When does property risk pass? Alex Ho revisits damage and destruction before settlement

A damaged property does not always give a purchaser the right to walk away from a contract. In a recent session on damage and destruction before settlement, Massons Commercial Partner Alex Ho unpacked how NSW courts assess “substantial damage” and why the answer often turns on what the purchaser actually contracted to buy.

Drawing on cases spanning more than 80 years, Ho traced the shift from the common law position in Fletcher v Manton to the statutory protections now contained in the Conveyancing Act 1919 (NSW). He explained that, in NSW, risk generally remains with the vendor until settlement unless the purchaser takes possession earlier. The session examined how sections 66L and 66M operate in practice, including the distinction between “damage” that may justify a price adjustment and “substantial damage” that may entitle a purchaser to rescind the contract and recover the deposit. Through examples involving fire damage, altered common property, contamination and illegal dumping, Ho highlighted the courts’ focus on whether the land is “materially different” from what was originally contracted for.

A central focus of the presentation was Retirement Village Bargo Pty Ltd v Anwar [2023], which considered asbestos-contaminated waste dumped on rural land during a lengthy settlement period. Ho noted the Court’s move toward an objective assessment of damage, rejecting the idea that a purchaser’s private development intentions should determine whether section 66L is triggered. The session concluded with practical guidance for lawyers and property professionals, including the importance of documenting pre-exchange property condition, maintaining insurance, refreshing searches during long settlements and carefully drafting contractual damage and destruction clauses for commercial transactions.

If this topic interests you, you can learn more and receive a CPD point in Substantive Law here