Building Defects: The Spanish Case

Transcription

1 Building Defects: The Spanish Case Martinez-Escribano, C. University of Valladolid ( Abstract Spanish law on building defects was modified in The current Act of Edification establishes three different liabilities of one, three and ten years, depending on the building defects. There are also three insurances also of one, three and ten years to cover damages caused by building defects during these periods of time. However, only ten years insurance is obligatory. Besides, the liability in the current law is a strict liability, while in the former regulation it was based on negligence, and now obligations of all the professionals and entrepreneurs are clearly defined. Taking into account all these changes, the purpose of the paper is to evaluate the new system ten years after it began running. The current law intended to improve the situation of Spanish construction by reducing building defects and making the repair process faster and easier. However, the Act of Edification was criticised because of the mandatory insurance and the reduction to one and three years in some building defects cases. The former law recognized a delay of ten years to claim for any kind of defects. The result was an in depth examination of the new situation can reveal the positive and negative effects of the legal change. The research has been accomplished by comparing judicial resolutions that applied the former and the current law This reveals the different way to resolve similar cases, as well as observing the number of claims pro year during the former and the current law. As a result, the new rules of liability and insurance have reduced litigation, in spite of critics at the time of approving the Act of Edification. In conclusion strict liability, clear delimitation of liabilities and insurance are important tools to prevent building defects and improve the quality of construction. And this provides a guarantee for purchasers. Keywords: building defects, liability, insurance. 113

2 1. Introduction For a long time, Spanish law did not have specific rules related to liability for construction defects. Only article 1591 of the Civil Code established a guarantee of ten years in which the ruin of the building gave rise to liability of constructors or architects, depending on the origin of defects that caused the ruin. Most of the construction defects had a different nature, not reaching the category of ruin. In order to provide protection for purchasers of houses against such kind of defects, courts started to extend article 1591 to all these cases, even though the rule was intended for a different scenario. New problems arose and the solutions were not definen in article This rule was established in Construction procedures, techniques and professionals taking part of it changed significantly during the 20th century (and also now, in the 21st century), so the old legal regulation did not correspond to reality of construction. The rule does not take into account the new professionals of construction and all the evolution in the process of edification. For decades, courts had to look for and create new rules to give answer to the cases that they had to resolve, and in such a context, the Act of Edification was approved in The current regulation of liability for construction defects recognises some of the rules created in the courts, but in some aspects the Act establishes new solutions. These are different to the previous solution and introduce new elements, like mandatory insurances. It is interesting to analyse the implementation of the current regulation ten years after the approval of the Act. 2. The former regulation One decade after the approval of the Act of Edification we could consider that the former regulation has just a historical interest, and nothing else. Contrary to this idea, article 1591 of the Civil Code and all the jurisprudence created around this rule still raise questions for the following reasons: a.- Even today there are cases in the Courts that must be resolved by the application of this old rule: the Act of Edification was approved on November 5 th 1999, but it was not in force until May 6 th 2000 and only for constructions whose edification license was applied once the Act was in force. For buildings whose edification license application was issued before May 6 th 2000, liability for construction defects is decided according to article Once these buildings are finished, there is a ten year delay in which the apparition of any construction defect gives rise to an action of liability, with a 15 year delay of prescription. That means that even today a claim can be presented in the Court by the owners of buildings whose edification license application was made at the beginning of 2000 or even before, and it will be resolved with the former regulation. b.-many rules included in the Act of Edification are a recognition by the Spanish legislator of the principles and rules established by the Courts in order to give a satisfactory solution to some problems arising through the years, and that article 1591 did not resolve. All these judicial criteria are 114

3 considered as a development of article 1591 and the study of them allows a better understanding of the meaning of the Act. c.- There is not an explicit derogation of article 1591 by the Act of Edification, thus it could be still in force. Although several authors like Cabanillas Sanchez (2000, p. 408) and Alvarez Olalla (2002, p.26) and courts (ROJ: SAP MU 1337/2009, July 10 th 2009) consider a tacit derogation of the article, there is not the certainty about that until the Supreme Court declares it. Nevertheless, I think that this is the weakest argument about the current importance of article Taking these reasons into account, let us briefly describe the former regulation of liability for construction defects. Article 1591 established a delay of ten years in which the ruin of a building due to construction defects gives rise to the constructor s liability. If the origin of the ruin is a defect in the project or in the direction of the works, the architect will also be liable for ten years. This delay is just for the production of the ruin; once it has appeared, a new delay of 15 years starts to claim in the Court. The first delay is a guarantee and it is not possible to interrupt it; however, the 15 year delay is a delay of prescription, so it could be interrupted and would start running again from that moment. With such a system, constructors and architects liability is extended for a long time. Additionally, liability has been extended because of the judicial interpretation of the term of ruin contained in article 1591 (ROJ: STS 8231/2004, December 20 th 2004; ROJ: STS 6257/2006, October 26 th 2006). The ruin evokes a total or partial destruction of a building. However, also construction defects that merely reduced its quality and habitability were considered as ruin. For instance, dampness and cracks were submitted in the liability of article 1591, and constructors and architects were considered liable for them in the delays previously explained. In some exceptional cases mere aesthetic defects were referred as aesthetic ruins in the courts. The purpose of this open interpretation of the concept of ruin was to protect purchasers of houses. There was not any rule that specifically regulated liability for construction defects and a satisfactory solution had to be found for them. Article 1591 was the only one rule that regulated a similar situation, and an extensive interpretation of this article could be a way to find protection in such cases in Spanish law. But, constructors and architects were placed in a difficult situation as far as liability is concerned. Several years after works were completed, a claim could give rise to their liability for imperfections of the building that perhaps had more to do with the running of the time and the use of the building than with their intervention in the works. Not only constructors and architects were considered liable, although they were the only persons mentioned in article In the 19th century, when this rule was established, constructions were very simple and only constructors worked on them. Sometimes in the most complex cases, architects took part of the construction as well. But nobody else was involved in the construction process, so article 1591 did not mention anyone but constructors and architects. However, as construction became more complex, new actors appeared in scene: 115

4 a.- The developer, who takes important decisions about the construction process, was not taken into account by the legislator in XIX century, so he would not be liable for construction defects, according to the law. b.- Working with the architect, a new construction professional appeared called the rigger who was not considered by the law. c.- Sometimes engineers carried out functions normally undertaken by the architect because of the complexity of the construction. d.- It was more common that the constructor subcontracted part of the works. This raises the question whether the professionals and companies should be liable for construction defects when article 1591 Civil Code did not mention them. It would be unfair to deny their liability even in a civil law system and as a result the courts forced an interpretation of the law. The developer s liability was assimilated to the constructor s (ROJ: STS 7070/1999, November 10 th 1999), while riggers and engineers were considered as architects (ROJ: STS 7401/2002, November 8 th 2002; ROJ: STS 3402/2005, May 26 th 2005, respectively) as far as article 1591 was concerned. Liability for subcontractors work was assumed by the constructor, who had an ulterior action against the subcontractor to claim the amount paid for reparation damages (ROJ: STS 3808/2008, July 3 rd 2008). The developers liability has a special interest: it was considered that his or her function by promoting, selling and obtaining profits with the works justifies that, in case of building defects he or she has the duty to repair them, even though he or she did not cause it directly. Theoretically each one of these persons could be liable as they may have contributed to construction defects. Once a construction defect appeared, the cause or origin of it had to be found and the person who assumed that part of the works would be liable. However this subject has presented some additional problems, as follows: First, it was very difficult in most of the cases to successfully identify who was liable before the trial and submit a claim against them. When the defendant considered that other professionals were liable, it could be unfair that only he was condemned. In such a case, he used to make an exception. However the courts refused it. Second, in cases of liability with several people, courts found it very difficult and sometimes impossible to define the limits of where one s liability finished and another's started. If one defendant were missing from the trial the question of liability became more complex. Courts therefore decided that when it was not easy to establish the different extent of liability, liability would be in solido (ROJ: STS 1950/2005, March 31 st 2005). Sometimes not all of them had been claimed by the owner. With such a solution, the owner of the building could claim the total amount for damages from one of them, which made the reparation of damages easier. Once the defendant had paid, they could claim in another trial against all the other liable persons. In this second trial, the court fixed the exact extent of liability for each one in order to recover the amount that he paid but did not corresponded to him. But, 116

5 if the defendant was not a part in the first trial, there was the risk of an absolutory sentence in the second one. One of the main reasons to recognise solidary liability in most of the cases was an attempt by the courts to extend liability to some professionals with solvency. Constructors were frequently insolvent, so when they were liable, even with a judicial resolution recognising it, citizens could not obtain reparation for damages. However, architects and riggers used to take out liability insurance, so they were always covered for damages. It was very useful for plaintiffs that these professionals were liable in solido with the constructor, and this was a hidden reason to extent liability to them. However the professionals did not consider this to be fair. Finally, in order to make the reparation of damages easier, courts considered that in all the cases of construction defects fault was presumed (Lucas Fernandez, 1986, p. 327; ROJ: STS 5987/2001, July 10 th 2001) As a result the owner only had to prove damages that they appeared during the ten year delay. The defendant would have to prove that he acted with the diligence to exclude liability, but proving such diligence was not easy. Definitively, that was a way to approach these cases to strict liability even if the law did not recognise it. After this short explanation of the situation before the Act of Edification, let us see the current regulation of liability for construction defects. 3. The act of edification: overview The new law has established three different delays of guarantee depending on the seriousness of the construction defects: - Ten years for defects in the structure and stability of the building, the same as the former regulation (ten years in case of ruin of the building) - Three years for other constructive defects related to the habitability of the building (such as in the case of dampness and cracks, which in the former regulation were submitted in the liability of ten years) - One year for aesthetic defects which even though exceptionally, were sometimes included in the ten years liability of article According to the Act only the constructor is liable. If damages appear during one of the delays, there is a strict liability of agents. The responsibility depends on the kind of defect. The Act contains a very detailed description of the agents of edification, who are all of the professionals and contractors involved in the construction process. A definition of each one and a list of functions and obligations assumed in the edification process are contained in the Act. This allows identifying liability in the case of building defects, because it is considered that these defects appear as a result of a breach of contract. Once the defect is identified and according to the obligations assumed by each agent, the liable one can be identified, and fault need not be proved. 117

6 Through this description and maybe unconscionably, the Act draws the contractual relationships established in the edification process. At the top of the hierarchy is the developer, who resources the project with the required contractors. Next the developer sets the direction of the works to the same professional who made the project or another with similar qualification, and to a rigger. He contracts also the performance of the works with a constructor. There are four main contracts in the edification process and it is very common (especially in the case of the constructor) that other contracts are established in order to fulfil part of these main contracts. However the four persons who contracted with the developer are in charge of each one of the four main sections of the edification process and as we will see later, assume the liability for defects of the building related to their own part of the edification activity. In charge of the four persons is the developer who according to the Act, leads, programs and founds the edification process. This part of the Act is very detailed because one of the purposes of the legislator was to establish the functions and competences of the different contractors of edification. At the same time this regulation is very useful in order to determine liability for construction defects, considering the obligations that each one of them assumes. As previously discussed, with article 1591 it was very common that several persons who worked in the building were liable in solido, so one of them could be forced to repair all damages, although he was not the only one liable agent. With the Act of Edification each contractor is obliged to repair only as much as he contributed to damages, and nothing further. The Act looks for a delimitation of liability for each of the agents of edification, trying to avoid the cases of solidary liability (ROJ: SAP LE 940/2009, July 16 th 2009). At the same time the Act recognises that this individual liability is not only for the damages directly caused by the edification agents with their acts, but also for damages caused by dependents or other agents who contracted with them. The last possibility is a way to introduce simplicity in the claim. For instance, the architect engaged in the project is liable for any defects, which can be personally caused by them or by another person they employ. The owner only knows that damages are caused because of a defect in the project, and that is enough to obtain architect s reparation for damages. The owner does not have to investigate the identity of the person who caused the defect, in spite of the individual liability of the law. If the project and the management of the works were carried by two different professionals, the director is considered liable for defects of the project. This is enough for the plaintiff to make a claim regarding defects related to these technical questions. Sometimes it is not possible to identify only one person liable for damages. For instance the origin of damages can be a defect in the project, but also the direction of the works was wrong, and the constructor did not act properly in the construction process. In such a case, all of them are liable, if the plaintiff cannot prove the portion of liability of each one, all of them will be liable in solido according to the Act of Edification. Solidary liability is also recognised in the Act for cases in which several people assume the same role (i.e., several architects make the project as a team). The Act of Edification introduces a special rule in order to avoid cases of solidary liability and to resolve some procedural problems that used to appear under the former regulation. Such problems 118

7 arose as a consequence of the exception made by the defendant when there were other liable agents who had not been claimed. It was very common that the court held a solidary liability of the defendant(s) and other people who took part in the construction process but were not in the trial. However, the judicial decision had no effects against them because they were not part in the process, it was possible that they were not considered liable in an ulterior trial, so sentences would be contradictory. The Act of Edification tries to resolve this problematic situation by allowing the intervention of these agents in the first process, although they were not defendants, and the sentence would have then effects against them. Some courts have a special understanding of the rule and consider that the sentence can hold their liability, but that is not enough to obtain reparation for damages from them because they were not defendants. Another trial must be pursued against them, but the court will have to respect the first sentence, so contradictory sentences will not be able to exist at the same time (ROJ: SAP VA 526/2009, May 26 th 2009; ROJ: SAP BA 521/2009). Finally, the Act recognises that the developer is liable in any case. That means that no matter who is liable for building defects, the developer is liable in solido with him. This is a guarantee for purchasers in two senses: in case of insolvency of the liable agent, and because the plaintiff has no risk of failing in a trial when the developer is the defendant. It is considered that he is the head of the construction process and makes the most important decisions. Besides, the purchasers contract only with him so he must be always liable against them. At the same time such a rule makes the claim easier when damages arise because the owner just has to make a claim against the developer, and there is no need of finding out the origin of damages before. The developer will always be liable, and at the same time he can introduce other people in the process thanks to the special rule of the law mentioned previously (ROJ: SAP MU 633/2009, May 25 th 2009; ROJ: SAP M 7171/2009, July 3 rd 2009). Not only companies and professionals are considered developers in the current regulation. Also individuals who engage in the construction of their own dwelling are considered developers. That means that they assume the same liability in case they sell the house in the future, even though they are not professionals (Cordero Lobato, 2000, p. 210). The Act does not require fault in order to recognise liability for building defects. Thus it is enough for the plaintiff to prove that damages appeared in the delay of guarantee because of a defect in the building (Ruiz-Rico Ruiz and Arias Diaz, 2002, p. 104). According to article 17.8 of the Act of Edification, the defendant will be liable unless he or she can prove that damages were caused for another reason, such as by the act of another third party, the act of the owner, or force majeure. According to the Act, all these cases of liability should be protected with insurances. However, only the insurance for structural defects is obligatory, although the three insurances are contained in the law. A critic must be done at this point because the case of obligatory insurance is least common in practice. A premium is always paid for a tiny risk, while the most frequent cases of liability are not protected with insurance. On the other hand, insurances have a positive effect for prevention: the subscription of the insurance takes place once the building is finished, but the insurance company surveys the construction process in order to assess the risk. If any problem is noticed during the process a rectification is required, so at the end there is a high level of certainty regarding the quality of the building. However that happens only as far as structural damages are concerned. 119

8 Finally it must be noted that in addition to the liability system established in the Act, it is clearly stated that contractual liability also exists in these cases. Contractual liability can give rise to a claim in a delay of fifteen years (delay of prescription) after the contract is fulfilled, and tort law allows a claim within a year after the damages appear. The subsistence of both, contractual and noncontractual liability raises questions about the limitation of liability introduced by the Act of Edification through the three delays of guarantee. Is one year really the delay for aesthetic defects, and three years for construction defects? We can make a claim against the developer for fifteen years if we bought directly the building or part of the building from him. If we are the developer and also the owner typical case of houses in the country- we can make a claim against any of the agents that contracted with us in the same time period architects, riggers and constructors-. Does this system make sense? From my point of view there is only one way to make that the delays of guarantee have a special meaning: we must remember that the Act of Edification establishes strict liability, while contractual liability and the general rules of tort law are based on fault. Only if courts consider such a distinction, the legal modification introduced in 1999 would be real. Otherwise these other rules of liability would allow owners to go over the limits of time introduced in the Act. By now, courts seem to forget it and extend liability for damages once the guarantee is done through the rules of contractual liability (ROJ: SAP PO 1985/2009, June 9 th 2009; ROJ: SAP AV 258/2009, July 23 rd 2009). 4. Effects of the legal change Litigation has been massively reduced with the current regulation. In 1999, the year of the approval of the Act of Edification there were 557 judicial resolutions in appellation resolving about liability regulated in article In 2009, we had 238 sentences in appellation related to liability of the Act of Edification, which means a reduction of almost 43% of litigation in appellation. Nevertheless, insurance does not help in this sense because it is obligatory only for the less frequent cases: structural defects. Therefore it seems that insurance has increased the price of buildings without providing a real protection. It must also be noted that the resolution of November 12 th 2009 in the Spanish Court of the Defence of the Competition has concluded that a cartel was established by three insurance companies (ASEFA, MAPFRE and CASER) to establish minimum premiums in the ten years of insurance. The situation as far as insurance is concerned must be criticised since the Act came into force because of the reduced risk covered and abuses by insurance companies. By comparing the content of sentences applying article 1591 or the Act of Edification some differences can be found, and some surprises too: 1.- The wide concept of ruin established by the jurisprudence with article 1591 and delays of guarantee and prescription were reduced in the Act of Edification. As a result, there are some cases in which the courts have denied liability while they could have obtained protection with the former regulation (ROJ: SAP TF 1498/2009, June 5 th 2009; ROJ: SAP VA 936/2009, July 15 th 2009; ROJ: SAP V 3059/2009, July 15 th 2009; ROJ: SAP BU 484/2009, June 10 th 2009). At the same time, it seems to be an attempt by judges to extend liability as far as possible according to the terms of the 120

9 Act. That is in the case of continuing damages, where the delay does not start when they appear, but once the whole damages are produced, sometime later (ROJ: SAP GC 1967/2009, May 25 th 2009; ROJ: SAP CU 263/2009, June 3 rd 2009; ROJ: SAP BU 484/2009, June 10 th 2009). There is a flexible interpretation of defects included in the three year delay in order to provide protection to cases hardly included in the text of the rule (ROJ: SAP CA 677/2009, June 16 th 2009). Finally, the limitations of the Act as far as liability is concerned disappear thanks to contractual liability. If the delays have gone, the court argues that there is still the fifteen year prescription delay established in the law for contractual liability, and no evidence of fault is required in such cases. Therefore agents are considered liable in these cases according to the terms of strict liability although this liability should be based in fault (ROJ: SAP PO 1985/2009, June 9 th 2009; ROJ: SAP AV 258/2009, July 23 rd 2009). As a result the intention of limiting liability in the time has failed. 2.- Perhaps, the most important effect of the current regulation seems to be the reduction of cases of solidary liability. As previously stated, under the former law most of the cases of construction defects were resolved as solidary liability because it was considered that several were responsible for the defects and it was not possible to determine their part of liability. The Act of Edification also recognises solidary liability for such cases, establishing at the same time that individual liability is preferable. When we compare sentences, we realised that a progressive change from a general situation of solidary liability existed before the Act of Edification (ROJ: STS 1550/1999, March 6 th 1999) to individual liability when article 1591 was applied once the Act was approved (ROJ: SAP B 14242/2005, July 13 th 2005). Finally there is a recognition of individual liability under the current regulation (ROJ: SAP LE 940/2009, July 16 th 2009). The reason for the change is not only the specific mention of individual liability in the law. Also other factors have influence in this sense. There is a new and more casuistic regulation for building defects, with three kinds and each with different delays of guarantee. It is very important in the trial to specify the kind of defect in order to know if it appeared during the period of the guarantee. That makes the reports of experts even more relevant than in the former regulation, and this fact helps in some cases to individualise liability (ROJ: SAP PO 1985/2009, June 9 th 2009). The classification of defects implies a delimitation of liability. According to the Act, for the annual delay is only liable the constructor, thus the rigger, who was previously liable in these cases is not liable anymore. As courts hold now, it cannot be required to the rigger such a detailed control and survey (ROJ: SAP GU 252/2009, June 3 th 2009; ROJ: SAP VA 526/2009, May 26 th 2009). For the delay of three and ten years there is not an attribution of liability to a specific agent. Courts now consider that the ten year liability is only for architects, whose knowledge of construction techniques and calculation of measures and materials makes them liable in case of structural defects in the building (ROJ: SAP LE 940/2009, July 16 th 2009). Only in the three year delay have cases of solidary liability usually arisen for riggers and constructors (ROJ: SAP CA 677/2009, June 16 th 2009). 3.- Under the former regulation it was said that it was not possible to make an exception when the defendant considered that the claim should include other agents too (ROJ: STS 1325/2008, February 27 th 2008; ROJ: STS 4869/2009, July 22 nd 2009). Some problems arose in practice when several agents were liable but not all of them had been defendants in the trial. The result was the risk of contradictory sentences, as previously explained. The Act of Edification tries to resolve it by allowing intervention in the procedure of agents that were not required at the beginning. When the defendant 121

10 considers that they are liable, he can apply the court to call them to the trial and, in that case the Act of Edification determines that the sentence will be opposable and effective against them. Nevertheless, some courts have a different understanding of the rule: after allowing the intervention in the procedure of these agents, they say that not being defendants in strict sense, the sentence cannot be opposable nor executive against them (ROJ: SAP VA 526/2009, May 26 th 2009; ROJ: SAP BA 521/2009). The purpose of the Act is frustrated in the trial. In other cases, although not often, courts respect the literal terms of the rule and the problem of contradictory sentences can be avoided (ROJ: SAP ZA 329/2009, July 31 st 2009). 5. Conclusion Current regulation has reduced litigation, but also the cases that give rise to liability. Thus, it does not mean that the new rules included in the Act of Edification have improved the edification process and building defects are not as common as before, but that more prerequisites are required for liability. Interests of professionals and companies working in this sector are now better protected which is in the interest of consumers. They spend an enormous amount of money to buy a house, which is in most cases the most valuable asset that they own. However, the spirit of new legislation is to diminish protection for construction defects. Only if contractual liability is finally imposed as a solution for the cases excluded from the Act of Edification, protection could be wider. It does not seem to be the intention of the Act, but could lead to fairer results. Acknowledgement I would like to thank professor Vicente Guilarte Gutierrez for giving me the opportunity to study this topic in depth and to share his knowledge in law and experience in the legal practice. I also would like to thank Richard Foster and Amalia Figueroa for kindly helping me to better accomplish this paper. References Alvarez Olalla (2002) La responsabilidad por defectos en la edificación. El Código Civil y la Ley 38/1999, de 5 de noviembre, de Ordenación de la Edificación, Cizur Menor, Aranzadi. Cabanillas Sanchez (2000) Responsabilidad civil por vicios de la construcción en la LOE, Anuario de Derecho Civil 2: Cordero Lobato (2000) Comentario al articulo 9, Comentarios a la Ley de Ordenación de la Edificación, Cizur Menor, Aranzadi. 122

11 Lucas Fernandez (1986) Comentario al articulo 1591, Comentarios al Código civil y Compilaciones forales, Madrid, Edersa. Ruiz-Rico Ruiz and Arias Diaz (2002) La responsabilidad por vicios o defectos constructivos en la Ley de Ordenación de la Edificación: sus caracteres basicos, La responsabilidad civil en la Ley de Ordenación de la Edificación, Granada, Comares. All judicial decisions can be found in 123