An old condominium building, one flat being renovated: walls are knocked down, channels are chiselled, the building services are replaced. A few days later a stain appears on the neighbour's ceiling, and a crack runs along the wall facing the stairwell. Three parties, three policies and a dispute in which everyone points at someone else: the contractor says the building is old; the owner says they only commissioned the work; the managing agent (közös képviselő) says the condominium's insurance does not cover this. As a broker, I see that most such cases fail not because there is no insurance, but because nobody knows which policy is for what – and because nobody photographed the neighbour's wall before the work.
- The contractor is liable for its own fault (Ptk. Section 6:519), and since 15 January 2025 it has had compulsory liability insurance (Government Decree 191/2009, Section 21/B) – if the damage was caused by the work, this is the first port of call.
- The owner who commissioned the renovation may also be liable under neighbour law (Ptk. Section 5:23); in that case the liability section of their home insurance may step in, if such damage is insured under the policy conditions.
- The condominium's insurance covers damage to the commonly owned parts and the community's liability losses, but Hungarian policy conditions typically exclude damage arising in a part of the building under renovation.
Three policies, three questions
- The contractor's liability insurance. Under Section 21/B of Government Decree 191/2009 (IX. 15.), since 15 January 2025 every contractor has been obliged to take out liability insurance which, under Section 21/C, provides cover for personal injury and property damage caused to third parties through breach of professional rules and of the contract, and for the grievance award (sérelemdíj). The neighbour is typically a third party: if the damage was caused by the contractor's fault, this is the first port of call. Under Section 3(2)(r), the construction contract must contain the policy number and the insurer's name – or the contractor's declaration regarding the insurance.
- The liability section of the owner's home insurance. The liability cover of Hungarian home insurance typically applies to damage caused as the owner of the property, as a private individual. If the damage was caused by the owner's own work, by their instructions or by a fault in the flat's building services, this cover may step in – but whether damage arising during a renovation carried out by a contractor is included varies from insurer to insurer.
- The condominium's insurance. It covers damage to the commonly owned parts of the building (main pipes, floor slabs, façade) and the community's liability losses. If the source of the leak is the common main pipe, this policy may pay; if the water comes from the flat under renovation, Hungarian condominium policy conditions typically exclude damage arising in a part of the building under construction or renovation – in a case described on an expert forum, the injured party's claim got stuck on precisely this exclusion.
Who is legally liable?
Under Section 6:519 of the Ptk. (Hungarian Civil Code), the contractor is liable for damage it unlawfully causes, and it is relieved of liability if it proves that its conduct was not culpable – so the burden of proof is on the contractor, not on the neighbour. The owner's position is twofold. Under Section 5:23 of the Ptk., in using the property the owner must refrain from any conduct that would unnecessarily disturb others, in particular the neighbours, or jeopardise the exercise of their rights; under Section 20(1) of the Condominium Act (Act CXXXIII of 2003, Tht.), a co-owner must notify the managing agent of any building work planned in their flat, and under Section 16 may not exercise their rights to the detriment of the rights and lawful interests of the other co-owners. Under Section 21(1), without the consent of the general meeting only building work that does not require the deed of foundation to be amended may be carried out – opening up a commonly owned wall or floor slab requires more than that. In practice, the neighbour often approaches the owner first; if the owner pays, they can reclaim from the contractor, under the rules on breach of contract (Ptk. Section 6:142), whatever was caused by the contractor's fault. The article written from the owner's perspective also covers this.
No condition survey: the root of the dispute
In an old building, a crack is rarely new: the question is whether the work caused it or merely made it visible. The injured party has to prove the loss and the causal link, and the contractor has to prove the grounds for relief from liability – and both are difficult if there is no photograph of the condition before the work started. What is routine for the foundations of a building – I wrote about this in the article on cracks in the neighbouring building – also works for a flat renovation: dated photos of the neighbour's affected rooms, preferably taken in the neighbour's presence, notifying the managing agent of the work, and recording the building services work (shutting off the water, pressure tests) in writing. This is not distrust but protection for both parties.
What is the procedure when a loss occurs?
The primary route for reporting is the insurer's claims line or online portal. The injured party should report the loss to their own home insurer (if water ingress or escape of water from pipes is insured there, they may receive compensation under their own policy conditions, and the insurer can then reclaim it from the party that caused the damage under Section 6:468 of the Ptk.) and also to the insurer of the party that caused the damage – the contractor or the owner; on the condominium side, they should involve the managing agent. Under Section 6:453 of the Ptk., late reporting of a loss has legal consequences if, as a result, material circumstances can no longer be established – but photos and a written record are most valuable in the first few days. The procedure is described in the article on the first steps in reporting a loss. Be prepared for two things: the liability insurer pays compensation, not new value, so it may apply depreciation to old paintwork; and the insurer pays only for what is an insured event under its contract. If the insurers point at each other, after a complaint the Financial Arbitration Board (PBT) or the court decides – the MNB does not rule on individual claim disputes. If a case gets stuck or disputed, I help as a broker where I can, but representation is not my role.
What should you do before the renovation?
- Ask the contractor for the policy number of its compulsory liability insurance and record it in the contract (the decree requires this anyway). Ask whether the cover extends to damage caused to the neighbour and to your existing property – the second is not automatic.
- Check the limit and conditions of the liability cover of your own home insurance, and if the renovation brings a change that must be reported under the policy conditions (for example floor area, value, under-construction status), report it to your insurer: reporting changes under Section 6:452 of the Ptk. is your obligation.
- Notify the managing agent (Tht. Section 20), and clarify whether the work affects commonly owned parts.
- Carry out a condition survey of the neighbouring flats.
- For a larger intervention – knocking down walls, underpinning, replacing all the building services – consider whether the work needs a project CAR policy; the article on small projects offers criteria for this.
If you need help reviewing the construction contract and the policies, I put together the questions and show you the boundaries of the covers – signing the contract, making the reports and coordinating with the neighbour remain your responsibility.
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Sources
- Act V of 2013 – Hungarian Civil Code (Ptk.), Sections 5:23, 6:142, 6:452, 6:453, 6:468, 6:519
- Act CXXXIII of 2003 on Condominiums (Tht.), Sections 16, 20, 21
- Government Decree 191/2009 (IX. 15.), Section 3(2)(r), Sections 21/B–21/C
- CLB expert answer: Claims settlement under the contractor's liability insurance or the condominium's home insurance
- Insura: Flooded by the upstairs neighbour – whose insurer pays?
- Insura: Renovation and home insurance – what needs to be reported?
- Financial Arbitration Board (Pénzügyi Békéltető Testület, PBT – MNB)
