When does risk pass to the buyer in NSW?
In NSW the property is at the vendor's risk until settlement. Risk passes to you at completion, or earlier if you take possession of the property before settlement, whichever happens first (Conveyancing Act 1919 (NSW) s 66K). Until risk passes, the vendor must take reasonable care of the property so its condition stays the same between the contract date and settlement, subject to fair wear and tear. For how settlement timing works, see our guide to time and settlement in NSW property contracts.
How does NSW compare with Queensland and Victoria?
The point at which risk passes is not the same across states, and Queensland is the outlier: there, risk shifts to the buyer almost immediately after signing. If you are also buying interstate, compare our guides to property condition, risks and insurance (QLD) and property condition, risks and insurance (VIC).
| State | When risk passes to the buyer | Who bears it until then |
|---|---|---|
| NSW | On settlement (completion), or earlier if you take possession first (Conveyancing Act 1919 s 66K) | The vendor |
| QLD | 5pm on the first business day after the contract date | You, almost immediately, so insure on signing |
| VIC | On settlement, or earlier if you take possession first | The vendor |
Can a special condition pass the risk to me earlier?
Not when you are buying a home. For the sale of a dwelling-house the risk rules in the Act cannot be contracted out of (Conveyancing Act 1919 (NSW) s 66O), so a special condition that tries to pass risk to the buyer before completion, or before you take possession, is void. For other property, such as vacant land or commercial premises, the parties can agree to shift risk earlier, so read any special conditions carefully and take advice before you sign.
What happens if the property is damaged before settlement?
If the property is substantially damaged before risk passes to you, you can rescind the contract within 28 days of first becoming aware of the damage. For lesser damage, the purchase price may be reduced by an amount that is just and equitable in the circumstances. That price-reduction protection does not apply if you caused the damage through a wilful or negligent act. Damage counts as substantial when it makes the land materially different from what you contracted to buy, which is a question of fact rather than a fixed dollar figure.
What insurance do I need, and from when?
For a standalone house it is best to arrange your own building and contents insurance from exchange, rather than waiting for the settlement date. There are two practical reasons: your lender will require a certificate of currency in your name before it releases loan funds, and holding your own policy from day one closes any gap. Building insurance is typically required by lenders; contents insurance is optional but sensible.
If you take possession before settlement, risk passes to you at that point, so your own cover needs to be running already. As a limited backstop, section 50 of the Insurance Contracts Act 1984 (Cth) can treat you as insured under the vendor's building policy for loss or damage between the time risk passes and the earliest of settlement, possession, or the start of your own cover. It only helps if the vendor actually holds a current, adequate policy, which you cannot verify or control, so treat it as a fallback, not a plan.
I'm buying a strata unit. Who insures the building?
In a strata scheme the owners corporation holds a master building insurance policy covering the building for its full replacement value, together with public liability cover for the common property, under the Strata Schemes Management Act 2015 (NSW), ss 160, 161 and 164. The cost is shared through your levies. So as a strata buyer you do not need standalone building cover: you need contents insurance for your lot, plus public liability for its interior. If you are buying a unit, see buying in a strata scheme in NSW.
What does the vendor warrant about the property?
In NSW, unless the contrary is disclosed in the contract, the vendor warrants that as at the contract date: the land is not subject to any adverse affectation; the land does not contain part of a sewer belonging to a recognised sewerage authority; the planning certificate meets Environmental Planning and Assessment Regulation 2021 Schedule 2 requirements (either no building matters justify demolition/upgrading orders, or a building certificate exists for any structures that would); and no charge is payable in relation to any positive covenant, and the property is not subject to annual coastal protection charges. Buyers accept the property in its existing condition with fair wear and tear, so before exchange it is strongly recommended you carry out your own building and pest inspection to verify you are comfortable with the property's physical state.
Risk and insurance at a glance (NSW)
| Scenario | Who bears the risk | Detail |
|---|---|---|
| Before settlement (no possession taken) | The vendor | The vendor must take reasonable care; risk passes to you at settlement |
| You take possession early | You | Risk transfers to you when you take possession, so have your own cover running |
| Substantial damage before risk passes | The vendor | You can rescind within 28 days of becoming aware of it; for lesser damage, a just-and-equitable price reduction |
| Special condition passing risk to you early (home) | Not effective | For a dwelling-house the risk rules cannot be contracted out of, so such a clause is void (s 66O) |
| Strata unit | Owners corporation for the building | The owners corporation insures the building and common property; you insure your contents and interior public liability |
General information only — not legal advice. Confirm your situation and the exact contract terms with a licensed conveyancer or solicitor.
