“The building has liability insurance, so the representative is insured too” – I hear this sentence at many general meetings, and it is typically wrong. The building's liability insurance applies when the building causes damage to someone else; the common representative's own liability insurance applies when the representative causes loss to the building. The two are different risks, with a different insured and a different injured party – and only one of them appears on the building's policy. This article shows the difference and how the representative's cover works.
- Building liability insurance covers damage the building causes to others; the common representative's liability insurance covers loss – typically pure financial loss – caused to the building or the co-owners by failures arising from the representative's office.
- The representative is in a mandate-type legal relationship with the condominium and may be liable under the general rules of civil law for damage caused in performing their duties – a missed claim report, premium payment or deadline falls into this category.
- The content, limit and period of cover vary by insurer; the building is well served if it can see that the policy has been taken out, the limit and the scope of cover – not just that “there is a piece of paper”.
Two liabilities, two insurances
Under Section 6:470 of the Hungarian Civil Code (Ptk.), under liability insurance the insured may demand that the insurer relieve them of paying compensation for damage for which they are liable by law. In building liability insurance the insured is the condominium: if falling plaster injures a passer-by, it is the community, which has legal capacity under Section 3(1) of the Condominium Act (Tht.), that is liable, and the insurer relieves it of the payment. In the representative's liability insurance the insured is the common representative (the building's elected manager) – a private individual or a management company – and the injured party is typically the condominium itself or the co-owners, to whom the representative's failure has caused loss.
It is important to note that the representative's liability is primarily “inward-facing”. Real-estate legal practice – referring to a Curia (Kúria, Hungary's supreme court) decision with a 2013 case number – takes as its starting point that the condominium is liable for damage caused to third parties within the representative's scope of activity; the representative is liable towards the party they represent. The building's policy typically does not cover this “inward-facing” liability – that is what the separate product is for.
Why is the common representative liable?
Under Section 43(1) of the Condominium Act, the representative must prepare and implement the resolutions of the general meeting, take all necessary measures for the maintenance of the building, and notify and collect the common charges; under Section 44, the representative keeps the Book of General Meeting Resolutions. Election creates a mandate-type legal relationship between the representative and the building – with a professional manager, a mandate contract – and the representative may be liable for damage caused to the building in performing their duties under the general rules of the Civil Code on breach of contract and compensation.
From an insurance point of view, the typical failures are easy to describe: the insurance voted for was not taken out, or not with the content set out in the resolution; the premium was not transferred, and the contract terminated retroactively under Section 6:449 of the Civil Code; the claim was not reported, or was reported late, and as a result a material circumstance could no longer be established under Section 6:453 of the Civil Code; the notification of changes after a renovation or extension (Section 6:452) was not made; a request from the insurer – for example concerning a loss-prevention requirement – was not carried out. Each of these is a situation in which the building or a resident is left without compensation and looks to the representative for the difference. Since October 2024 the office has also been formally named: under the amendment of the Condominium Act, the common representative must be registered in the land register, with a grace period until 1 May 2025 – so liability is less and less a matter of “doing someone a favour”.
What does the representative's liability insurance cover – typically?
In the Hungarian market, liability insurance for common representatives and condominium managers belongs to the family of professional (officers') liability insurance. The conditions typically cover loss that the representative causes to the condominium or the co-owners in the course of their office by breaching the law, the deed of foundation, the rules of organisation and operation (SZMSZ) or a resolution of the general meeting – by an act or an omission – and which is pure financial loss, i.e. does not result from physical damage. The insurer relieves the representative of paying compensation up to the limit, and some conditions also cover the costs of defending unfounded claims – this varies by insurer.
What the building should ask about: the period of cover (professional liability insurance typically links cover to when the claim is made, so run-off cover is a key issue when the representative changes); the per-claim and annual limits; the deductible; and the exclusions. Areas that are typically excluded or need separate cover are intentional damage – under Section 6:464 of the Civil Code, the insurer may be released from paying in the case of gross negligence, with the burden of proof on the insurer –, criminal offences, shortfalls in the funds under management, fines and contractual penalties, and claims relating to the representative's own fees. The crash course in reading policy conditions is useful here too.
Who should take it out, who should pay, and what should the building see of it?
The representative's liability insurance is typically the representative's – or the management company's – own contract, which they take out and pay for; in some arrangements the building is the policyholder and the representative the insured person, depending on the conditions. The building can stipulate in the mandate contract or in the SZMSZ that the representative must hold liability insurance and provide evidence of it every year: a copy of the policy, scope of cover, limit, renewal date. This is not mistrust, but the same requirement as for an accountant or a lawyer. The SZMSZ checklist includes this point too, and the checklist for a change of representative covers the question of run-off cover.
What the representative's cover does not replace is the building's own property and liability insurance. If the building is underinsured, or has no escape-of-water cover, that is not the representative's failure but the community's decision – the representative's insurance does not pay for it. The two covers together give a realistic picture; one does not replace the other.
What should the building do – and what should the representative do?
- The building: ask the representative for evidence of liability insurance, and set down the requirement in the mandate contract or the SZMSZ.
- The representative: check the scope of cover, the limit and the period of cover in your own policy – “pure financial loss” and run-off cover are the two key terms.
- Both: liability insurance will not be needed if things are in order – documented implementation of resolutions, premiums paid on time, claims reported without delay.
As a broker, I also help with comparing offers for the representative's liability insurance if the representative or the building asks for this; the decision remains theirs. And if a claim is made against the representative, that is a legal route – there, reporting it to their own insurer is the representative's task, and the building may need a lawyer.
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Sources
- Condominium Act (Tht., Act CXXXIII of 2003 on condominiums) – National Legislation Database (Nemzeti Jogszabálytár)
- Hungarian Civil Code (Ptk., Act V of 2013) – National Legislation Database (Nemzeti Jogszabálytár)
- Generali claims settlement information (quoting Hungarian Civil Code (Ptk.) Sections 6:460–6:471)
- ingatlan.com Tudástár (knowledge base) – Duties and liability of a condominium's common representative
- THT trade journal – Registration of condominium officers (1 October 2024, grace period until 1 May 2025)
- Veszprém County Chamber of Commerce and Industry – Legislative changes affecting condominiums and common representatives, 2025
