Key Aspects of the Ten Years Insurance -Seguro Decenal
Mandatory Coverage:
- For New Buildings: The Seguro Decenal is required by law for all new buildings intended for residential use in Spain. It must be in place before the property can be sold. The policy is taken out by the developer or builder and transferred to the new property owner upon sale.
- Structural Defects: The insurance covers structural defects that could affect the stability and safety of the building, such as defects in the foundation, load-bearing walls, beams, and other essential structural components.
Duration:
- Ten Years: As the name suggests, the coverage period is ten years from the date the building is completed and receives its certificate of occupancy (Licencia de Primera Ocupación).
What is Covered?
- Structural Damage: The insurance primarily covers damages that could jeopardize the building’s structural integrity, such as subsidence, cracking, or collapse of load-bearing elements.
- Serious Construction Defects: It may also cover serious defects that significantly affect the habitability of the building, although minor issues or defects related to aesthetics or non-structural elements are typically excluded.
Legal Requirements:
- Law 38/1999, of November 5th, on Building Regulation (Ley de Ordenación de la Edificación – LOE): This law mandates the ten-year insurance for all new residential constructions. It outlines the responsibilities of builders, developers, and architects in ensuring that buildings are constructed to meet safety standards.
- Certificate of Insurance: Before selling a newly built property, the developer must provide a certificate proving that the Seguro Decenal is in place. Notaries and registrars will typically require this certificate to complete the sale and register the property.
Beneficiaries:
- Property Buyers: The main beneficiaries of the Seguro Decenal are the property buyers, who are protected from bearing the financial burden of repairing major structural defects that arise after purchase.
- Subsequent Owners: The insurance coverage also extends to any subsequent owners within the ten-year period. This means that if the property is sold within the first ten years after construction, the new owners will still be protected.
Exemptions:
- Self-Built Homes: If a private individual builds their own home (self-construction) and does not intend to sell it, the Seguro Decenal may not be mandatory. However, if they decide to sell the property within the first ten years, they will need to secure this insurance before the sale can proceed.
- Non-Residential Buildings: While the Seguro Decenal is mandatory for residential buildings, it may not be required for certain non-residential buildings, although some developers may still choose to take it out.
Importance of the Ten Years Insurance
- Buyer Protection: The Seguro Decenal is a significant safeguard for property buyers, ensuring that they are not left with the financial burden of repairing major structural issues that could arise due to defects in the construction process.
- Quality Assurance: The requirement of this insurance also encourages higher standards of construction quality, as developers and builders are incentivized to avoid defects that could lead to costly insurance claims.
- Market Confidence: Having this insurance in place increases confidence in the property market, as buyers are reassured that their investment is protected against major structural risks.
Conclusion
When you buy off-plan from a builder or developer, or you build a new property by your own , the builder or developer, together with the architect, must guarantee you that the essential and most important parts of the construction will be secure at least for ten years, in order to follow the Spanish Law.
In order to confirm this responsibility, the Spanish regulations forces to the developers of new buildings to insurance the most important parts of the construction, as the foundations, internal structure, bines, etc. Other defects affecting the habitability of the property are covered for 3 years. Other minor defects are covered for 1 year. In the last two cases insurance cover is not required, but obviously if a builder can offer this as an additional guarantee, it will be better.
Also, this is an additional guarantee for the construction, because the same insurance company will force the builder to pass determinate quality inspections, to check the quality of the materials and the works made in the property, in order to give the proper policy.
The Ten Years Insurance (or “Seguro Decenal”) is compulsory when the promoter is a company with the activity to build houses for sale.
But, it is voluntary when the promoter is a particular (the owner of the plot). This is called in Spain “Autopromotor”, translated as “Self-Promoter” or “Self-Developer”. This is the case in which a particular buys a land in Spain with the intention to build a house for him as main, or second residence, but he has not the activity of buying for sale. In these cases, the Spanish law give the option to these particulars not to apply for this insurance, because the Spanish Government understand that, if a particular is building something to live inside, he will take the necessary care to build in safe and in a secure condition. So the particular can choose whether to save costs avoiding to pay this insurance; or in instance, to contract this insurance to have a better protection against big construction problems and defects.
But, if you, as self-promoter chose not to apply for this insurance, when you sell the house in the future to other buyers, the Spanish Laws forces you to inform them that the construction is not covered with this guarantee and they must accept this condition from the sale. From the point of view of an eventual buyer, it will be always a better option to buy a property with this insurance. So, they must be duly informed, and they must confirm, that the property is not with any insurance in this way.
TLACORP SLP
