Many clients approach us with the intent of purchasing a decennial insurance. We have noticed that they share similar concerns, especially regarding when it is essential to take out this insurance and what procedures, requirements, and timelines should be followed. In this text, we aim to clarify all these points so that those who wish to contract it understand the entire process for the issuance of a decennial insurance.
Before delving into the implications of transferring a property within the 10 years following its construction, it’s crucial to understand what decennial insurance is and its purpose.
This insurance is a guarantee that the developer is required to take out to cover material damage that may occur in the building due to failures or defects affecting the foundation, supports, beams, slabs, load-bearing walls, or other structural elements that directly compromise the mechanical strength and stability of the property.
According to the Spanish Building Management Law (LOE), those responsible for construction are obliged to respond to building owners for material damages under the following terms:
1. Ten years: For damages resulting from failures or imperfections that impact the foundation, supports, beams, slabs, load-bearing walls, or any other structural component, jeopardizing the mechanical integrity and stability of the building. This support is commonly referred to as decennial insurance, and the developer is responsible for its contracting.
2. Three years: In cases of damages resulting from deficiencies in construction elements or installations that don’t meet habitability standards. As with decennial insurance, it is the developer who must contract this coverage.
3. One year: For damages caused by errors or failures in execution affecting the final finishes of the work. The responsibility to contract this insurance falls on the builder, as stipulated in the LOE.
1. Why is it Mandatory?
The mandatory nature of decennial insurance is established by the Building Management Law (LOE) in Spain. This law aims to protect the consumer from potential construction defects. It serves as a safeguard not only for the original owner but also for those who might acquire the property within the insured decade.
The regulation states that decennial insurance is essential for buildings primarily intended as residences. Without this insurance, it’s not possible to register the building in the Property Registry, preventing the developer from obtaining financing or selling properties.
For the rehabilitation of a house registered as a ruin, decennial insurance is required if the house has been renovated within the previous decade, based on a technical certification of its age and a refurbishment license. Works that do not compromise the structure (as per art. 19-1-c of Law 38/1999) do not require decennial insurance, with a competent technician being responsible for certifying this aspect (Resolution DGRN of February 11, 2009). Changing the purpose of a premises to a dwelling does not require decennial insurance, unless there is an intent to confirm modifications that substantially alter the building. In ambiguous cases, a technical certification is needed. Separate extensions affecting only a building’s parking area also do not require insurance.
For a self-developer of a single-family home for personal use, it is not necessary to contract the Decennial Insurance. The exception to the obligation to contract decennial insurance for the self-developer demands documentary evidence of prior use by the transferor, a mere declaration to this effect being insufficient. If the house is transferred within ten years from its registration, the self-developer must contract the guarantee unless they prove the house was for their use and the buyer exempts them from this obligation. At the time of the home’s sale, this use must be demonstrated with suitable documentary evidence. A mere statement by the developer-seller is insufficient, requiring evidence such as a notarial certificate or registration certificate.
3. Property Transfer and Its Implications
Selling a property within the decade covered by the decennial insurance carries some legal considerations:
1. Transfer of Benefits and Obligations
The insurance policy automatically transfers to the new owner. This means that, in the event of structural damage, the new owner can benefit from the coverage.
2. Duty to Inform
It’s essential that the seller informs the new buyer about the existence of the decennial insurance, detailing its scope and duration.
3. Future Claims
The new owner has the right to claim under the decennial insurance as long as the damages fit what’s covered by the policy.
4. The Importance of Legal Advice
Legal consultation is vital: The real estate world is filled with complexities that, if not addressed properly, can lead to lengthy and costly litigations.
Minimize Risks: A specialized lawyer can identify potential risks and advise on how to minimize or avoid them.
Document Management: Transferring properties and policies requires meticulous handling of documentation. An error could result in the invalidity of the insurance or unattended claims.
5- Real Cases and Lessons Learned
Throughout our experience, we have faced multiple cases where a lack of understanding or improper handling of decennial insurance has led to complicated situations. These stories emphasize the need for expert advice.
Transferring a property within the decade covered by the insurance should be a decision made with full awareness of its implications. Decennial insurance is not a hindrance but a protective tool.
At Quikprokuo, our dedication and passion for the real estate world drive us to provide the best advice so that each transaction is carried out successfully and peacefully. For more details or inquiries, visit our contact page.