Decenal Insurance is mandatory for every new property developer

The topic

Spain has oriented itself to German law in many areas and standardized comparable regulations, especially in civil law – some with a slight delay. In the area of building law, there has been a property developer regulation in Germany since 1974, which serves as consumer protection and establishes the property rights of the buyer of a property when purchasing from the property developer. A comparable regulation in Spain took until 1999, however, when the special building law Ley 38/1999 was passed. The construction boom in Spain, which began with the development of tourism in the 1960s, revealed that the buyer of a property needed protection in relation to the mostly economically strong developer. After a long process, many buyers went away empty-handed because the property developer, the building contractor and the architect had become insolvent, had changed their legal framework and, therefore, even claims established by the court could ultimately not be realized.

The Law

The previously mentioned Building Law of 1999 regulates the liability of the parties involved in the construction and protects the buyer as a consumer. Since 2000, every property developer has been obliged to take out a so-called “seguro decenal”, a construction liability insurance, which protects the buyer against structural damage for a period of 10 years. Only if the Notary is presented with the decenal insurance when the purchase contract is concluded can the seller register a new construction declaration in the land register and sell the house or apartment. In the event of damage, the buyer can contact the Decenal insurance company directly, which in turn can then contact the responsible parties (property developers, contractors, architects, etc.). Damage to the foundations, beams, beams and structures affecting the mechanical resistance and stability of the structure is covered for a period of 10 years; for a period of 3 years defects in the structural elements and installations that affect the conditions for habitability (hygiene, health, environmental protection) and 1 year for defects in the execution or completion of the construction. If the house is resold later – within the 10-year period – the rights from the Decenal insurance are transferred to the second buyer for the remaining term.

The OCT, a kind of “Building Inspection”

Decenal insurance must always be taken out before the start of construction work. This requires the submission of documents and test reports so that the insurance company can assess its risks. For this purpose, the developer usually commissions an engineering company (OCT, a kind of building inspection agency) with the quality control of the project and the processed materials, as well as constant monitoring and checking of the construction progress. At the end of the construction project, the commissioned company then hands over a log book in which the checks carried out are listed.

In the 20 years since the law came into force, Spanish juristiction has clarified some of the ambiguities of the law, so that today the decenal insurance guarantees a highly effective consumer protection when buying from a property developer.