Michael Spillane, an award-winning sales agent from RE/MAX in Queensland, describes the state-wide law as ’strange’.
“If you look at section 8.1 of the sale contract, you would stop and think, ‘Wait a moment, that’s not very logical’,” he told Real Estate Business.
According to the sales contract in Queensland, the property is at the buyer's risk from 5pm on the first business day after the contract date.
“It’s hard for the buyer to control the property when it’s not even theirs yet. It just doesn’t make sense,” Mr Spillane said.
Having worked in real estate for 13 years, Mr Spillane has had buyers raise concerns about the section over the years.
“If I was a seller, I could just think ‘I can stop my insurance now’ because it’s there in black and white; the property is at the buyer’s risk.”
However, Michael Gapes, a partner at Carter Newell Lawyers, believes the section should remain.
"In my view, the clause is eminently fair," he told Real Estate Business. "In most contracts for the sale of residential property throughout Australia, the risk passes to the buyer immediately upon execution of the contract.
"With standard Queensland contracts, the property is deemed to be at the buyer’s risk on 5pm on the first business day after the contract date, giving the buyer sufficient opportunity to shop around and select an appropriate insurance product that suits their requirements.
"The clause should also give buyers peace of mind that the property is insured in the event of a claim, because the buyer has no control over whether the seller has adequate insurance over the property or, indeed, whether the seller has cancelled his or her insurance policy in its entirety once a contract of sale has been entered into," Mr Gapes said.
Elizabeth Siataga from Ray White Townsville also queried the law, commenting on www.rebonline.com.au that the only party to benefit from the clause is the insurance companies. Her comment came in response to Qld government plans to change property laws in the state.
“It is beyond comprehension that the buyer has to insure the property, when the property remains the vendor's property until handover and therefore, the vendor's responsibility,” she commented.
“The vendor will already hold insurance on the property. It is a conundrum that defies reasonable explanation. When buyers ask the question why and state, 'it does not make sense', there is no reasonable answer.
“I strongly advocate for 8.1 to be removed from the contract. I believe if a straw poll was held the outcome would be unanimous from the buyers and agents for the removal of 8.1. The only beneficiaries are the insurance companies.”