Which buildings require decennial insurance?

The LOE criterion: residential use

The second additional provision of Law 38/1999 on Building Regulation (LOE) makes decennial damage insurance compulsory for buildings whose main use is residential. It is taken out by the developer and is a requirement for executing the deed of the new building and registering it in the Land Registry.

For the law, residential use means a building suitable for permanently and independently serving as a person’s home. What matters is that use, not how the property is exploited: it makes no difference whether the homes are sold, rented out or granted in usufruct.

In buildings whose main use is not residential (offices, retail units, industrial buildings, hotels…), the insurance is not mandatory, but it can be taken out voluntarily.

When is decennial insurance mandatory?

In practice, decennial insurance is mandatory in the following cases:

• Works involving more than one home, whether intended for sale or for rent.
• Works that require horizontal property division, because there is more than one home or because, alongside the home, there are retail units, mezzanines, garages or other independent units, whether or not they are to be sold.
• Self-developed homes that are sold before ten years have passed since the handover of the works, with the nuance we explain in the next section.
• Extension, alteration or renovation works on residential buildings that change their architectural configuration, for example when they affect the structure, as well as certain works on buildings protected for their historic or artistic character.

Renovations must be assessed case by case: not every alteration requires the insurance, but those that modify essential elements of the building do.

Self-promoters: exempt unless they sell within ten years

The LOE exempts the individual self-promoter of a single-family home for their own use. It is a narrow exception: if the works include more than one home or require horizontal property division, the insurance becomes mandatory again.

If the self-promoter sells the home before ten years have passed since the handover of the works, they must take out the insurance for the remaining period, unless the buyer expressly releases them from this obligation.

Taking out the insurance once the home is finished is usually harder and more expensive than doing so before building. We explain this in the guide to decennial insurance for self-promoters.

Borderline cases depending on the use of the building

It is not always easy to know whether a project requires decennial insurance. These are the cases we are asked about most, analysed using the residential-use criterion:

• Extension of a commercial unit attached to a residential building: the insurance is not required if the extension is structurally independent and only affects the commercial unit or garage. If it affects the structure of the residential building, it is mandatory.
• Residences (care homes, student halls, military or religious residences…): not mandatory, because communal residential use lacks the permanence of residential use as a home.
• Hotels: not mandatory, because the rooms do not independently meet the need for a home and stays are temporary.
• Aparthotels: although the apartments could function as independent homes, stays are temporary, so it is not mandatory either.
• Timeshare buildings: they are suitable as homes, but their use is by definition temporary or for tourism, which exempts them from the obligation.
• Condo-hotels: it would be mandatory, because occupancy is permanent, even though they are run as a hotel with shared services for the owners.
• Residential buildings for rent: it is mandatory, because the use is residential. The same applies if the homes are granted in usufruct.
• Assisted-living homes: it is required in a building divided under horizontal property into assisted-living homes, because the care services complement their use as permanent homes.

Change of use within ten years

If, within ten years of completion of the works, the use of the building changes and its main use becomes residential, decennial insurance will be required in order to register the “new” residential building.

In these cases, taking out the insurance is much more complex and costly than doing so during construction, because the insurer has to assess works that have already been carried out. If a change of use is at all foreseeable, it is best to take it into account from the outset.

Taking it out even when it is not mandatory

The fact that the law does not require it does not prevent you from taking it out. In non-residential buildings, decennial insurance makes it possible to cover, at a low cost compared with the total project budget, structural damage that could otherwise lead to very high outlays or lengthy court proceedings to settle liability.

It also offers added assurance to the future buyer or user of the building and leaves the door open to later changes of use or sales. The factors that determine its cost are explained in the guide to the price of decennial insurance.