Decennial insurance for self-promoters
Anyone building their own home is exempt from decennial insurance, but with important caveats. We explain when the exemption no longer applies and why it may be worth taking out the insurance anyway.
What is self-development?
Self-development is a development whose purpose is to build a home for the developer’s own use. Any home intended for that use counts as own use, whether it is a primary residence, a second home or a temporary home.
The self-promoter therefore takes on the role of developer as defined in the Building Regulation Act (LOE), with the difference that they are not building to sell.
Is a self-promoter required to take out decennial insurance?
The LOE requires a guarantee, in the form of insurance or a financial guarantee, for material damage caused to the building by flaws or defects originating in or affecting the foundations or structural elements and which directly compromise its mechanical resistance and stability. The guarantee must cover 100% of the final material execution cost of the works, including professional fees.
The individual self-promoter of a single-family home for their own use is exempt from this obligation. The exemption is narrow: if the works include more than one home or require horizontal property division, the insurance is mandatory. The other cases are reviewed in which buildings require decennial insurance.
What happens if the home is sold within ten years?
If the self-promoter sells the home before ten years have passed since the handover of the works, they must take out decennial insurance for the time remaining until the end of that period, unless the buyer expressly releases them from this obligation.
In practice, to execute the deed of sale and register it in the Land Registry, either the insurance or the buyer’s express release must be evidenced.
Taking out the insurance some time after the works are finished, because a sale comes up, tends to be considerably more expensive and difficult than doing so before building: the insurer has to assess works that have already been carried out, and the Technical Control Body (OCT) must be able to check the foundations and the structure, which may require additional documentation or tests.
Advantages of decennial insurance for self-promoters
Even when it is not mandatory, decennial insurance offers self-promoters several advantages:
- It makes selling easier during the ten years after the works. With the insurance in place, the deed can be executed and the home registered without depending on the buyer agreeing to release the seller.
- It protects the investment against structural damage. Self-development involves a significant outlay, and the insurance makes it financially possible to deal with repairs to damage affecting the stability of the home.
- It avoids waiting for liability to be established. In the event of structural damage, the insurance responds directly, without waiting for a court to decide which building agent is liable.
- It speeds up payment of compensation. Payment to the self-promoter, as policyholder and insured, does not require a prior court ruling against those liable.
How much does decennial insurance cost a self-promoter?
For a self-promoter, decennial insurance is a small additional expense compared with the total cost of construction. As a rough guide, it is usually below 0.5% of the cost of the works, although each project has its own price.
The premium depends on the sum insured, the type of construction, the ground, the structure and the cover chosen. All these factors are explained in the guide to the price of decennial insurance.
When is the best time to take it out?
The best time is before construction starts. The insurer requires an OCT to supervise the works from the design stage or the start of construction; if technical inspection starts in good time, the process is simpler and the premium more competitive.
The policy is arranged at the outset, but cover starts at the handover of the works and lasts ten years from then. The steps are set out in how decennial insurance is arranged.
If there are no plans to sell today but a sale within the next ten years cannot be ruled out, taking out the insurance from the start is usually the most prudent option. At Seguróx we manage the policy for private individuals building their own homes.