Associaition of Housing Warranty Insurers(AHWI)

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The Act for Secure Execution of Defect Warranty Liability

The Act for Secure Execution of Defect Warranty Liability

What does The Act for Secure Execution of Defect Warranty Liability (the act) do for housing consumers (home owners)? The name of the Act sounds complicated and difficult to understand, houwever the Act is quite favorable to home owners.

Housing suppliers who provide new houses are required to provide 10-year warranty for a defect occurred in certain parts of the house. But if the housing supplier had been bankrupt when a defect is found?? There is nobody to pay the repair cost.

The Act provides the solution for this kind of trouble.

Under the Act, housing suppliers must secure financial resources that cover the cost to repair a defect, which will help home owners correct the defect with the minimum cost.

The reserves can be held by either “taking out housing insurance” or ”deposit of set amount of money”. Through this mechanism, the repair cost for a defect found in a house within 10 years from the handover will be covered even if the housing supplier cannot fix the problem due to bankruptcy or other reasons.

What is a defect?

A defect means an imperfection or flaw. A defect defined in the Act is the one found in major structural parts or parts to prevent rainwater leakage in a house.

What does a housing supplier have to do under the Act?

A housing supplier has to choose which measure he/she will take in order to secure financial resources in case of defect occurrence between ”taking out housing insurance“ and ”deposit of set amount of money”.
The Act also requires that a housing supplier explain his/her method to the home owner when constructing or selling a new house.

Scope of housing defect warranty liability

The parts covered by the 10-year defect warranty liability under The Act are major structural parts and parts to prevent rainwater leakage.

Scope of housing defect warranty liability
Mechanism of housing insurance

The housing insurance is provided by housing insurance companies that are designated by the Minister of Land, Infrastructure, Transport and Tourism. If a defect is found within 10 years after the handover and the housing supplier carries out the repair work, the cost of the repair will be covered by the insurance money.

Direct claim for insurance payment - consumer protection mechanism

In cases where a housing supplier cannot carry out a repair work due to bankruptcy or other reasons, the home owner can make a claim for the costs of repair and others (direct insurance claims).

Mechanism of housing insurance
Another way of securing financial resources

The alternative method of securing financial resources for housing suppliers is to deposit certain amount of money at designated institutions such as a regional legal affairs bureau.

Direct claim for a refund at the depositary institution - consumer protection mechanism

A home owner may claim the amount of repair and other costs at the depositary institution if the housing supplier cannot carry out a repair work due to bankruptcy or other reasons.

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