What decennial liability in construction means
Decennial liability is the regime under which construction agents are liable, for ten years from the reception of the works, for material damage that compromises the stability and structural soundness of a building. Its framework is Law 38/1999, of 5 November, on Building Regulation (LOE), in particular Articles 17 and 19.
This is not a minor matter. A structural defect that emerges years after the works are handed over can lead to major repairs, rehousing, the suspension of an activity and lengthy litigation. For a developer, a construction company or a real estate fund, that exposure must be identified and transferred precisely.
It is worth setting the boundaries from the outset. This article deals with liability after the reception of the works. It does not address Contractors' All Risks insurance, which protects works in progress; we cover that separately within our areas of cover.
Guidance only, not binding. The periods, liable parties and covers described summarise the legal regime; the actual scope depends on the type of damage established and on the terms of each policy. New Brokers is an insurance brokerage registered with the DGSFP under key J0140.
What damage does the decennial guarantee cover, and what does it not?
The LOE does not set a single liability period, but three tiers depending on the nature of the damage (Article 17):
| Period | Damage covered | Who is liable |
|---|---|---|
| 10 years | Material damage from defects affecting the foundations, supports, beams, floor slabs, load-bearing walls or other structural elements and compromising the building's strength and stability | The agents according to their involvement; the developer, jointly and severally |
| 3 years | Damage from defects affecting the building's habitability | The agents according to their involvement |
| 1 year | Execution defects in finishing elements | The contractor |
The decennial guarantee in the strict sense is the first tier: structural damage over ten years. That is its perimeter. It does not cover natural wear and tear, deficient maintenance by the owner, damage arising from improper use, or damage originating in modifications made after the reception of the works. The specific exclusions are set out in each policy.
The starting point for the count is the date of reception of the works, without reservations or with existing ones remedied. From then on, the ten-year period runs vis-à-vis third parties.
Does your organisation develop or build residential-use properties? We can review how this risk is transferred in your current portfolio. Request a review of your programme, with no obligation.
Who is liable: developer, contractor and technical agents
One of the defining features of the LOE regime is that liability is shared between several agents and, in certain cases, on a joint and several basis. Article 17 identifies those responsible:
- Developer (promotor). Liable jointly and severally with the other agents, towards owners and third-party purchasers, for material damage from construction defects. It is also the party required to arrange the guarantee under Article 19.
- Contractor. Liable for damage from defects arising from the execution, including that of subcontractors and staff under its charge, as well as materials.
- Designer (projectista). Liable for defects originating in the design.
- Site manager and works execution manager. Liable for the correct direction and control of the execution in accordance with the design and the applicable regulations.
Where the cause of the damage cannot be individualised, or the fault of several agents concurs without it being possible to determine each one's degree of involvement, liability is enforced jointly and severally. This architecture of responsibilities is what makes a technical analysis of how each party's cover is structured within a single project indispensable.
Decennial damage insurance: whether it is compulsory and how it works
Article 19 of the LOE provides three guarantee instruments —material damage insurance, surety insurance or a financial guarantee— to secure compensation for damage during the legal periods. In practice, the most widespread for the ten-year tier is decennial damage insurance.
The decennial guarantee is generally required for buildings whose main purpose is residential (Second Additional Provision of the LOE). An exception applies to the individual self-developer of a single family home for their own use, although that exemption lapses if they transfer the property within the ten-year period. For other uses —tertiary, industrial, institutional— arranging the guarantee is generally voluntary, without this removing the civil liability under Article 17.
Some usual operational features of this cover, always subject to the terms of each policy and insurer:
- Policyholder. Usually the developer.
- Sum insured. Referenced to the material execution cost of the works.
- Technical Control Body (OCT). Insurers typically make issuance conditional on the involvement of an OCT that supervises the design and execution and issues reports.
- Land registry evidence. For the deed declaring new residential construction, evidence of the guarantee is usually required.
None of these points replaces reading the policy wording. Deductibles, exclusions, temporal scope and OCT requirements vary significantly between insurers.
Arranging the guarantee is only part of the work. The other part is defending your position if the damage appears years later. At New Brokers we act on the client's mandate and we support you through the claim as well. Let us discuss your case.
Decennial versus Contractors' All Risks: two distinct covers
It is a common mistake to treat decennial liability and Contractors' All Risks (CAR or TRC) as if they were the same. They are not, and confusing them leaves gaps in cover.
| Aspect | Contractors' All Risks (CAR/TRC) | Decennial guarantee / insurance |
|---|---|---|
| When it applies | During the execution of the works | After the reception of the works |
| What it protects | Accidental damage to works in progress | Structural damage from defects |
| Time horizon | Duration of the works (and maintenance period) | Ten years from reception |
| Framework | Contractual, voluntary | LOE, Arts. 17 and 19 |
Both covers are complementary. A single project needs protection while it is being built and protection once it is handed over. Designing both in a coordinated way —avoiding overlaps and, above all, gaps— is part of the advisory work of a brokerage.
How an independent brokerage approaches it
New Brokers works on the client's mandate, not on behalf of any insurer. In decennial matters, this translates into three specific functions:
- Risk analysis. We review the project, the agents involved and the allocation of liability to determine what should be transferred and how.
- Placement in the market. We approach specialist insurers —including, where the risk requires it, the London market and Lloyd's— and compare policy wordings, not only premiums.
- Defence at the claim stage. If the structural damage emerges within the ten years, we represent you before the insurer so that the cover arranged translates into indemnity.
This independence is the axis of our proposition. You can find out more on our page about the independent brokerage.
Frequently asked questions
Is decennial liability compulsory for every construction project? The decennial damage guarantee is generally required for buildings whose main purpose is residential (Second Additional Provision of Law 38/1999), with the exception of an individual self-developer of a single-family home for their own use. For other uses it is voluntary, although the civil liability under Article 17 remains in any case. The specific requirement must be verified case by case.
What is the difference between decennial liability and Contractors' All Risks insurance? Contractors' All Risks (CAR/TRC) protects the works while they are being carried out. Decennial liability applies after reception and covers, for ten years, damage from defects affecting structural elements. They are complementary covers, not interchangeable.
Who must take out decennial insurance? The party required to arrange the guarantee is, as a general rule, the developer (Article 19 of the LOE). Civil liability may also extend to the contractor and the technical agents —designer, site manager and works execution manager— according to their involvement (Article 17).
What liability periods does the LOE establish? Three periods: ten years for damage affecting the building's stability, three years for damage affecting habitability, and one year for execution defects in finishing elements, for which the contractor is liable. The specific scope depends on the damage established.
Guidance content prepared by New Brokers Correduría de Seguros, registered with the DGSFP under key J0140. It does not constitute binding advice. The covers described operate subject to the terms of each policy and insurer. For an analysis of your specific case, contact our team.