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New Build 10 Year Decenal Property Insurance

- Updated: 03/01/2013

It is obligatory in Spain for a new build property to have ‘Seguro Decenal’ which is insurance on the building for 10 years. This article by Building Surveyor Mark Paddon explains what the implications are when buying a new build property in Spain :

New Build 10 Year Decenal Property Insurance

It is a comfort when you buy a new build property in Spain to know that if any defects are discovered you are covered for the costs of the builder to return and rectify any faults. Sadly all too often there are problems. This could involve the insurance not being taken out by the developer and promoter to the builder having gone into liquidation. This article explains what the implications are when buying a new build property in Spain.

10 year newbuild property insurance Spain ‘Seguro Decenal’

Since may 2000 it has been obligatory in Spain for Promotors or property developers to take out a ‘Seguro Decenal’, in order to cover the building, should it be subject to any significant defects that affect it’s structural stability and resistance.

Firstly it is important to note that most builders will opt for the basic obligatory cover. While optional cover is available to cover things like the water tightness of roofs and walls, many builders will not take additional cover and though elements that affect the habitability of the building may need to be rectified by the builder up to 3 years from the date of completion (see below), after 3 years it’s only the remaining 7 years of the 10 year policy that can be called upon. Many owners therefore find that having found problems with their Spanish property after 3 years, it is only those defects that affect structural stability that can realistically be pursued with the insurers. The correct diagnosis of problems and identification of structural relevance is therefore important.

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Post purchase calendar:-

First 15 days: Owners should report any evident defects to the builder, who then has 28 days to rectify them. Significant omissions may even give the owner an opportunity to withdraw from the purchase, though in practice this may be lengthy and costly to achieve. (Such defects are best identified prior to completion and corrected before final monies are paid as the current market has seen many builders folding)

1st year: In the 1st year the builder is liable to correct all defects reported to them. What’s important here is that the builder repairs defects properly and doesn’t just bodge them up to last for a short period. The 1st year is the best opportunity to get things put right properly. The right repair works are therefore essential including the use of the right materials, otherwise problems are likely to reoccur later (when claiming may be very difficult). While a conscientious builder may opt to properly correct any problems, others will be looking for the cheapest option. Unfortunately, some of the most serious defects might take some time to show up.

2nd & 3rd years: Over the next 2 years, the builder is still responsible for repairing major defects that would make the property inhabitable. But of course such issues can be difficult to argue. While flooding from a leaking pipe or roof may be the obvious responsibility of the builder, lesser issues may not get any response and BE WARNED! Some builders can be impossible to pin down, evading responsibility by claiming insolvency, changing their company name or simply disappearing.

Unfortunately some builders see the 10 year obligatory insurance in Spain as a way out of responsibility and in extreme cases it has actually resulted in builders skimping on crucial details such as foundations because -‘it’s insured so we’ll cut corners’,so it is important to understand that whilst a good insurance policy may protect owners it does not automatically mean that a new property is better built than one that is 30 years old. Whilst the terms of most policies will require an increased level of control (e.g. most policies require that a site substrate test is carried out – ‘estudio geotecnico’ and that works are overseen by an ‘Organismo de control tecnico’ – ‘OCT’), a general lack of control and a tendency for some Architects and ‘Tecnicos’ to turn a blind eye to the poor practices of builders that give them lots of work, results in defective or sub standard elements slipping through.

1st 10 years years: The builder (normally Promotor, but see below!) must take out seguro decenal insurance. This is the 10 year policy covering the costs of repair in the event of a structural failure in the building. Remember it may well not cover other defects, so if you can’t find the builder or they simply won’t repair, the 10 year policy may not be of any help, other than for cases of structural failure.

What if there is no policy?

I have seen an increasing number of cases where no policy is in place. This occurs through a ‘loophole’ whereby an ‘auto promotor’ (owner/developer) has built the house for their own occupancy with the intention of living in it for the duration of the first 10 years. Through a lack of understanding at the time of purchase, the builder may submit all paperwork showing the buyer as ‘Promotor’, therefore the obligation to take out the insurance (if they intend to sell on within 10 years) rests on their innocent shoulders. It is only later when they find defects, try to register / mortgage or sell the property, that the non-existence of a policy may come to light. Also, as the insurers like to specify a level of control during construction, it can be difficult to get insurance post completion.

Will the insurers pay out when needed?

If there is a strong enough case that meets the terms of the policy, yes, they are obliged to pay, but of course the insurance assessors job is to wriggle out of any responsibility. Commonly they may initially claim that an issue is nothing to do with them but instead down to the builder. This may be correct if the issue is not covered in the policy, but if it is covered (and all issues that affect the structural stability have to be), it is their responsibility to pay for such issues, whether the builder is around, absconded or bankrupt.

Of course where a serious omission has occurred due to builder negligence, the owners may not be confident in the same builder correcting the problem and if you are really unhappy about the original builder ‘having a go’ at correcting a serious structural defect, it is important to stress this lack of confidence to the insurers, which in turn will help to highlight the fact that this is their, rather than the builder’s responsibility.

Will the courts need to be involved?

Unfortunately getting any parties to admit to responsibility can be long and sometimes fruitless, such that a court decision may be needed to force one or more parties to pay up. The good news is that there are some specialist lawyers with experience in such cases, and the good ones won’t advise you to proceed unless you have a decent case. Of course all court actions carry some risk and ultimately the decision to proceed will be down to the owner, for this reason is it often the larger claims that merit court action. In some cases for minor issues, it may be worth simply getting a decent builder in to put things right. A Building Surveyor’s report is advisable so as to establish what the defects are and how they might be corrected including costings. This is sometimes backed up with an Architect’s 2nd opinion, though it should be noted that in Spain not all Architects will have the defects knowledge of a building surveyor and hence should not be relied upon for initial diagnosis.

When entering into a claim, it often soon becomes clear that the builder, architect, town hall and insurer will try to ‘pass the buck’ when identifying who was negligent and in some cases it may actually be all of them. Don’t take no for an answer from the insurers. Theoretically if there is an obvious defect covered by the policy, they should pay up without the need for court action, but getting them to pay out can be hard.

Trust no one!

Or at least trust no one that was involved in the original build process and purchase. While you may get one or more of the parties on your side, it is common for all involved to try and make light of what may be a serious structural issue. Usually the Architect or Tecnico involved in the project will come up with an understated report or inadequate short-term solutions. I am often called in to examine a project Architect’s or builder’s proposed ‘solution’ and many of them are simply not good enough. Provided that evidence is submitted to the insurers or courts to demonstrate the inadequacy of such ‘remedies’, they are fortunately willing to listen to independent expert opinions, other than those of the parties involved in the project, so if you are not making progress get independent advice for structural AND legal issues.

Protecting yourself:-

If you are buying a newbuild get your solicitor to check the decenal insurance is there and included with the deeds, that it is not your responsibility as ‘Promotor’ and that the cover is adequate for your purposes, (you may wish to pay the extra for a policy extension).

The sooner you report defects to the builder in writing the better, so worth having a snagging survey check and further check before the 3 & 10 year periods end (especially if there is any cracks in the building structure.

The state of the property market means that many builders are in financial difficulty, so it is best to get all defects addressed before the final payment.

Article supplied by Mark Paddon BSc Hons Building Surveying. MCIOB. FAS. CAAT. Click here for further information and contact details.

Comment on this Article

 
Hi, How do I find out who insurer is ? My apartment is 7 years old and has a fairly large crack which is pulling water in and causing damp and mould. Thanks
Trev Greenwood - Sat 11th May 2013
It sounds like you might benefit from the advice of a chartered loss adjuster. Please contact me directly ( mrmpaddon@hotmail.com ) with a summary so far and I will seek initial comment from an experienced chartered loss adjuster on your behalf. Regards, Mark
Mark Paddon - Wed 16th Jan 2013
Hi Mark, the plot thickens...the 3rd party of the damage has a report from their insurance co (same as ours) stating that our 1/3 of a wall and groundworks brought down all the groundworks, the full width of the 2nd parties wall upto the 2rd partys swimming pool, all this landed on the 3rd parties land and we are responsible for his damage to his villa and solar panel, so now he is seeking compensation from me. If it was my fault how come the 2nd party insurance company has authorised all his claims.. I take your comments on board and will be speaking to my solicitor in spain and mention all this.. Many thanks appreciate your comments Liz
Liz Mold - Fri 4th Jan 2013
LIZ : Also note that the architect and their indemnity insurers may hold ultimate responsibility, if the wall was included in the original project. Many people give up when builders go out of business, but it is commonly the architect that is responsible for poor design and inadequate works supervision.
Mark Paddon - Fri 4th Jan 2013
Dear Liz, You may be entitled to compensation under the 'consorcio' system if the rainfall was over 40L/m2. Ask your insurers to assist you with a consorcio claim and try and get a consorcio 'perito' out to view the damages ASAP. They will not carry out betterment, but may pay you an amount equivalent to the cost of putting the wall back 'as was'. Contact me directly (Via the link in my Article, above) if you have any further questions.
Mark Paddon - Thu 3rd Jan 2013
I have found your article very interesting and wish I had this information when I purchased my spanish property 6/7 years ago... My builder did not take out any insurance, due to the agent going bust and we had to pay the builder the monies already paid to the agent before he would issue legal paperwork and asked us to pay more... Terrible three years. We are now in a situation that a wall has collapsed at the bottom of our garden due to the heavy rains on 28th September and the insurance company Linear Directa.es has said that due to the wall not being built properly with reinforcement steel and foundations, we are not insured and will have to chase our builder... lol. The house next door wall was built together at the same time/same builder etc and had more damage then ours and their wall has been approved by their insurance co.. We know we are not going to get anywhere with the builder. Any suggestions. Would appreciate your help. Liz .
Elizabeth Mold - Wed 2th Jan 2013