Yes, buildings insurance must be in place from exchange of contracts, not completion.

From the moment contracts are exchanged, the buyer becomes legally responsible for the property, even though they do not yet own or occupy it. Any damage that occurs after exchange, but before completion, is the buyer’s financial risk.

This often surprises first-time buyers, but it is a long-established principle in residential conveyancing in England and Wales.

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What Happens if the Property Is Damaged After Exchange?

If the property suffers significant damage after exchange, such as fire, flooding, storm damage, or structural failure:

• The seller is still entitled to the full purchase price
• The buyer is legally required to complete
• The seller is not obliged to repair the damage or reduce the price

This applies even if the damage is severe, provided it was not caused by the seller and there is no special condition in the contract.

In practice, this means the buyer must rely on their buildings insurance policy to cover repairs or reinstatement after completion.

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Why Risk Passes to the Buyer at Exchange

Under standard residential contracts:

• Risk transfers to the buyer on exchange of contracts
• The principle of buyer responsibility after exchange is well established in English property law
• The property is sold on a “buyer assumes risk” basis unless the contract states otherwise

This is why solicitors treat buildings insurance as a pre-exchange requirement, not an administrative formality.

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What Your Buildings Insurance Must Cover

Your policy should be suitable for a worst-case scenario, not just minor damage:

• Rebuild cost (not the purchase price or market value)
• Fire, flood, storm, and subsidence
• Escape of water
• Theft and malicious damage

Most lenders will refuse to release mortgage funds unless adequate cover is in place from exchange.

You will usually be required to provide your insurance certificate to your solicitor before contracts are exchanged.

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When the Seller Might Still Be Responsible

The seller may remain liable only in limited circumstances, including:

• Damage caused deliberately or negligently by the seller
• Breach of contract (for example, failure to take reasonable care if still living in the property)
• A special condition in the contract that keeps risk with the seller (rare in standard residential transactions)

Some new-build contracts and commercial property contracts handle risk differently, but this is not the norm for second-hand residential homes.

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Why This Matters for Buyers

Exchange of contracts is the point at which:

• The purchase becomes legally binding
• Your deposit is at risk
• Your financial exposure begins even though you do not yet have the keys

Having buildings insurance in place from exchange is not just a lender requirement; it is your only protection against unexpected loss before completion.

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Related Guides: Comprehensive pre-exchange checklist

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