By Raymundo Larraín Nesbitt
Lawyer – Abogado
8th of August 2013
Is community of owners insurance mandatory in Spain?
It depends where you live in Spain. Spain’s Horizontal Property Act in its article 9.1.f stipulates that Communities of Owners (C.O.) are free to take out an insurance policy to cover all damages. So from a national point of view there would be no obligation. However, as Spain is divided administratively into seventeen different autonomous regions, each act like mini-estates, these have their own powers to pass laws that affect matters within their territory. Some of these regions have made a C.O. policy mandatory i.e. Madrid and Valencian Comunity.
How is it funded?
It is mandatory that all C.O.s set aside 5% of the annual community budget to help build a communal reserve fund. The community insurance policy would be one of the expenses paid out from this fund. So basically all common-holders are actually pooling into this fund.
What does it normally cover?
This is a general question to which there is no specific answer. The correct reply is “it depends”. There is a broad range of policies available in the market with different price ranges. The difference in price is explained because the more expensive ones cover more accidents. So basically a community will tailor its insurance according to its own needs and circumstances. For example, it may not make much sense for a Community of Owners located in Marbella to pay a premium for additional cover against falling airplanes. However, this would make perfect sense in a Community that’s in the vicinity of a busy airport. So bottom line, you pay what you get. There is no general communal policy acting like a blueprint to match one and all Community of Owners. It’s left at the discretion of the Communities’ governing body to ensure what events require cover.
You would typically expect a Community of Owners policy to cover any and all of the following:
• Fire, explosion, lightning ray
• Smoke, acoustic noise, vandalism
• Faulty electric wiring
• Earthbound transport collision, aircraft collision
• Fire extinguishing expenses
• Rescue, demolition, debris cleaning, appraisal expenses
• Forced eviction or uninhabitable
• Rental loss
• Documents and archive replacement
• Automatic cover of insured capital
Water-related damages as well as those caused by adverse climatology
• Water-related damages in communal drains, gutters and waste pipes
• Faucets left accidentally running
• Leaks, damp patches and resulting mould growth
• Fire-proof installations
• Additional expenses borne by abusive use of community water
• Water damages caused in non-communal areas (privative)
• Plumbing expenses: localising the origin of the problem, repair of communal and non-communal areas
• Heavy rain, hailstone, snow and flooding. Mud-extraction (as a direct result of flooding in low areas such as underground garages and basements)
• Broken communal crystals and floor tiling including skylights. Photovoltaic systems or solar panels
• Workmanship to have them mended or replaced
• Employee non-loyalty
• Faulty machinery and electrical equipment
• Health and Safety. Employee accidents within premises
• Of the Community, of the ‘Mancomunidad’
• Of community employees
• Of individual owners blunders i.e. forget to turn off a water tap and cause a small flood
• (Legal) advise over the telephone
• Representation and litigation before Spanish courts of Justice
• Litigation against non-paying community owners for outstanding community fees
Aesthetic damages to building facade or interiors (communal areas)
24-hour emergency repair assistance
Handymen urgent services i.e. locksmith
• Total loss. Demolition-related expenses. Professional fees
• Frost-related damages
• Theft, petty larceny, hold-ups (of goods located in communal areas; not in private dwellings)
• Communal fund misappropriation and mismanagement
• Theft-induced damages (i.e. broken windows due to break-in) in communal areas
Do I need to hire home insurance policy if my Community already has one?
Yes, they are completely unrelated. The former covers your home contents and the latter covers (mainly) the community.
I would strongly recommend that you hire your own insurance to cover your home contents. The communal policy is geared normally to cover almost exclusively communal areas and facilities. Its purpose is not to cover the contents of your private home within a Community of Owners. On very few occasions will the communal policy actually cover an accident in your own home and it will only be indirectly at best i.e. water-related damages originating in communal areas, such as a badly sealed gutter in the rooftop, that result in water seeping through into your master bedroom.
By the same token you can also be held liable if your own home causes a flood that extends to adjacent neighbouring properties i.e. split internal pipes. This is not covered by communal insurance and you will have to pay for all related damages and repairs.
Far-fetched claims such as “there is no need to hire a home insurance for contents if your community already has an insurance policy in place” are grossly misleading and unfounded. They should be disregarded as ill-advice. If you want to be appropriately covered and insured hire and pay your own private home insurance policy. There is a wide array available to suit all pockets. Be advised that normally on taking on a mortgage to buy property in Spain lenders will throw in the deal some form of home insurance. This is a linked product to your mortgage and you normally have little choice over it. Please read section six in my article on Spanish Mortgage Loans: Beware of Abusive Clauses.
While it’s true that a communal insurance is only mandatory in some parts of Spain the fact is that it only makes common sense to have one hired. Its annual cost can be greatly reduced by eliminating many of the above-listed covers leaving only those deemed as ‘essential’.
While most of the events covered are related only to communal areas there will also be some instances, particularly those induced by heavy rainfall, where privative areas are also indirectly covered as a direct result of induced damages originating in communal areas. So private owners may indeed claim against the Community insurance in such cases. The insurance company will send its own ‘peritos’ (qualified experts) to assess the cause and extent of the damage to ascertain if the community is indeed liable. In which case it will have to pay for the repairs.
Rainfall-related water damages are typical of communities dotting the Spanish coastal areas as properties, in my experience, are in general built ill-equipped against heavy rainfalls resulting in damp patches and aggressive mould growths. If these are left unchecked by the owner, over the winter period, they will likely lead to unpleasant surprises when he comes to enjoy his overseas property during their holiday break. Which is why it is strongly recommended to leave the property keys to someone of trust (family, friend, neighbour, estate agent) who may regularly drop by and take a quick peek at your property in your absence during the rainy season to ensure everything is above board and raise the alarm if not.
“The rain in Spain stays mainly in the plain” – Eliza Doolittle. My Fair Lady.
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