Based on the powers granted to the Arab Monetary Agency –then, and Saudi Central Bank for now– to monitor cooperative insurance companies, it issued its Decree No. 441/187 on 5/8/1441 AH, which has bound contractors in non-governmental sector projects to ensure against hidden defects that might appear in constructions. Such insurance shall remain effective for a period of not less than ten (10) years, starting from the date of project final delivery.
To clarify, a hidden defect is any defect that arises in the construction work or its protective elements that may weaken or destabilize the construction due to errors, faults, deficiencies in design, implementation, quality of materials used, or a failure in soil inspection or whatsoever defects pertaining to human involvement.
Therefore, and pursuant to the provisions of this Decree, each non-governmental Employer/Owner will have to engage their contractor(s) through (Baladiبلدي ) service where Employer will have to attach a valid insurance document against hidden defects that might appear in the project(s) involved for a period of no less than ten (10) years starting from the date of project final delivery. Afterward, the Certificate of Occupancy will be issued. For Certificate of Occupancy, the following requirements must be met:
1. Payment of insurance premiums owed to the insurance company.
2. The insurance company to receive “Safety Confirmation Certificate”.
3. The insurance company renders a clear representation of the policy validity.
As of Decree date, an effective insurance policy against hidden defects has become a prerequisite for all types of projects and new constructions in the non-governmental sector to obtain a certificate of occupancy with the aim of preserving the material rights of the beneficiaries of those buildings.
In case of any inquiries regarding any of the above, we hope that you will not hesitate to Contact Us.