Fernando Prado, Technical Director of DA-Solutio
The LOE (Law 38/1999 of November 5th) signified, when it started to run, the advent of a new era referring to housing consumer protection. For the first time homebuyers were protected from accidental damages to their homes by solvent, proven reputation companies with a reasonable long expected lifespan. So it was intended to achieve that the developer responsibility concerning to the building were truly executable not depending on the current legal status and thus circumvent uncomfortable situations such as lockouts or bankruptcy-like situations.
As its first step, the law set up as mandatory only the guarantee involving those injuries coming from or concerning the fundamental work, that being roughly understood as the structural building elements. It was expected in an early future the wording and development of the Technical Building Code. A two years term was established to achieve this aim. Additionally the enactment of the remaining guarantees provided in the Article 19, concerning to habitability and building finishing was also expected.
As often happens, that two years term was largely exceeded. Technical Code did not become active until the year 2006 and those guarantees intended at Article 19 are not working right now.
Despite of this, some insurers placed products in the market called Triennial Guarantees providing with cover some assumptions related to those matters not only concerning structural issues, mainly facilities, masonry and waterproofing elements. In this way, they came before the Lawmaker opening a path, not always selfless, for the next Royal Decree that was about to come to regulate the compulsory underwriting of those guarantees.
Since there was not a regulatory framework itself, these guarantees were conceived as complementary to the decennial main guarantee. In addition to this, the hiring nature was voluntary, their requirements were remarkably demanding and their price was quite high. On the other hand, the occurrences that could find cover were not so many as we could think and usually excluding all the subjects relating to comfort subjective sensations or even that some facilities did not reach the expected project levels. Joining this to the legal guarantee deadlines, it did not seem a very risky bet for the insurer.
The Congress has recently approved a non-law proposal in order to urge the Government to enact the legislation concerning to compulsory three-year insurance on buildings. So finally a change in circumstances eventually covered could be seen. Mainly if, as it seems to, comfort parameters or, what may be seen equal, home habitability are come to value. This will suppose giving a 180- degree turn to the direction that insurers are focusing the matter from right now.
If this finally happens, insurer companies will face up to a great challenge to properly refine their risk and to establish parameters of certainty allowing them to monetize the product. Many of them lack of adequate, skilful human resources, especially when they have greatly lightened their structures on the occasion of the temporary situation so unfavourable that we are suffering from recent years.
Also policyholders must be aware of the product they are hiring, mandatorily, to avoid situations which could lead to misunderstandings hidden behind alleged concurrences of insurance cover that involve different products that can be hired to a building such as homeowner´s, multi-risk or decennial insurances. One more product could increase confusion and lead the insured to comfortless positions.
Those two last matters require of large, proven expertise professionals both to serve as an aid to insurers or to advise a confused policyholder facing up to a wide range of contracts including misleadingly similar guarantees.
In any way, it is early to assess the impact that a Royal Decree yet to write will have on the insurance and construction sectors. An examination of the contents of the same is necessary to properly calibrate its implications. We look forward to its publication.
The Triennial Guarantee framed within the Spanish Law of Building Regulation (LOE) by Fernando Prado Diaz is licensed under a Creative Commons Reconocimiento-NoComercial-CompartirIgual 4.0 Internacional License.