The law containing all the particulars and participants in the building sector is the
Spanish Law on Building Ordinances (in Spanish:
Ley de Ordenación de la Edificación), also known as the
LOE
We are going to focus on three areas:
- Purpose
- Participants
- Guarantees
- Warranties and payments on account
1.-Purpose of the law
Article 1. This law regulates some essential aspects of the building process. It establishes the duties and responsibilities of any agents involved in the transactions and the necessary guarantees for a successful outcome. The goal is to ensure that the building complies with basic building standards and that its users' interests are duly protected.
2.- Participants
It is very important to distinguish between the developer (in Spanish:
promotor) and the builder (in Spanish:
constructor).
Article 9. The developer.
A developer is defined as any individual or company, public or private, that, individually or collectively, decides, promotes, programmes or finances, using its own or third-party resources, to carry out building work for itself or for subsequent disposal, delivery, or transfer to third parties in any way.
Article 11. The builder.
The builder is the party engaged by the developer to build the works according to the project or contact with their own or with third-party human and material resources.
3.- Guarantees
The builder must provide the guarantees set out in Article 19.1.a)
Article 19. Guarantees for material damages caused by construction defects and flaws.
Ten-year insurance: Since the enactment of the L.O.E. (Law 38/1999 of 5 November, on Building Ordinances), the
ten-year guarantee or ten-year insurance is mandatory for all new builds used for residential purposes. This law must cover material damage in the insured building due to defects that originate in or affect the Fundamental Work (foundations and/or structure) and directly compromise its mechanical strength and stability for ten years.
Hidden defects: these are construction faults that are not noticeable when the house is delivered but exist in the house and become evident after a while.
Building defects: these are faults that are visible at first sight.
Guarantee periods for new builds
The
LOE sets the guarantee periods that can be classified into three groups
- Ten years for damages resulting from defects or faults that affect the structural safety of the building. This guarantee is known as the ten-year insurance (in Spanish: Seguro Decenal)
- Three years for defects or faults that affect the habitability of the building
- One year for the defective finishes, for the damage caused by poor workmanship. When the defective finish appears within the one-year deadline established, the owner has two years during which to file a claim in court
These construction defects must occur or appear before the respected deadlines, so these dates are crucial for claims.
The buyer of the property may demand the developer rectify the faults within the deadlines established by law.
4.- Warranties and amounts paid on account
Warranties and amounts paid on account of the price during construction.
When you buy a home from a developer, the amounts you pay on account must be insured by a policy taken out by the developer for which the buyer is a beneficiary. Alternatively, these sums must be guaranteed or endorsed by a credit institution.
- The obligation to guarantee takes effect when the building license is obtained.
- The guarantee must be issued and remain in force for all amounts paid in advance, including taxes, plus the legal interest on the money from the date of the advance payment until the expected date of delivery of the house.
- If the construction does not begin or is not completed by the deadline, the developer must return all the sums paid, and if this is not done within 30 days, the guarantor may be requested to reimburse the amount.
- If two years have elapsed since the developer failed to comply with the guaranteed obligation without demanding the termination of the contract and the return of the money, the guarantee will lapse.
- The guarantee will be cancelled either when the occupancy certificate, the first occupation licence or equivalent document and the proof of the delivery of the house to the purchaser are issued or when having fulfilled these conditions, the purchaser decides not to accept the house.
Obligation of developers who receive amounts on account of the price of the house
The amounts advanced by the purchasers through credit institutions must be deposited in a special account and kept separate from all other types of funds belonging to the developer. They can only be used for items derived from the construction of the dwellings.
