Why keeping up your HOC is critical

If you are a home seller, it is essential to check that your property will remain insured during the time between the actual sale and the day it is transferred to the new owner.

That's the advice of Gerhard Kotzé, MD of the RealNet estate agency group, who says homeowners must be clear about the date on which the "risk" in the property passes to the new owner. "This could be an earlier date on which the buyer takes occupation of your home or a later date on which the property is actually transferred, and is usually stated in the agreement of sale.

"However, you do need to be sure, otherwise a disaster that strikes when the buyer is in occupation but has not yet taken transfer could turn into a financial nightmare. Who would be liable for the cost of repairs if, for example, an undetected slow leak in a geyser caused a ceiling collapse and water damage to the interior during this time? Or if the roof was damaged by a high wind, or if the house itself was damaged by fire?

"In the normal course of events, you would expect to be covered for such events under your home owner's insurance policy (HOC), but if your buyer is already in occupation, this will only be the case if you have kept up your HOC premiums - or the buyer has already taken out a new HOC policy effective from his date of occupation, and not the date of transfer."

In short, he says, if the sale agreement says that the risk will pass to the buyer only once the transfer of ownership is registered, the seller must ensure that he has enough HOC insurance until then to cover the total replacement of the building if necessary - even if he no longer lives there.

"If, on the other hand, the sale agreement stipulates that the risk in the property passes to the buyer on occupation, he must specifically insure against disaster from that date - or he could find himself having to pay for rebuilding or repairs to a house that he doesn't even own yet."

In general, Kotzé says, it is a good idea to allow the risk in the property to pass from the seller to the buyer on the transfer of the property, and not on occupation -  and to double-check with your estate agent that this is written into the agreement of sale.

"Such an arrangement means the careful seller will stay fully insured until transfer, and that there will be no need for the buyer to take out special insurance. It also avoids the confusion that can arise over the fact that there is usually risk insurance attached to the buyer's new home loan, but that this does not become effective until transfer."

Meanwhile, he says, homebuyers need to remember that they will always be responsible for insuring their own belongings such as cars, furniture, clothes and jewellery - even if they are only storing these at their new home ahead of taking transfer, or if they are in occupation ahead of transfer.

"The home seller is not responsible for insuring these goods, so buyers need to advise their short-term insurer as soon as they move things from their old address to their new one, and not wait for the transfer."