Energy-efficiency renovations have ushered in a new era for condominium building services: after solar panels and charging points, more and more condominiums are deciding on a shared heat pump or a central air-conditioning system that replaces the old boiler or cools the stairwells and communal areas. As a broker, I see that this investment becomes one of the building's most expensive machines, yet it often runs for years without the insurer knowing about it, without the sum insured having been adjusted to it, and without any cover in the policy that would pay for a breakdown of the equipment. This article goes through the insurance side of the joint investment: the decision and the siting, notifying the insurer, machinery breakdown cover and questions of liability. Residents' own units mounted on the facade are discussed in a separate article: the air-conditioning outdoor unit on the common facade.
- A shared heat pump becomes commonly owned equipment of the condominium: the decision lies with the general meeting, and after installation the insurer must also be informed, because a valuable new machine has appeared in the policy's sum insured and risk profile.
- Basic cover pays for external events – fire, lightning, storm, hail – while an internal failure of the equipment (compressor, inverter, controls) is covered only with a machinery breakdown add-on; some conditions offer this as a separate heat pump package or a combined lift and air-conditioning machinery breakdown package, with exclusions that vary by insurer.
- Noise, opening up the roof insulation and damage during installation are liability questions: the condominium's building liability insurance, the contractor's liability insurance and erection insurance each work at a different stage – order comes from the resolution, the contract and the documentation.
A joint investment: decision, ownership, siting
A shared heat pump becomes the common property of the co-owners, just like the boiler or the lift: the condominium pays for it, maintains it and is liable for it. The decision belongs to the general meeting. Under the definitions of the Condominium Act (Act CXXXIII of 2003, Tht.), converting or replacing the central heating and hot-water system for energy-efficiency purposes counts as modernisation, i.e. it falls within renovation, on which the general meeting decides by the majority set by the Condominium Act and the SZMSZ (the condominium's organisational and operational rules); if, however, the investment qualifies as expenditure beyond the scope of ordinary management, Section 38(3) of the Condominium Act requires a unanimous resolution of the co-owners. Which category the planned work falls into is determined by its technical content, so it is worth preparing the wording of the resolution with this question in mind.
Siting is not only a technical question. A unit placed on the roof affects the penetrations through the roof insulation and the structural loads – water coming in through a badly sealed penetration later appears as a claim on the condominium's policy, and the insurer may point to faulty workmanship. For installation in a courtyard or garden, noise and theft are the two typical problems: under Section 5:23 of the Hungarian Civil Code (Ptk.), owners must not unnecessarily disturb their neighbours, and a machine standing in the open also raises security considerations to a different level. Before deciding, it is also worth checking the local noise and townscape regulations, because these cannot be overridden by a general meeting resolution.
Notifying the insurer: the policy does not know about the heat pump
Under the Civil Code's rule on disclosure and notification of changes (Section 6:452), the policyholder must report changes in circumstances that are material to the insurance within the period set in the contract. Hungarian condominium insurance conditions typically allow a few days or two weeks for this – one market policy wording, for example, requires notification within 14 calendar days if the insured property has been extended, renovated or modernised. A building-services investment worth several tens of millions of forints is such a change. The notification matters for two reasons: first, the condominium's sum insured has to follow the new value, otherwise a loss is paid only proportionately – this is explained in the article on raising the sum insured mid-term – and second, it allows the insurer to state whether it requires any conditions or offers an add-on for the new equipment.
It is worth knowing that under the Civil Code, if the insurer learns of a significant increase in the risk after the contract has been concluded, it may propose an amendment or terminate the contract – a heat pump is typically not such a case, but failing to notify the insurer may count against the condominium in a claim if the equipment played a role in the loss. If the annual review is also due at the time of installation, it is worth handling the two together; if you let me know before the renewal date, I prepare the comparison and the paperwork.
What covers it if it breaks down? Basic cover, machinery breakdown, warranty
Basic cover pays for external, sudden events: fire, lightning, storm, hail, escape of water from pipes. If hail smashes the outdoor unit, or sheet metal torn off the roof damages it, the natural perils cover of the condominium's policy typically responds – the article on fire and natural perils describes the limits. What basic cover does not pay for is an internal failure of the equipment. If the compressor stops, or the inverter or the controls fail, that is machinery breakdown, and Hungarian conditions provide it only as additional cover. On the market there are conditions that offer this explicitly as ‘heat pump failure’ in a renewable energy package, and others that combine machinery breakdown insurance for the lift and the central air-conditioning system in a single package – the details, the limits and the deductible vary by insurer. The general logic of building-services cover is discussed in the article on lifts and building services.
Machinery breakdown cover has typical limits, and it is worth knowing them before the resolution is adopted. Conditions usually exclude wear and tear, faults resulting from missed maintenance, faults covered by the manufacturer's warranty and often damage once the equipment has passed a certain age; many conditions require a maintenance contract or regular servicing. The manufacturer's warranty and machinery breakdown insurance therefore do not replace but complement each other: the former covers manufacturing defects, the latter unexpected internal failures. The secondary effect of lightning – the overvoltage that destroys the inverter and the controls – is, depending on the insurer, either part of the basic cover or a separate add-on in Hungarian conditions, typically with a separate limit; the situation is the same for solar panels, as the article on solar panels explains in detail.
Liability: noise, leaks, installation – when the condominium's machine causes damage
If the condominium's equipment causes damage to others – the vibration of the outdoor unit cracks the neighbour's wall, condensate soaks the ceiling of the floor below – the condominium is liable, and the building liability insurance may step in; disturbance caused by noise, however, is not property damage, liability covers typically do not pay such claims, and they are resolved as a neighbour-law dispute. The installation period is a different stage: here the contractor's liability and liability insurance come first, and erection insurance can be taken out for larger works – the article on insurance during renovation gives an overview. It is worth requesting proof of the contractor's liability insurance as an annex to the contract, because this will be the first question if water later comes in where the roof insulation was opened up.
What should the condominium manager do before and after installation?
Before installation: the wording of the resolution should include the technical content, the budget and the financing; proof of liability insurance should be attached to the contract with the contractor; and it is worth asking the insurer in advance – directly or through the broker – whether it sets any conditions for the siting and what machinery breakdown add-on it can provide. After installation: notifying the change within the deadline in the conditions, raising the sum insured to reflect the new value, deciding on the additional cover with authorisation from the general meeting or under the SZMSZ, concluding a maintenance contract, and placing the documents – invoice, commissioning report, warranty card, service records – in the condominium's insurance file. In a claim, the primary route for reporting is the insurer's claims line; in a machinery breakdown claim, the claim rarely stands up without the service technician's expert opinion and the maintenance log. If the boundary between the covers is unclear, or the insurer rejects the claim citing maintenance, I help where I can.
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Sources
- Condominium Act (Tht., Act CXXXIII of 2003 on condominiums) – Section 38(3) unanimous resolution for expenditure beyond ordinary management, Section 56 definitions (renovation, modernisation)
- Hungarian Civil Code (Ptk., Act V of 2013) – Section 5:23 prohibition of disturbing neighbours, Section 6:446 significant increase in risk, Section 6:452 duty of disclosure and notification of changes
- Colonnade Atlasz Társasház Biztosítás (condominium insurance) – policy conditions and customer information (renewable energy package: heat pump failure; machinery breakdown insurance for lifts and central air-conditioning equipment; notification of changes within 14 calendar days) – an example of a market policy wording
