When is ten-year insurance compulsory?
- For projects with more than one dwelling
- For buildings that require horizontal division because there is more than one dwelling, business premises or garage, etc. per floor, regardless of whether they are to be sold or not.
- That all dwellings are sold within 10 years of completion, even if they are owner-occupied.
For self-builders of single-family dwellings for own use, decentralised insurance is not compulsory but advisable. This is because if the owner decides to sell the house within the first 10 years, this insurance is necessary for registration in the land registry.
Law 38/1999, LOE (Ley Ordenación Edificación), which was published in the BOE in November 1999 and came into force in May 2000, establishes that the promoter of a building is liable for 10 years for damages caused by faults or defects in the construction that directly affect the resistance of the building.
Who must take out ten-year insurance?
The developer, as long as the apartment/building has not been handed over.
When is it taken out?
Ideally, it should be taken out before or at the start of the building works in order to be able to assess the risk during the execution of the works.
In this way, with the information from the geotechnical study, the project and the information from the OCT (Technical Control Organization), a prior policy is issued until the completion of the works.
The ten-year insurance policy is then recalculated using all the information from the OCT and the insurance cover starts from the date of the construction acceptance certificate.
What is the validity of the Ten-year insurance policy?
The coverage of the ten-year insurance policy takes effect from the issuance of the addendum to the effective date of the guarantee. The effective date of the guarantee corresponds to the date of signature of the building inspection certificate. From this date, its duration is 10 years.
There are additional guarantees, the duration of which varies depending on the company. The duration of the waterproofing coverage is usually 3 years, and some companies issue the supplement on the entry into force of the same only after the observation period of 1 year (which coincides with the client’s responsibility for the completion and execution of the works).
What damages are covered?
The decentralised insurance covers material damage to the building caused by faults or defects originating in or affecting the foundations and other structural elements. This damage can be caused by hidden faults or defects in the construction that directly affect the stability of the building.
When is the premium paid?
20% or 50% (depending on the insurance company) is paid when the preliminary contract is concluded.
The remainder is payable on completion of the construction work.
If the decentralised insurance is applied for after completion of the works, it is more difficult to find an insurance company that will assume this risk. If a company agrees to take on the risk, premiums can be expected to increase by double or more.
It is also important to know that a decentralised policy must be certified by a notary and that there may be a period of up to one week between payment and receipt of the policy at your home address.
Is it compulsory to take out insurance with an OCT?
The law does not stipulate this. It depends on the insurance company we want to insure with if they require it or not.
I am a developer (self-builder), do I need a ten-year insurance policy for my own house?
If you are building a house for your own use, or building your own house, you are not obliged to take out a ten-year insurance policy. However, it is highly recommended to avoid having to pay for possible structural damage to the building with your own money and assets.
What if I sell before the ten years are up?
If you sell a property before ten years have passed since its construction, the notary will require a ten-year insurance policy at the time of the sale to cover and protect the future owners in compliance with the law.
What does the ten-year insurance exemption mean and is it possible?
When selling and buying a self-built property, the buyer can “waive” the seller’s declaration if the seller is unable to provide it.
The buyer voluntarily accepts the transfer of the property without the ten-year policy and releases the former owner from the obligation to take out a ten-year policy.
What is the purpose of an OCT?
The main task of the OCT is essentially to review the construction project and to control the process of execution of the works. The benefit for the project developer is that it is an element of prevention and leads to a higher quality of construction. The vast majority of insurance companies require the OCT to be in place before the works begin.
