Insurance Spain

It is obligatory in Spain for a new build property to have what is known as ‘Seguro Decenal’ which is insurance on the building for ten years. We look at this insurance in detail so you know what coverage you have.

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 come back and rectify and 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.

The article below sets out clearly what the implications are if you are thinking of buying a new build property in Spain.

New Build 10 Year Decenal Property Insurance Spain

Author: Mark Paddon

10 year newbuild property insurance Spain ‘Seguro Decenal’

Since may 2000 it has been obligatory in Spain for ‘Promotors’ or property (normally the developer) 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 elements such as 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.

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)

First year: In the first 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 first 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.

Second and third years: Over the next two 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’, it’s therefore 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 (and money), results in defective or sub standard elements slipping through.

First ten years: The builder (normally ‘Promotor’ but see below!) must take out seguro decenal insurance. This is the ten 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 encounter defects, try to register / mortgage or sell the property, that the non-existence of a policy may come to light. Furthermore, as the insurers like to specify a level of control during the construction period, it can be difficult to get insurance post completion.

Will the insurers cough up 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 simply 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 out 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 the process of getting any parties to admit to responsibility can be drawn out 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 clearly establish what the defects are and how they might be corrected including costings. This is sometimes backed up with an Architect’s second 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 solely relied upon for initial diagnosis.

When entering into a claim, it often soon becomes clear that the builder, architect, town hall and insurer are all keen to ‘pass the buck’ when it comes to identifying who was actually negligent and in some cases it may actually be all parties. 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 in reality getting them to dip into their pockets can be a difficult process.

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 clearly on your side, it is common for all involved to try and make light of what may be a very serious structural issue. Commonly the Architect or Tecnico involved in controlling 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 (some have already proved to have failed). Provided that evidence is submitted to the insurers or courts to demonstrate the inadequacy of such ‘remedies’, they are fortunately very willing to listen to independent expert opinions, other than those of the parties involved in the project, so if you are not making positive progress get independent advice for both structural and legal issues.

Protecting yourself:-

If you are buying a newbuild get your solicitor to check that the decenal insurance is in place (and included with your 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 ‘belt and braces’ policy extension).

The sooner you report defects to the builder (in writing) the better, so it’s worth having a snagging survey check and further check before the 3 year and 10 year deadlines expire (especially if there is any evident cracking in the building structure).

The most critical defect commonly involves inadequate foundations, and you should take every opportunity to ensure that your newbuild includes adequate foundation design and control, even if this means paying the builder more money to carry out necessary sub ground works.

The current market downturn means that many builders are in financial difficulty. It is hence best to get all defects remedied prior to payment of final monies.

NB:- Information for advice purposes only. Proper legal and safety procedures should be followed for all property purchases and building works.

Copyright- Mark Paddon 2009

About the Author:

Mark Paddon BSc Hons Building Surveying MCIOB.
Graduated from Liverpool Sir John Moores University in 1992 with a 1st class honours degree and prizes for best dissertation and best student. Mark has worked for 6 years in the Valencia community Spain proving structural surveys for home buyers, defects advice and expert witness reports. Mark has also consulted for Channel 4′s ‘Selling Houses Abroad’ (appearing in 3 episodes) and writes property related columns for two local papers.

Related Pages: This article on property insurance on new builds in Spain comes under the main section of home and house insurance in Spain.