IDI can replace the property warranty deposit!

Helping property developers reduce costs and increase efficiency with the "two funds" - Gongbao.com's "Construction Law" clarifies that construction projects implement a quality warranty system.

In order to ensure that the construction unit assumes the warranty responsibility of the property, many places stipulate that before the initial registration of the property rights, the construction unit shall deposit a property warranty fund at a rate of 2% (3% in some areas) of the total construction and installation cost of the property as a property warranty.

Coverage of repair costs during the warranty period.

In order to ensure that project quality problems after the expiration of the property warranty period are properly resolved, the "Property Management Regulations" also stipulate that the owner shall pay a special maintenance fund for the property (also known as the "Special Maintenance Fund" before the promulgation of the "Property Management Regulations") -

Property warranty funds and property special maintenance funds*** together constitute the "two funds" of the property, which serve as a "house pension" to prepare for repair needs.

However, whether it is the construction unit paying 2%-3% of the construction and installation project cost as property warranty money, or the commercial housing owners paying 5%-8% of the cost per square meter as special property maintenance funds, it is not a small amount for both parties.

The pre-payment of funds is of a post-compensation nature and cannot strengthen project quality management from the source. In practice, it is far from the original intention of the system.

In recent years, in response to the shortcomings of the warranty and special maintenance fund systems, many places have gradually embarked on the innovative path of "protecting owners' rights and interests and ensuring housing quality through insurance" in the exploration of optimizing construction quality management.

Among them, insurance refers to Inherent Defect Insurance (hereinafter referred to as "IDI") in construction quality, that is, IDI is implemented to replace and optimize the warranty and special maintenance fund systems.

1. Shanghai: Choose between IDI insurance and property warranty money. As early as 2011, Shanghai’s "Shanghai Construction Project Quality and Safety Management Regulations" stipulated that "the construction unit’s insured project quality assurance insurance complies with the warranty scope stipulated by the state and this city."

and warranty period, and are reviewed and approved by the housing administrative department, the property warranty deposit can be exempted." This has created a model of choosing between IDI insurance and property warranty deposits.

By 2016, Shanghai City followed this idea in the "Implementation Opinions on the City's Promotion of Potential Quality Defect Insurance for Commodity Housing and Social Security Housing Projects" and once again emphasized that construction units that have purchased latent quality defect insurance for projects can be exempted in accordance with regulations.

Pay property warranty deposit.

This model replaces the warranty system with commercial insurance, which not only saves costs but also increases protection for the construction unit: on the one hand, the base premium is 1.5% of the total construction and installation cost of the project. IDI greatly saves the construction cost of the construction unit.

The amount of protection is also greatly increased based on the original coverage. On the other hand, the insurance company will introduce a third-party professional risk management agency to provide quality risk management services from the start of construction.

For owners, on the one hand, the reduction in construction costs will drive down the cost per square meter, thereby saving the owner's home purchase costs and special property maintenance funds; on the other hand, the owner can make repair claims to the insurance company after quality problems occur, and his rights and interests

It will also be protected more efficiently.

2. Jinan: Cancel property warranty funds and implement IDI. In 2017, the Ministry of Industry and Information Technology and the Ministry of Finance issued the "Notice on Publishing the Catalog of Enterprise-related Security Deposits of State Council Departments" and canceled various types of enterprise-related security deposits established by local governments. Property maintenance funds established in various places are also cancelled.

among the list.

As a result, Jinan began to stop the deposit business of property quality warranty funds, and comprehensively cleaned up and returned the deposited property quality warranty funds.

After returning 3.861 billion yuan in property quality warranty funds in 2018, Jinan City issued the "Ten Prohibitions" on Strengthening the Quality Management of Housing Construction Projects in 2019, which stipulates that the project responsible unit is not allowed to shirk the owner's maintenance demands or delay maintenance.

.

In the same year, the Jinan Municipal Housing and Urban-Rural Development Bureau also solicited opinions on the "Regulations on Strengthening Property Management in Residential Areas" and planned to require development and construction units to set up separate housing after-sales service centers to accept repair reports from owners.

In order to institutionalize the implementation of quality warranty work, this year the Jinan Municipal Housing and Urban-Rural Development Bureau and other departments issued the "Jinan Municipal Social Investment Simple Low-risk Project Quality Potential Defect Insurance Management Measures (Trial)", which stipulates that the construction unit must hand over the house during the insurance period or after the expiration of the period and

If the construction unit discovers that the project has quality defects within the scope of insurance within 6 months from the date of handover, the insurance company shall perform maintenance or compensation obligations within seven days from the date of reaching a compensation agreement with the construction unit.

IDI will fill the gap in the quality warranty system after the defect liability period, and insurance claims will play the role of quality warranty.

This will completely eliminate problems such as difficulty in collecting, using, and returning property warranty funds, as well as construction units shirking warranty, going bankrupt, or refusing to perform warranty obligations, and protect the basic life and legitimate rights and interests of owners.