How to insure your restoration project
Before you begin work on your new-build or restoration project, it is vital to have all the necessary insurance policies in place, say David Anderson and Graeme Perry
When carrying out building works in France, there are numerous obligations on you as the owner, and on the builder, all of which are prescribed by French law. One of the most crucial aspects is ensuring that you have the right insurance policies in place at the right stage.
The builder’s works will be guaranteed for a period of 10 years from completion. You should ensure that the builder provides you with proof that there is an insurance policy in place which covers this guarantee.
The builder must also have in place a policy known as tous risques chantiers, which covers them for any accidents that might take place during the building process. Proof of this policy must be provided to you before the building site is opened.
Builders may try to provide you with certification of the policies from their broker. You should insist on a certification from the insurance company itself with details of the policy number, the sum covered, and specific reference to your building project.
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You must obtain dommages-ouvrages insurance, which covers repairs to the building for the period of 10 years following completion. It is often the case that the builder is able to organise this for you, which may be preferable as they are often in a better position to make these arrangements.
If you do, it is essential that they prove they have obtained this before the work begins. As the property owner, you will have to sign a declaration, which is lodged with the mairie, confirming that the building site is open.
When you sign this, you are certifying that you have all the necessary insurances for the site to operate legally. It is acceptable to obtain a certificate with a cover note which must be unconditional. In these circumstances, the premium for the insurance must still have been paid at the outset.
The insurance must always be in the name of the owner and must specify in detail the property to which it relates. The insurance should not be in the name of the contractor.
Insurance companies will need to have details of all sub-contractors who will be involved in the project before they are able to issue this policy. The insurers will also want to inspect the works at various stages.
In practice, some insurers do not issue the final insurance contract until the end of the build because the actual costs of construction and the people who have worked on site can only be finalised at this time. In this case you have to rely upon the cover note, though it is always preferable for the policy to be issued at the outset with any changes relating to, for instance, a costs overrun added at the end.
The total cost of the building works should be covered by this policy. You may wish to consider whether the sum insured can be index-linked to take account of inflation following completion of the works. Generally speaking, the costs of this policy will be around 1.5% of the sum covered.
We have seen cases where owners have not been informed of this requirement and the builders have proceeded with works, without having this policy in place. This carries significant risk for the owner. Without the policy, homeowners will face various sanctions and also the possibility of seeing their property reduce in value (by say 20-30%) as any buyer within that 10-year period will want proof of this insurance. It will be extremely difficult to obtain this insurance once the building works are completed.
It is also essential for the owner to have public liability cover/responsibilit� civile in place. As above, it is possible for the builder to arrange this as they may have greater access to brokers. However, if you do ask your builder to obtain it, you should insist on seeing the policy documents prior to the building site being opened.
There are certain important considerations when choosing this and also when verifying that the builder has insured you with an appropriate company.
The French government has in place a fund which guarantees sums due to consumers from insurers who are insolvent. In order to benefit from this, the insurer does not necessarily have to be a French company but it should be established in France. You should seek confirmation from the broker that the company benefits from the additional protection offered by this fund.
David Anderson is a solicitor-advocate and chartered tax adviser, and Graeme Perry is a solicitor with Sykes Anderson LLP