24 Jul Insurance and Property Conveyancing | shared by the Auckland law firm legal team
This article has been sourced by the conveyancing lawyers at Auckland law firm Quay Law.
Quake puts insurers, home buyers on alert
The property market is expected to become a casualty of Sunday’s earthquake as insurers and home buyers tread more cautiously.
Buyers in the Wellington and Marlborough regions are being advised to consider delaying their purchases or to ensure the final sale agreements are subject to obtaining insurance.
Massey University senior lecturer in insurance and finance Michael Naylor said prospective buyers should pause for a while.
“If I was buying homes, I would delay things until they can buy insurance. You can’t expect the insurance companies at this stage to take on new clients.”
Insurance Council of New Zealand operations manager Terry Jordan said some of its 27 members – including AA, State, NZI and AMI – were not taking on new business in the centre of the country as they assessed quake damage and risk.
However, insurers have said they are open to compromise to ensure the property market does not “grind to a halt”.
Even if earthquake activity eased, the standoff could last for weeks, and could stretch to several months, Mr Jordan said. “There’s no measure on this, unfortunately.”
AA Insurance has an exclusion zone on new policies in place for the Wellington and Marlborough regions.
Home buyers would be given insurance only if the home was already insured by AA, consumer affairs head Suzanne Wolton said.
That was provided the house was undamaged by the latest swarm of earthquakes, and met other insurance criteria. “We don’t want the property market to grind to a halt, and we hope this will be a relief for some home buyers.”
Tommy’s Real Estate sales director David Platt said it had implemented a policy by which all sales agreements contained a clause making them subject to the buyer being able to obtain satisfactory insurance.
It was also speaking to all recent vendors and purchasers who had not yet settled.
“Our advice is people who have bought properties need to establish that they are able to get insurance cover or where there might be a potential issue.
“We would imagine this process will be short-lived and may cause a few disruptions to some property settlements for a couple of weeks.”
Harcourts New Zealand chief executive Hayden Duncan said demand did not appear to have been affected, but Sunday’s quake was likely to lengthen the sales process.
One method adopted in Christchurch, and largely accepted by insurers, involved buyers taking over the insurance policies of the vendors. While insurers were reluctant to take on new policies, they could generally replace them and maintain the same level of risk. “There’s no logical reason for that not to occur,” he said.
Mr Jordan said he had spoken to the Real Estate Institute about ways to smooth out the sales process in affected areas, including the subject-to-insurance clauses and adopting existing policies.
He expected the advice would be passed on to real estate agents to help ease any concerns among wary buyers.
“It’ll make people a bit nervous, but I think the real estate agents will work this out.”
Those up against a sale deadline should instruct their lawyers to work out an agreeable solution.
Prime Minister John Key said yesterday that, for the most part, insurers had taken a “very responsible view” of the earthquakes and there was no suggestion they now saw New Zealand as too risky.
“We haven’t seen any indication that insurers don’t remain committed to this market and, most importantly, the reinsurers who actually provide the backup insurance . . . seem to remain committed to New Zealand.”
Dr Naylor said he did not expect the latest shakes to have a major effect on premiums.
– © Fairfax NZ News