Question
I note that a significant change has been made to the conditions relating to insurance under the new 5th edition of the Standard Conditions of Sale (SCS). Under clause 5.1.1, the risk now passes to the buyer on exchange of contracts rather than on completion. Why has this change been made?
Answer
Revisions have been made to bring the Standard Conditions in line with current law and practice with the aim of reducing the need for special conditions. The changes are intended to achieve a balance between the interests of the buyer and seller.
The explanatory notes to the 5th edition of the Standard Conditions of Sale (SCS) say significant changes have been made to the conditions relating to risk and insurance. The principal effect is that the risk position is reversed (from that in the fourth edition of the SCS) and the buyer bears the risk from exchange. The previous edition of the SCS left the risk with the seller until completion and, in practice, special conditions were frequently included to make the buyer bear the risk from exchange.
However, even though the buyer now takes the risk from exchange (meaning he still has to complete if the property is destroyed between exchange and completion), the seller may still have an obligation to insure the property between exchange and completion by virtue of condition 5.1.2. Under this condition, the seller is obliged to insure if the contract specifically provides for this or if the property is leasehold and the seller (whether as landlord or as tenant) is obliged to insure under the terms of the lease. For further information, see p45 of the Law Society's Conveyancing Protocol (2011) which is available to purchase from the Law Society's online bookshop.