When risk passes. In NSW the property is at the purchaser's risk once settlement has taken place. The important exception is possession: if you take possession of the property before settlement, risk transfers to you at the point you take possession. Until risk passes, the vendor must take reasonable care of the property to ensure its condition remains the same between the contract date and settlement, subject to fair wear and tear.
Damage between contract and settlement. If damage occurs before settlement or before you take possession: the purchase price may be reduced by “an amount as is just and equitable in the circumstances”; for substantial damage, the purchaser may rescind within 28 days of discovering it; and the price-reduction protection does not apply if the purchaser caused the damage through wilful or negligent acts.
Insurance. For standalone houses and community-title dwellings it is advisable to obtain your own insurance for the property by no later than the settlement date. Building insurance is typically required by lenders; contents insurance is optional. For strata properties, the owners corporation provides building and public liability insurance, so purchasers only need contents insurance if desired. Community title insurance covers association property, public liability and voluntary workers. Strata insurance covers building damage, personal-injury indemnity, voluntary workers, and damage to others' property on common property.
Vendor warranties. 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 inspections 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 |
| Substantial damage before risk passes | The vendor | You can rescind within 28 days of discovering it; for lesser damage, a just-and-equitable price reduction |
| Strata unit | Owners corporation for the building | The owners corporation insures the building and common property; you insure your contents |
General information only — not legal advice. Confirm your situation and the exact contract terms with a licensed conveyancer or solicitor.