Compulsory insurance for all types of building?

The Spanish Building Act (Ley de Ordenación de la Edificación, LOE) requires developers to take out 10-year structural insurance (seguro decenal) covering damage or defects affecting the mechanical strength or stability of the building. And how is that obligation enforced? By not allowing the new build to be registered at the Land Registry, which in practice makes it impossible for the developer to obtain mortgage finance, market the homes, etc. If the developer does not go to the Notary with that insurance, there is nothing to be done, and the building remains outside the Land Registry until those 10 years have passed.

But this obligation, which has worked, applies only to buildings intended for housing, under article 19.1.c) of the LOE and its Second Additional Provision. Industrial buildings, public, administrative and commercial buildings, and even self-build projects were exempt.

However, a Bill is currently going through the legislative process to change the rules so that all types of buildings are required to take out the guarantees provided for homes in the Spanish Building Act.

Specifically, the bill aims for “commercial, industrial and any other activities to be able to enjoy, like housing, the protection of damage insurance guaranteeing the proper construction of the buildings they need to build to carry on their business”.

And not only that, but also to extend that requirement to three-year insurance in order to improve the quality of construction in matters relating to the habitability, functionality and accessibility of buildings, as provided for in the LOE, making it compulsory to take out such insurance as well.

In other words, any type of building could have insurance covering all damage, and the “benefits” of guarantees against damage to buildings would be extended to all constructions, so as to encourage the construction of new buildings as well as the refurbishment and renovation of existing ones.

However, this bill is still awaiting approval in Congress, and it would also need to be backed by what the insurers offer, bringing new products to the market that can meet these needs.