Just jack up the excess. I've got like a $2.5k excess on building claims.

      You are also right, bank needs to see building insurance before settlement. Pretty sure mortgage includes a clause to maintain insurance.

      • Carmen Sandiego on 21/03/2022 - 16:17

        I'd say only put the excess to the amount you'd be OK paying in the event of a claim. High excesses are great but, $2.5K is basically a lot of self insurance.

        The section 32 has a clause around it in light terms (as well as a clause that your descendants still need to pay off the mortgage in the event of your death etc)

        • netjock on 21/03/2022 - 16:19
          +1

          High excesses are great but, $2.5K is basically a lot of self insurance.

          True, but lucky I live in an area that doesn't have 1/100 year floods every 2 years. Neither is it is bush fire proned or hail etc.

          I've seen policies basically double (from $1.5k to $6k) because it is considered an area subject to potential flooding. I know because you can sign a flood opt out.

          • Carmen Sandiego on 21/03/2022 - 16:31

            @netjock:

            I live in an area that doesn't have 1/100 year floods every 2 years. Neither is it is bush fire proned or hail etc.

            Be careful what you put your hat to. I've seen some pretty insane claims in places that has never had things happen to it.

            As for the flood insurance, yes, it happens. That's why I advise people to check out what a home insurance premium is in any of the areas they want to buy because it might come back to bite them.

            Also, if you opt out of flood, it can be rather nasty when you have any claim to do with water. I remember snarling at one who decided their hill to die on was one which stated that because of faulty tap + rain had caused flooding, they wouldn't cover it - eventually, enough people saw the stupidity of that and the claim was paid.

    • oO0Dam0Oo on 22/03/2022 - 14:51
      +1

      We got our insurance as soon as our contract became unconditional (private sale Vic).

      • Carmen Sandiego on 22/03/2022 - 14:53

        That's what everyone should do ideally.

        I can't comment about the specific laws since I'm not a lawyer, but even if a situation happened on a privately sold property, I would imagine there is a cooling off period somewhere.

  • FareEvader on 21/03/2022 - 14:14
    +3

    You need a better lawyer!

    • knasty on 21/03/2022 - 14:17
      +2

      Lionel Hutz?

  • jaimex2 on 21/03/2022 - 14:18
    +1

    If it hasn't settled then its not your problem in NSW, you'd be screwed in Qld.

    Obviously you wont settle and demand full reimbursement. Fire your conveyancer and seek a proper solicitor to handle both the house issue and smacking your conveyancer down if they want any payment for their service.

    If the seller wants to go ahead with the sale they will need to restore the house and pay you for any expenses while the house couldn't settle.

    • sheamas88 on 21/03/2022 - 14:37
      +3

      you'd be screwed in Qld.

      False. In QLD if the property becomes uninhabitable before settlement the buyer can terminate. Section 64

      Now you'd have to prove that it's uninhabitable, but since the owners had to move out due to the damage that would be a good start.

      You'd be far from "screwed"

      • jaimex2 on 21/03/2022 - 16:36

        Good to know, I saw this when purchasing in Qld:

        https://www.qld.gov.au/law/housing-and-neighbours/buying-and…

        • sheamas88 on 21/03/2022 - 16:51

          Yes, 'tis a stupid law to thrust responsibility onto the buyer, who cannot even enter the property.

          That said, I would suggest it's sensible for both the seller and buyer to have insurance for the property once the contact is signed no matter who is technically responsible (seller is NSW/VIC/WA, buyer everywhere else). The extra cost of insurance for an extra month or two is insignificant to the price of the house.

          If the seller doesn't have insurance and the buyer terminates, their deposit may not cover full cost of repairs/rebuild. The seller would then have to sue the buyer to recoup costs, which they might not have any way to pay (first home buyer with little assets for instance)

          If the buyer doesn't have insurance then they have to deal with the seller and the sellers insurer. If repairs/rebuild aren't complete before settlement then I doubt the seller is gunna be very helpful and you're not the seller insurers customer so they probably will be difficult too. Much better to have your own insurance and deal with them.

    • Mistredo on 21/03/2022 - 19:28

      He would just sue the previous owner for damages he caused, no? Considering he just sold his house he has money.

  • FW190 on 21/03/2022 - 14:22
    +5

    this happened to my family many years ago, and it was for a commerical property (a corner shop type thingy) so I am not sure if the same rules applies or not.

    this is in NSW as well.

    on the eve of settlement, some equipment of the tenant caught fire overnight and caused extensive damage to the property.

    my parent's lawyers tried to push the deal through, the buyer's lawyers obviously pushed back, after a lot of back and forth, eventually the buyer backed out. it was 10+ years ago so sorry I can't remember the exact details on how the buyer managed to get out of the deal.

    luckily the place was insured, so my parents used the payout out to fix the place up, upgraded it etc and sold it for a higher price later down the track, but it was definitely a very stressfull 2 years for the whole family, so I hope OP has better luck.

  • happydude on 21/03/2022 - 16:09
    -2

    I honestly think the lawyer is correct. It looks to me like you do need to go through with settlement but can claim compensation. This isn't to say you can't back the seller into a corner and agree to terminate the contract.

    Best bet would be to inflate the compensation you will be seeking after settlement so much that that the seller agrees to back out. They may need to be convinced that you will make it such a hassle that they are better off fixing the issue themselves and reloading. They may still have to pay the argents fee but that is their problem to work out.

    To me it looks like you must give them a compensation figure prior to the settlement.

    Conveyancing Act 1919 - Schedule 3.

    5 No error or misdescription of the land shall annul the sale, but a compensation, if demanded in writing before the proper time for completion, shall be made to or given by the purchaser, as the case may be, the amount to be settled in case of difference in accordance with the provisions of the Arbitration Act 1902.

    • djkelly69 on 21/03/2022 - 16:45
      +1

      What are you talking about? There is no error or misdescription here, which is what that section is dealing with.

      • happydude on 21/03/2022 - 16:49
        -1

        Did it say it was set on fire in the brochure?

  • FlyingMiffy on 21/03/2022 - 16:17
    +2

    Like a few people have already pointed out the responsibility for the damage and repairs sit with the previous owner however, chasing them and ensuring that it happens is another matter altogether. The clause that the lawyers will haggle over is whether the pre-settlement inspection identifies damage that is outside of reasonable wear and tear from point of purchase, and if that damage can be repaired prior to or after settlement. If prior, the argument is going to be about how long the repair takes and whether the settlement date can be deferred. If after, the argument is about the cost reimbursement and guarantees that the repairs will be adequately funded by the seller once they no longer have a security to care about. Either way, this is what you get a solicitor for, and a conversation with the sellers insurer base on that lodged claim will offer some facts on what to expect. To be honest, pulling out sounds more complicated than not (don't forget that the seller has a contract that allows them to retain your deposit, if they play hard, you'll need to go to the tribunal or court to have an argument - since you are going there anyways, might as well keep your property, and get an unplanned reno done while you are at it…

  • charkwayteo on 21/03/2022 - 16:26
    +1

    Like many said your lawyer sucks, he just wanted an easy job.

    The damage sounds substantial and the place would now be a hazard to live in and unfit for occupation

    I'm 100% sure you can fight for it but you may have to wait until settlement to do so. There's usually a condition report done a week before settlement and it will fail for sure as the damages have occurred after you won the auction.

    So basically if vendor can repair the house to a state fit for occupation you might have to follow through with the purchase, if not I'm pretty sure you can rescind or work out a deal to subtract estimated costs of repairs and subtract that from the purchase price. Keep all important correspondence via email and sms for records don't rely on face to face conversations and phone calls, and always follow up with a confirmation email after a call.

    I'd go through with an independent building inspector and list of all the hazards, and highlight what needs to be repaired for you to be able to occupy the place. Send the report to agents, and both yours and vendors solicitor.

    Goodluck

  • Gnilgorf on 21/03/2022 - 16:36
    +2

    Ok. Sorry to hear you've been put in such an awkward position. Hopefully it all works out in the end.

    Best to check the contract in case there are any specific clauses which vary, but otherwise the following would be a good read:

    NSW Conveyancing Act 1919
    https://legislation.nsw.gov.au/view/html/inforce/current/act…

    In it, it basically says the risk is the vendors up until the completion of contract (which in the case of auctions would be settlement), or if the purchaser took possession earlier.
    And if substantial damage occurs after the contract was signed, and before risk is transferred as above, then the purchaser retains the right to rescind the contract. Also you get a full refund of all amounts paid.

    One would hope a fire which causes the vendor to vacate immediate would be sufficient grounds for 'substantial damage'.
    Now the question is, how much do you like the property? Is it enough to stick it out and wait for the vendor to repair via their insurance or negotiate compensation.

    • [Deactivated] on 21/03/2022 - 16:47

      I am counting on this ground as well. But the vendor's solicitor keep citing that auction is unconditional blah blah.

      • treekangagaroo on 21/03/2022 - 17:07
        +5

        No wonder coz they represent the seller

      • happydude on 21/03/2022 - 17:11

        Fire where it wasn't allowed to be terminated - http://classic.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/…

        I could see that the damage to the house was mainly smoke damage. The paint was still on the walls, but was charred. Two ceilings had sagged as a result of water from the fire department putting the fire out. These were in the lunge room and sunroom. The ceilings were otherwise in fairly good condition. They were still white and were not charred. Almost all the windows had shattered, as had the glass in the front door. All carpets were burnt.

        Fire where it was allowed to be terminated - http://classic.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/…

        The roof had been breached in part and asbestos sheeting had fallen to the floor. An area of approximately 65m2 had been damaged and water and smoke damage had affected another 70m2 approximately. Mr Youssef recommended this area be demolished as one could not be certain of the structural adequacy of the steel members following the fire. He gave a quote, realised he had made a mistake, and increased his estimate for the restoration work to $378,400. He thought the work would take 12 weeks.

        • BargainBogan99 on 21/03/2022 - 17:28
          +1

          Also the first one "Fire where it wasn't allowed to be terminated" takes into account consideration that the purchaser had intended to redevelop the land and as such the "minor" fire to the 50 year old house (after being repaired to an equivalent at purchase state) did not significantly affect the lands value.

          • happydude on 21/03/2022 - 17:30

            @BargainBogan99: Yes, the fact they fixed it mitigated.

            In any event the fire damage was not a problem for the plaintiff because the risk in terms of damage to the property was still with the vendors; they had insurance, the damage was put right within a few weeks and it was put right before the date on which the plaintiff had a right to call for completion.

      • BargainBogan99 on 21/03/2022 - 17:16

        The vendors solicitor is not engaged to represent your interests, they are for the interests of the seller.

        You need to engage your own legal representative.

        • mauricem on 21/03/2022 - 18:30
          +1

          The (alright, some) solicitors will look to their own interests. If a $1500 conveyancing job can turn into a $50,000 High Court challenge thats a happy ending?

          • gimli on 22/03/2022 - 09:59
            +1

            @mauricem: 50000 high court challenge sounds like a bargain

      • Gnilgorf on 21/03/2022 - 17:39

        As others have said, the vendors solicitor is acting in his clients best interest, which in this case would be to offload the property asap and not having to deal with repairs and compensation.

        Getting massively distracted at work, but @happydude found a couple of interesting cases. Decent read~

        Though with that being said.

        The first case (unable to rescind contract), the vendors managed to repair the property via insurance prior to the finalized settlement date. So materially, there would have been negligible difference.

        The second case (rescinded), was a commercial property, where the purchaser had intended to lease out the property prior to doing future works. But the vendor whilst insured had not repaired the property. Nor was the amount to repair offered as compensation.

        Very interesting indeed…

  • lazarski on 21/03/2022 - 16:52
    +2

    "My lawyer said the once I won an auction, it is my property, and I have to settle on it, no matter what."

    Is your lawyer the seller?

    I'm not a lawyer but if you buy something and its condition is not as advertised or the same as when you bought it then you don't buy it.

    Tell your lawyer to take a hike, how can you be liable for a house you don't own that was burnt down after you saw it.

    • Donaldhump on 22/03/2022 - 21:13

      Depends on the state, in qld you must settle and then sue seller for damages

  • BargainBogan99 on 21/03/2022 - 17:13
    +1

    Is your "lawyer" an actual solicitor, or are they "just" a conveyancer.

    I mean it's not much of an excuse either way, but a real lawyer will give you actual legal advice, whereas some conveyancers I've know just give out whatever advice "they reckon is correct" (it may or may not be legally correct).

    This is the difference you pay for.

    • xavster on 22/03/2022 - 16:35

      In my experience of having bought and sold quite a few properties in Sydney with a mix of existing & OTP appartments, existing houses and new constructions, I have found well established conveyancers to be much more experienced in complex property transactions than normal solicitors.

      Mostly because conveyancers only deal with property transactions and it is their core business. Of course this is highly subject and should in no way take away any validity of BargainBogan99's experience either.

      It's really pretty much a case of ask around and find a good one…

  • RolandWaites on 21/03/2022 - 17:21

    Sounds like a scam to me. Did you by chance meet this lawyer at the auction?

    This bloke's theoretically arguing you could win the auction, and be expected to pay up the whole amount even if that afternoon the seller bulldozed the house.

  • kator on 21/03/2022 - 17:53

    I am in WA and when I bought my house the bank agent organised building insurance for the settlement time. I think it is normal procedure here.

  • Webber000 on 21/03/2022 - 18:14
    +3

    You need a lawyer that is fighting for You in this situation.
    Not one that is defending the other party as their starting point and will then maybe see what they can do!

  • oO0Dam0Oo on 21/03/2022 - 18:29

    A word of advice to this forum… and please take from it as you wish. Lawyer/law firm over conveyancer.

    They all do a good job until something goes wrong.

  • DingoBlue on 21/03/2022 - 19:19

    No idea who is right or wrong but many people seem to be missing the fact that auctions are legally a very peculiar thing in terms of title transfer.

    • djkelly69 on 21/03/2022 - 22:44
      -1

      auctions are legally a very peculiar thing in terms of title transfer.

      In what way?

      The settlement/transfer of title takes place in exactly the same way whether a contract exchanged at auction or private treaty.

      • DingoBlue on 22/03/2022 - 11:51

        That’s my point, you need to stop thinking about title as something traded like a set of keys. Title as a legal concept is very different for auctions.

        • djkelly69 on 22/03/2022 - 11:56

          Title as a legal concept is very different for auctions.

          No it isn't. The 'concept' of title is exactly the same regardless of the method of sale.

  • funnysht on 21/03/2022 - 19:33
    -2

    Sounds like you better call saul

  • Bargainitis on 21/03/2022 - 19:45

    there is usually a clause in the contract around your ability to rescind a contract under the condition that there is damage / repairs needed over a threshold of the purchase price. This could be 5% of the purchase price, etc but depends how hard your solicitor negotiated it and its generally in place to cover situations such as this. Look in the "special conditions" of the contract - thats where the amendments to the contract are highlighted.

    Agreed with others, you need to look into getting a new solicitor.

  • Aap Ke Papa on 21/03/2022 - 20:00
    +2

    are you sure you hired a property lawyer and not a conveyancer. Because Conveyancers are useless. I never use a conveyancers to settle properties. ALWAYS use a Solicitor and a very good one. Its worth the investment considering you are doing the biggest purchase of your life.

    • vchar on 21/03/2022 - 21:52

      I couldn't agree more that conveyancers are mostly useless. I wouldn't use them again for my next purpose. They didn't, while they should, tell me what I need to know to buy a property.

    • infinite on 22/03/2022 - 11:57

      Waste of money.

      If you hire a solicitor, their just going to contract a Conveyancer to do it, due to how technical settlements actually are. Then they'll charge an additional $150 an hour on top of the Conveyancers fee and slug you for the total.

      • one man clan on 22/03/2022 - 13:32
        -1

        This is just not true at all. THey'll get a junior or secretary to do the "technical stuff" like show up for the xfer and just have a partner approve it.

  • greatlamp on 21/03/2022 - 20:27

    Any contract for property would surely be for 'land, building, fixtures and fittings'? The fixtures and fittings of the kitchen are missing now. The house you bought doesn't exist anymore.

    I can't believe your lawyer would push for settlement. Honestly I would be complaining to whatever lawyer registration board exists in your state, they are obligated to act in your interests and they clearly aren't. They are being lazy and incompetent. A registered professional isn't allowed to be lazy and incompetent, whether they are a lawyer, Doctor, electrician or any other registered trade.

  • Caped Baldy on 21/03/2022 - 20:32
    +1

    OP, you need to name and shame your lawyer.
    jfc

  • vchar on 21/03/2022 - 21:47
    +3

    I bought a house in Darwin, NT but was almost in a similar situation. I was having some other issues with the property conditions in which I expected the seller rectified them but I was advised that I was responsible for fixing them once I signed the sale contract right after the auction. I was contacting relevant parties to fix the issues, though I didn't expect much.

    If I had to blame someone, my conveyancer would be the first one in my list followed by the real estate agent. They took my money but didn't do their job properly. They didn't advise me about my responsibility towards the purchasing property. They only helped me with documentation. When the issues occurred, they didn't event advise me what should I do rather than asked me to contact my real estate agent. Then I complained them that they didn't do their job and kept asking me to contact the agent so why I would use their service. Then they changed their fking attitude a bit by detailing what I could expect. I even later warned them I would probably sue relevant parties for the damage, they got fcked and made things easier for me. But obviously, I was not a ready cooked fish for them. They learnt a hard lesson.

    I didn't get much compensation to the damages but fortunately, I could fixed most issues. It would cost me hundreds of thousands if I were to rely on paying contractors fixing them. Lesson learnt, be careful with all the dodgy real estate agents and conveyancers, they are mostly business partners thus they are not willing to help us as buyers to protect their fcking business. It is all about money, mate.

    • ntt on 22/03/2022 - 10:51

      most of the real estate agents are fking crook. We got 1 fking conveyancer and 1 rea at the same time, all were the worst one, lazy and liars

  • t_c on 21/03/2022 - 21:51
    +1

    So many experts here commenting and even challenging the lawyers competence.

    But OP has stated they have contacted 2 other solicitors confirming the advise.

    Quote incase anyone missed it.

    "Lots of advises to change lawyer, I'm just called two other solicitors. The first thing they said is in agreement of my current lawyer. they mentioned 'unconditional' words. Some say complicated to handed over mid-settlement, etc, etc. One said they can do it (cancelling it), but no promises.

    I don't know what to believe"

    Maybe before anyone provides further 'helpful' advice they can state their qualifications.

  • jv on 21/03/2022 - 22:00

    My lawyer said the once I won an auction, it is my property, and I have to settle on it, no matter what.

    Rubbish.

    Who's name is currently on the title?

    Get a better lawyer.

    • MrFunSocks on 22/03/2022 - 14:17
      +1

      To quote almost every single QLD law firm: In Queensland, standard contract terms generally provide that the risk of loss or damage to a property passes from the vendor to the purchaser at 5.00 pm on the first business day after the date of the contract. It is therefore essential that a purchaser takes out insurance to protect the property and for public risk, from this time.

      If OP is in QLD (and potentially other Aus states) then the lawyer is absolutely 100% correct, and no "better" lawyer will say anything different.

      When I bought my current house recently I was told this exact thing by my lawyer, so I asked for it to be reversed so that the current owners would take the risk until settlement date. My lawyer specifically pointed out this scenario as there had been a big case that apparently went to the supreme court where someone was forced to buy a million dollar pile of rubble after the house burnt down between contract signing and settlement.

      • xavster on 22/03/2022 - 16:43
        +2

        OP is in NSW and has not settled the property. NSW conveyancing act provides that risks do not transfer to the purchaser until settlement and therefore the vendor is responsible for any significant damage.

        NSW specifically has a pre-settlement inspection of the property (usually 1 week prior to settlement) for this reason.

        • MrFunSocks on 23/03/2022 - 10:23

          QLD has pre-settlement inspections too btw.

  • treekangagaroo on 21/03/2022 - 22:06
    +1

    https://www.propertynest.com.au/what-if-property-is-damaged-before-settlement/#:~:text=The%20Conveyancing%20Act%201919%20(NSW,therefore%20retain%20insurance%20until%20settlement.

    • jv on 22/03/2022 - 00:22

      Common sense….

  • Benoffie on 21/03/2022 - 22:14
    +1

    I cannot believe some of the advice on here.

    Lucky you're not in SA where, very clearly at every auction, the auctioneer reminds bidders that the winning bidder is required to take out building insurance as they are responsible for the property at the fall of the hammer. Auctions 101.

    https://www.sa.gov.au/topics/housing/buying-a-home/building-…

    • jv on 22/03/2022 - 00:23
      +1

      as they are responsible for the property at the fall of the hammer.

      They don't legally own the property until settlement is complete.

      • iCandy on 22/03/2022 - 09:03

        It doesn’t matter. That is the law. His solicitor also should have advised him to insure the house straight away.

        • jv on 22/03/2022 - 09:17
          -1

          That is the law

          The law states the person on the deed is the legal owner…

          advised him to insure the house straight away.

          Can you insure a building you don't legally own?

          • dtc on 22/03/2022 - 10:00
            +2

            @jv: Yes, you can insure anything

            You only get a payment to the extent you personally suffer a loss. So if I decide to take out insurance over your house, that is fine. Will the insurance company pay me out when your house burns down - probably not, because I havent suffered a loss.

          • infinite on 22/03/2022 - 12:10
            +1

            @jv: Yes you can, and in SA you are literally advised to prepare for that and do so by the state government, the auctioneer on the day, the sales agent on the day & you'll be advised of that by a Conveyancer too assuming you were smart enough to engage one before buying a property instead of afterward.

        • one man clan on 22/03/2022 - 13:33

          Laws are different in NSW

      • infinite on 22/03/2022 - 12:07

        He is correct about that in South Australia, JV. (https://eckermanns.com.au/conveyancers/the-perfect-storm-who…).

        Having said that, this differs a bit in each state around Australia.

        • MrFunSocks on 22/03/2022 - 14:23
          +1

          QLD has the same law as SA: https://www.powerlegal.com.au/happens-house-damaged-settleme…

          In Queensland, standard contract terms generally provide that the risk of loss or damage to a property passes from the vendor to the purchaser at 5.00 pm on the first business day after the date of the contract. It is therefore essential that a purchaser takes out insurance to protect the property and for public risk, from this time.

    • MrFunSocks on 22/03/2022 - 14:23
      +1

      QLD is the same as SA btw.

  • CheapskateQueen on 21/03/2022 - 22:43
    +2

    all this is complete nonsense unless your lawyer allowed an absurd special condition in the contract which I will find extremely unlikely.

    I sold my property at auction last year. oven broke after auction but before settlement. lawyer said I could argue fair wear and tear but would be a long shot and I would be liable to fix it.

    this story is garbage. call legal aid and get some free legal info

    • ntt on 22/03/2022 - 10:53
      +2

      not a very good adice to get free legal, most of them are slow and very neutral. Get a good lawyer.

  • AustriaBargain on 21/03/2022 - 23:27
    +1

    If he was in your house and he burned half your house down, couldn't you sue him personally? He just sold a house so he can afford to compensate you.

    • jv on 22/03/2022 - 00:25

      He just sold a house so he can afford to compensate you.

      Seller was still the owner at time of fire as settlement hasn't yet completed.

      • AustriaBargain on 22/03/2022 - 01:41
        +1

        If the previous owner chooses to cancel settlement then that solves OPs problem. If owner doesn't choose to complete settlement, then he burned down OPs house.

  • SeVeN11 on 22/03/2022 - 00:05
    +1

    Isn't this the best thing that can happen to you?

    Settle for the value you agreed less than insurance payout of seller. I suspect you'll be settling for less than land value.

    Ie. Congratulations for buying a piece of land below land value

  • nawapb on 22/03/2022 - 05:36
    +1

    Op are you able to share first page of the contract and any special conditions only which have been agreed to prior to auction?

    If you do share it please remove anything that identifies vendor/ purchaser / solicitor details of both parties and property address and purchase price and date of auction thats usually on the first page just to ensure privacy for all parties involved.

    That maybe more useful for any informed advice from anyone here but you should only be acting on advice from a lawyer and a competent one that you have paid for.

    Thanks

    • Worf on 22/03/2022 - 21:12

      Agree, upload the contract (redacting personal info)… there might be an easy answer of the bat.

  • Boogerman on 22/03/2022 - 07:30

    I wonder what the logic is behind the states which have made it law that the buyer is responsible after contract is signed, but before settlement. Seems illogical

    • Gnilgorf on 22/03/2022 - 11:19

      As a Victorian, yeah it feels illogical, but even then it all depends and I can sorta see why they may have the risk be borne by the buyer from exchange of contracts.

      One reason I can see is to ensure the purchase proceeds on schedule and the buyer receives their property, albeit not in the same condition. But afterwards they would be able to deal with their insurance provider and get it repaired whilst they were clearly the owner. Yes the buyer bares the risk, but financially, if the vendor was found liable for the damages the insurance company would then hound the vendor to recoup costs.

      On the flip side, a family member of mine recently sold a property at auction. But just before settlement the Vic earthquake of 2021 happened and the tenant at the time alleged there was structural damage caused. The property still settled on time, but under the cloud of potential repairs required and how it may affect the buyer.

      Vendor still submitted a claim, and luckily the insurance investigators found that damage was not the result of the quake. It was an old house…there were cracks already. So all's well that ends well.

      But if they found it was a result of the quake, it could get messy since the vendors insurance / repairers would be involved whilst the buyer was in possession of the property.

  • theguru1 on 22/03/2022 - 08:15
    +1

    I always advised buyers to get their own insurance. Owners may not have insurance or it may be inadequate. Something like 50% of people were either not insured or under when the black Saturday fires hit.

  • suti on 22/03/2022 - 08:21

    this is what you get when you hire a $500 conveyancer who doesn't even know whats in the standard NSW contract. Ask them to make a claim under section 7 of the contract. if its over 5% (maybe less if you use a shitty conveyancer who has written this down to 1%), the vendor may choose to cancel the contract.

  • iCandy on 22/03/2022 - 09:01

    Your solicitor should have told you to insure the house as soon as you both signed contracts because the house then becomes your liability in case of a fire. I doubt you can get out of the deal.

  • MuddyClear on 22/03/2022 - 09:22
    -1

    What’s all this fuss about! You just paint over the burnt bits. Move on.

  • jaybo on 22/03/2022 - 09:57
    +9

    obligatory i am not a lawyer, (but my wife is)

    your lawyer doesn't sound very good… even if they're competent, they've failed to explain things to you that you needed to know (eg: if you required insurance from the day you signed the docs, then they should've been communicating that to you!)

    the vendor has a responsibility at settlement that the house is in the same condition it was in when you bought it at auction - there's usually an inspection the week before settlement where you get to check the house again - you're normally checking things like appliances (aircon, hot water, dishwashers etc) are still in reasonable working order… there's a process to withhold money at settlement for broken things that should be working (again, like airconditioning units) but if the house is uninhabitable like the description seems to be, then that is not the same condition as when you bought it at auction… if you still want this house then you should be pushing for the settlement to be delayed until the house can be presented in reasonable condition again.

    definitely feel free to shop around for lawyers if you're not getting the service you feel you should be getting - at a very basic level if what they are saying is true that you "need to settle regardless" - then they should be able to clearly explain to you why this is (eg: if it was written into the contract that you had to settle even if the vendor accidentally burned half the house down) - you're paying a professional for a service, you shouldn't be in a position where you have to come to a forum like this and ask for advice.

    my wife operates in VIC but i'm sure she has some referral partners in NSW, if you're really struggling feel free to PM me and I'll chase down a couple of recommendations for you. buying a house shouldn't be this stressful or shitty :(

  • spammingb on 22/03/2022 - 09:59
    +2

    The situation is a little different in NSW. In NSW the risk as to damage to the land does not pass to the purchaser until the earlier of the settlement date or the date that the purchaser takes possession (i.e. where the purchaser takes possession prior to the settlement date). Further, the purchaser has the right to rescind (cancel) the Contract (and be refunded the deposit) where the land is 'substantially' damaged prior to the date of the passing of risk. Land is defined as including 'buildings and other fixtures'.

    See CONVEYANCING ACT 1919 - SECT 66K Postponement of passing of risk to purchaser

    and

    CONVEYANCING ACT 1919 - SECT 66L Power to rescind contract where land substantially damaged

    https://www.propertychat.com.au/community/threads/house-burn…

  • caitsith01 on 22/03/2022 - 10:15
    +1

    Geez, so much bad advice here.

    So let's assume you 'own' the house after the auction (untrue until settlement, because that's what settlement is, but anyway). So someone has burnt YOUR house down. Who cares if they have insurance? They are still liable to you for every cent of damage they have caused in that scenario, insurance or not. Luckily, you know they are about to get a big chunk of money when you settle so they are good for the damages.

    The insurance and settlement issues are a sideshow anyway. The vendor has damaged the property, the vendor is liable for it.

    Get a good lawyer, not the apparently terrible one you have spoken to so far.

    • BigBirdy on 22/03/2022 - 12:40

      Hmm, seller counter sues you (the buyer) because the fire was caused by the dodgy electricals in YOUR house, destroying all his kitchen contents and causing untold stress and pain to his family

      • kl2999 on 23/03/2022 - 00:53

        Apply the same logic, counter sue again because ex owner live in owner house (buyer) without consent. It's trespass after 5pm on auction date.

  • paralleltwin on 22/03/2022 - 10:28

    holy magoly

  • happyhammer on 22/03/2022 - 10:28

    I'm in Qld and recently bought on auction with 60 days settlement. I was surprised to find out I had to have insurance from auction date rather than settlement. The real estate agenct told me at auction otherwise I could have easily been screwed. It's a ridiculous system for me and feel for you. Legal recourse and a new lawyer is probably best action.

  • Tapek on 22/03/2022 - 10:37

    Even if the lawyer is right and you own the house now - the seller is responsible for burning your property so either they pay or take the cost of repairs out of the payment you have not yet given them for the house.

  • dtc on 22/03/2022 - 10:37
    +3

    A lot of people are confusing obligation under the purchase contract to complete the purchase and who is taking the risk of the property being damaged prior to completion.

    As others have pointed out, in NSW the buyer has an obligation to complete unless (relevantly) the land has substantially changed, in which case there is the option to rescind.

    The seller retains the risk of the property being damaged until possession or settlement.

    Therefore the buyer can

    • rescind and walk away (repaid the deposit)
    • complete the purchase (although that seems silly)
    • renegotiate the price and go ahead with the purchase (does not seem to be what the buyer wants to do)

    TBH, if the seller is insured, then the seller is probably best off taking the insurance, razing the place and selling the land (and allowing the buyer to walk away). The difference between the sale price of 'land plus house' is usually a lot less than 'land + insurance payment', assuming insurance cover is at least reasonable.

    For example, I have a house which would cost about $550k to rebuild (ie the insurance payment would be $550k), but I could sell the land alone for at least $450k. However, if I sold it with the house on it, probably only get around $750k. Hence if the house burnt down I would come out ahead - because the house is old, its just not worth the re build cost to a buyer but its insured for the rebuild cost. It was in the path of the NSW bushfires a few years ago and part of me was hoping it might become a victim…

  • innov on 22/03/2022 - 11:16
    +6

    I have no advice but I feel for you OP, such a horrible experience to go through.

  • sghetti on 22/03/2022 - 11:28

    We were fortunate enough to have a mortgage broker who helped with our property purchase, it was our first time and he stressed getting insurance during that settlement period for this exact reason.

    I feel sorry for you, and don't know what the laws are in your state. Regardless, even having the insurance this process would put a huge dampener on settling on a home.

    You would hope that anyone on your side involved in the purchase (conveyancer, even the real estate agent) would've advised you of this. Even if it's not completely your responsibility, if it's the home you want, protect it.

  • xavster on 22/03/2022 - 12:00

    Hi Op, if you're reading this, spammingb and jaybo have the correct answer.

    If the building is indeed damaged to an extent that is different to when you exchanged contracts, then it will fail the pre-settlement inspection.

    Depending on how much time you have left until settlement, you will have multiple options available to you depending on whether you want to continue, delay, or cancel settlement. This is of-course dependant on the contract that you exchanged and any special conditions that was agreed to by you in the contract when it was exchanged, if the contract is a standard NSW land sales contract with no 'unusual' conditions then you are well protected.

    Most conveyancers would have sat you down for about an hour to go through and discuss the contract with you. Most good conveyancers would have also advised you to take out building insurance prior to settlement.

    Does your lawyer have any conveyancing experience? Because they seem to be giving you terrible advice.

    • spaceflight on 25/03/2022 - 17:34

      If the building is indeed damaged to an extent that is different to when you exchanged contracts, then it will fail the pre-settlement inspection.

      Most good conveyancers would have also advised you to take out building insurance prior to settlement

      Why take out insurance to cover something that would invalidate the contract?
      The buyer is taking out insurance against something that isn't a risk.

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