We are aware of the disproportionate growth in building construction in Spain during the 1980’s and 90’s which led to a notable decline in the quality of the buildings and proportionally a decline in the protection of buyers.
For this reason, “La ley de Ordenación de la Edificación” (LOE from now on) Law 38/1999 of November 5th , 1999 that came into force on May 6th , 2000, had a great repercussion on the Spanish construction industry.
Its main objective was to regulate the process of construction of housing, establishing certain guarantees and establishing the responsibilities of the professionals involved. Obviously the huge amounts of money that a consumer pay for a house justified, without doubt, the need for a better protection from any future problem on recently bought houses which may materialized at a later stage.
What is the ten-year guarantee?
According to the LOE the ten-year guarantee (and I quote) is:
“An insurance against material damage caused by flaws or defects affecting structural elements”. I have underlined “affecting structural elements” because it is important to understand this. It doesn’t mean affecting any other building elements such as building enclosures, partition walls or any other construction component that is not a structural element such as foundations, structural beams, columns or slabs.
Many users both British and Spanish believe wrongly that this guarantee will protect them against any building defects and they get a good shocker when they make a claim and obtain a direct refusal from their respective insurance company.
The property developer is the legal entity, obliged by law to take out the ten-year guarantee and become the official policyholder up to the sale of the house or houses at that moment their new owners become automatically the beneficiaries of that insurance.
Some have it others don’t.
As all law, the LOE required some time for adaptation. In Spain, according to the Agency's technical Control for building (Certum), 30% of the housing being sold doesn’t have the famous ten years insurance policy. This is due to the fact that in the months prior to the implementation of the LOE property developers opted for obtaining building licenses for a good stock of properties, hoping to elude the requirement of the ten years guarantee, and as we all know there are plenty of that stock of housing still on sale, so be aware of this fact.
These circumstances lead to buildings which are for sale with old and new licenses. As a result, their guarantees are regulated by two different sets of legislation: the Civil Code or the LOE.
So to perform any relevant claim it is essential to know the date in which the building license was applied for and when the building was built, the key date being that before or after May 6th of the year 2000. So we will know on what legal texts are supported effectively any guarantees that we may have.
If the building license is subsequent to that date, it is mandatory that the houses are in possessions of the ten-year guarantee. In fact, the notary requires that guarantee at the time the building projects are legalized. This procedure not only is mandatory to new constructions, but also to rehab works that may alter an architectural layout and include any building officially listed for its artistic or historical character.
Main groups of building failures.
The LOE classifies buildings failures in three groups, and provides a warranty period during which, the end user can claim responsibilities to have repaired any possible damage or receive financial compensation instead. But most important, it establish the agents involved in the building process who re liable directly to the end user, unless any of them can demonstrate that he was not involved in the events that produced the damage.
All agents are responsible for any defects during the following periods of time.
1) Ten years for all structural elements.
2) Three years for all construction elements that may affect, energy saving, noise insulation, user´s health but exclude the finishes.
3) One year for finishes.
Still awaiting future legislation.
It is mandatory that the property developer has an indemnity insurance to cover all structural defects as stated in paragraph 1). The amounts insured are to be equivalent at least to the final cost of the work including professional fees. Paragraphs 2) and 3) are still awaiting new legislation to regulate them so any problem with any building elements that is not essentially the structure itself do not have any insurance covering them.
So it is important to know that there are no obligatory legal insurance covering important elements of building failures. Having said that the LOE does specify more clearly than before the responsibilities to third parties of all professionals involved in the building process and although there are not official insurance guaranteeing some elements of the new building, those agents are still responsible for them.
The bodies responsible to ensure that the new buildings do posses the right insurance are the notaries and property registrars by not allowing any property deeds to be issued or registered if it had not previously complied with the LOE.