Anyone buying a flat in a condominium usually checks the land registry title sheet, any arrears of common charges and the condominium's organisational and operating rules (SZMSZ) – but rarely the building's insurance. Yet behind the price of the flat stands the whole building: the roof, the riser pipes, the lift, the façade, and the question of whether damage to them is paid for by the insurer or by the owners out of the common charges. As a broker, I see that new owners typically come across the building's policy for the first time when the bank asks for it for the mortgage, or when the first water leak reveals that the building is underinsured. Both can be avoided: the building's insurance can be checked before the purchase just like the arrears. This article shows what to ask for, from whom, what to look at in it, and what to do after the purchase.
- Before buying, ask – through the seller and the condominium manager (közös képviselő) – for the building's policy and policy conditions: the sum insured, the scope of cover, the deductible, the renewal date and whether premium payments are up to date; under Section 45 of the Condominium Act (Tht.), when ownership changes, the condominium manager is obliged to present the general meeting resolutions on insurance at the request of the parties to the sale contract – including the buyer – and any co-owner may inspect the Book of General Meeting Resolutions.
- Three things directly affect the decision to buy: an underinsured building (proportional payment in a claim, with the shortfall landing on the common charges), the claims history (repeated water leaks, damage to riser pipes) and arrears – under Section 46 of the Tht., when ownership changes, the manager gives a written statement on arrears of common charges.
- After the purchase you will be insured under the building's policy – typically, under Hungarian policy conditions – in proportion to your ownership share, but this does not cover the flat's contents, the separately owned parts inside it or your own liability – for these you need your own home insurance; under Section 22 of the Tht., the change of ownership must be reported to the condominium manager.
Why is the building's policy part of the decision to buy?
When you buy a flat in a condominium, you are not just buying a flat but an ownership share in the common property – and with it a share in the community's obligations. Under Section 3 (3) of the Condominium Act (Act CXXXIII of 2003, Tht.), the co-owners are liable for the performance of obligations burdening the community as a whole in proportion to their ownership shares – or in a different proportion set in the SZMSZ – under the rules of simple (secondary) suretyship. In plain terms: if the building suffers major damage and the insurer pays nothing or only part of it, the difference lands on the common charges and, ultimately, on the owners – proportionally, on you too. The building's insurance is therefore not an internal matter for the condominium manager (közös képviselő) but part of your own financial risk. The relationship between the building's policy and your own home insurance is described in the article on how home insurance and condominium insurance relate; here, what matters is the buyer's perspective.
What should you ask for, and from whom?
As a buyer you are not yet a co-owner, but you still have access to the general meeting resolutions: under Section 45 (1) of the Tht., when ownership changes, the condominium manager is obliged, at the request of the parties to the sale contract – that is, the seller and the buyer – to present the Book of General Meeting Resolutions and the resolutions relating to the flat concerned; in addition, under Section 45 (2), the seller as a co-owner may inspect it and request copies at any time, and in practice the condominium manager hands out the policy and the policy conditions. If the manager refuses, that in itself tells you something about how the building is run. Your list is as follows:
- The policy in force and the policy conditions: insurer, sum insured, scope of cover, deductibles, limits, renewal date.
- The most recent general meeting resolution on insurance: when the policy was decided on, and on what basis it was chosen.
- The status of premium payments: the premium is paid out of the common charges – under the insurance rules of the Hungarian Civil Code (Ptk.), an unpaid premium can lead to the termination of cover; the manager can make a statement on this.
- The split between common and separate ownership in the deed of foundation: this shows what falls under the building's policy and what will be your own responsibility – the article on the boundary between common and separate ownership helps you read it.
Five points to check in the policy
First, the sum insured: this has to be measured against the rebuilding value of the building, not the market price of the flats. If the amount has been unchanged for years while construction costs have risen, the building may be underinsured, and under the underinsurance rule of the Ptk. the insurer may pay the loss in the proportion of the sum insured to the actual value – the shortfall falls on the common charges. This mechanism is explained in the article on underinsurance; as a buyer, it is enough to ask when the amount was last reviewed and whether there is indexation.
Second, the scope of cover: fire and natural perils are included in every policy, but the most common loss in condominiums is water damage from pipes – its cover, its limit and the handling of the cost of locating the leak differ from insurer to insurer. Third, building liability insurance: if plaster falling from the building damages a car or injures a passer-by, the building is liable; the absence of this cover is a direct risk for the owners. Fourth, the deductibles: a high deductible means a low premium, but in every claim the building – that is, the owners – pays the first part. Fifth, the renewal date and the cancellation rules: if the building's policy is weak, it can only be replaced at the renewal date, and you, too, will be able to propose this at the general meeting.
Claims history and arrears: the building's “school report”
The building's claims history tells you two things: the condition of the building and the future premium for its insurance. Repeated water leaks, damage to riser pipes, the same stairwell glass broken three times – these point to a maintenance backlog, and policy conditions typically exclude losses that recur from the same cause under unchanged circumstances, or the insurer imposes a loss-prevention condition after the claim. Ask the condominium manager or the property management company for the claims history; what the insurer reads from it is described in the article on claims history. On the financial side, two rules of the Tht. help: under Section 46 (1), when ownership changes, the condominium manager is obliged, at the co-owner's request, to give a written statement on arrears of common charges, and under Section 30 (1), the general meeting may order the registration of a mortgage on the separate property of a co-owner who is in arrears with common charges amounting to at least three months. A building with many owners in arrears also finds it harder to pay the insurance premium – which indirectly affects the continuity of cover.
After the purchase: notification, your own home insurance, mortgage
Under Hungarian policy conditions, the insured parties under the building's policy are typically the condominium and the co-owners in proportion to their ownership shares – so with the change of ownership you become insured in respect of the common property without any separate declaration, and you have nothing to do with the insurer. You do, however, have something to do with the condominium manager: under Section 22 (1) of the Tht., a co-owner is obliged to report the change of ownership of their separate property and their address, and Section 22 (4) also sets a deadline: the new co-owner must do this within 30 days of the registration of their ownership in the land register. This is not a formality: in a claim and when the insurer sends notifications, the manager can only reach owners they know about.
The building's policy does not cover the contents of your flat, some of the separately owned elements inside the flat or your own liability – for example, if water leaks from your flat into the flat of the neighbour below. For these you need your own home insurance, and it also puts you in a different position in a dispute: the condominium as policyholder is not a consumer, so the Financial Arbitration Board (PBT) does not handle disputes concerning the building's policy, whereas it does handle disputes concerning your own home insurance, where you are a consumer. If you buy the flat with a mortgage, the bank expects property insurance on the collateral property with a loss-payee clause; whether it accepts the building's policy for this differs from bank to bank – the details are discussed in the article on mortgages.
What should you do in practice?
Before signing the sale contract, ask the seller for the building's policy, the policy conditions, the most recent resolution on insurance and the claims history, and ask the condominium manager for the statement on arrears under Section 46. Check the five points – sum insured, scope of cover, liability, deductible, renewal date – and if something is missing, do not give up the purchase; instead, raise the question at the first general meeting: a weak building policy can be replaced at the renewal date. After the purchase, report the change of ownership to the condominium manager, and take out your own home insurance so that, together with the building's policy, it forms a coherent whole. As a broker, I help with this where I can: if you let me know, I put the building's policy and your planned home insurance side by side and show you where they overlap and where a gap remains – replacing the building's policy, however, is a decision for the general meeting, on which the co-owners vote.
Do you have a question about the flat you are planning to buy? Book a free 20-minute consultation →
Sources
- Condominium Act (Tht., Act CXXXIII of 2003 on condominiums) Sections 3 (3), 22 (1), 30 (1), 45 (2), 46 (1) – suretyship, reporting a change of ownership, mortgage, inspection of documents, statement on arrears
- Hungarian Civil Code (Ptk., Act V of 2013) – insurance contracts: non-payment of premium, underinsurance
- MNB (Hungary's central bank and financial supervisor) – Financial Arbitration Board (PBT): who can apply to the Board (definition of consumer)
