In city centres and densely developing neighbourhoods the picture is familiar: on the neighbouring plot, an excavation pit is dug, piles are driven or a building is demolished, and a few weeks later cracks appear in the stairwell, along the party wall and in the flats. The condominium manager first calls the condominium's insurer and receives a brief rejection. As a broker, I see that this is when the condominium loses the most time by heading in the wrong direction: it argues about its own policy while the construction progresses, the cracks change and the evidence dwindles. This article shows why the condominium's policy is not the route, who is liable for the damage, what insurance stands behind the contractor, what the condominium has to prove and what the condominium manager should do. The reverse situation – when the condominium itself renovates and may cause damage – is covered in the article on insurance during renovation.
- The condominium's own policy pays for the listed insured events – fire, storm, escape of water and the like – but cracking caused by earthworks, vibration or the removal of support on the neighbouring plot is not one of them, so a rejection is typically lawful: this is not an exemption (the insurer being released from paying) but a lack of cover.
- The party that caused the damage is liable: the contractor and the developer under the general liability rule of the Hungarian Civil Code (Ptk.), and for certain technologies on the basis of strict liability for hazardous activities – the claim must be addressed to them, and behind them may stand the contractors' liability insurance that has been compulsory since 2025, or the liability section of a contractors' all risks (CAR) policy.
- The burden of proof is on the condominium: without a condition survey before construction, dated photos, crack indicators and an expert opinion, the causal link is almost impossible to prove – so the condominium manager's most important tasks are documentation and a written claim sent in time.
Why does the condominium's own policy not pay?
Condominium insurance is property insurance that pays for the insured events listed in the conditions: fire, explosion, lightning, storm, hail, escape of water, burglary and – if the condominium requested it – earthquake, landslide and the collapse of unknown underground cavities. Cracking caused by earthworks on the neighbouring plot, the vibration of construction machinery, a change in the groundwater level or the removal of support does not correspond to any of the listed events, and in Hungarian conditions earth movement covers typically expressly exclude ground movement caused by human activity – construction, earthworks, mining. The insurer's rejection is therefore usually not an exemption (the insurer being released from paying) but a lack of cover: the insurer pays only for what is an insured event under the contract. The map of the cover is drawn in the article on what is covered and what is not.
This does not make the condominium's policy irrelevant. If the policy also includes legal protection cover, it may pay the costs of pursuing the claim – expert, lawyer, court proceedings – within limits that vary by insurer; this is worth checking in the conditions. If the condominium also reports the loss to its own insurer, the inspection report may later serve as evidence, but the condominium should be prepared for a rejection. And if the cracking affects the load-bearing structure, the residents' safety comes before any insurance question: a structural engineer and, if necessary, the building supervision authority.
Who is liable: the contractor, the developer – and on what basis?
Under Section 6:519 of the Hungarian Civil Code (Ptk.), anyone who unlawfully causes damage to another must compensate for it, and is released from liability only if they prove that they acted as can generally be expected in the given situation. In construction, what can be expected includes a prior survey of the condition of neighbouring buildings, appropriate shoring and support, and choosing the right technology. The Civil Code's neighbour-law rules also state specifically that an owner may not deprive a neighbouring building of the necessary support of the ground without providing other adequate stabilisation. A stricter standard is liability for extra-hazardous activities (Ptk. Section 6:535), where the party causing the damage can escape liability only by proving an unavoidable cause outside the scope of its activity: the courts may treat certain construction technologies – deep foundations, piling, blasting, large-scale earthworks – as such, but this is not automatic, it is decided case by case, and the condominium has to prove that the work in question was of this kind.
The liable party may be the contractor carrying out the work, the developer in whose interest it is being done, a subcontractor and, in the case of a design error, the designer. Under the Civil Code's rule on damage caused jointly by several persons, those who caused the damage may be jointly and severally liable to the injured party, so the condominium can also send a demand to the developer and the contractor together – how they share the loss between themselves is their business. For this, the condominium needs to know who the developer and the contractor are: the information board on the construction site and the details in the construction log help with this.
What stands behind the contractor: compulsory liability insurance and CAR
From 15 January 2025, under Section 21/B of Government Decree 191/2009 (IX. 15.) on construction activities, contractors must hold liability insurance for damage caused in the course of the construction work they undertake, with a minimum amount linked to the company's turnover; previously, legislation required such insurance only for residential buildings built under the simplified notification procedure. As the injured party, the condominium may benefit from this, with two important limitations. First, under the Civil Code's liability insurance rules, the injured party – except in the case of MTPL (compulsory motor third-party liability insurance) – enforces its claim not against the insurer but against the party that caused the damage, and the insurer pays the injured party; the claim must therefore be addressed to the contractor or the developer, asking them to report the damage to their insurer and to provide the insurer's details. Second, liability insurance also pays only according to its conditions, subject to a deductible and limits, and it examines the contractor's fault in the same way as a court would.
For larger projects, the developer or the contractor takes out contractors' all risks (CAR) insurance for the project: its first section covers the works under construction, its second section damage caused to third parties. In international practice, damage to neighbouring buildings caused by vibration or the weakening of support is dealt with in a separate clause, and two typical conditions of this clause are decisive from the condominium's point of view: the condition of the affected buildings must be recorded in a report before construction begins, and many policy wordings pay only for damage that affects stability or involves collapse, excluding superficial cracks – the exact content varies by insurer. So if the contractor asks the condominium for a condition survey before construction, this is not harassment but also in the condominium's interest: let them in and ask for a copy of the report.
Proof: condition survey, expert, causal link
The burden of proof is on the condominium: it has to prove the fact and extent of the damage, the conduct that caused it and the causal link between the two. The third is the hardest, because an old building is cracked to begin with, prolonged drought or groundwater can also move the walls, and the contractor's first answer will usually be that the cracks were already there. This is why a condition survey before construction is worth its weight in gold: dated photos and video of the stairwell, the party wall and the flats, a survey of existing cracks, preferably by a structural engineer, and, if the stakes are high, a notarial certificate of facts. During construction, crack indicators – plaster tell-tales, crack gauges – and regular photographs show the changes, and it is worth collecting residents' observations in writing, with dates. The causal link can be established by a forensic (court-certified) expert; the condominium advances the expert's fee, and if it wins the case, the cost may be passed on to the party that caused the damage. Under Section 6:22 of the Civil Code, the claim becomes time-barred after five years, but the evidence is lost much sooner – the role of the condominium's records is discussed in the article on the insurance file.
The condominium manager's tasks – in order
First comes safety: for cracks in the load-bearing structure, a structural engineer, and if stability is at risk, notifying the building supervision authority. Second, documentation as described above. Third, a written claim to the developer and the contractor, by registered letter with acknowledgement of receipt or by a verifiable electronic channel: a description of the damage, the photos, and a demand – with a deadline – that they provide their insurer's details and report the damage. Fourth, informing the general meeting and requesting authorisation to commission the expert and to take legal steps, within the framework of the SZMSZ (the condominium's organisational and operational rules) and the Condominium Act. Fifth, reviewing the condominium's own policy for legal protection cover, and informing the insurer if the cracks affect the building's risk profile. If the contractor does not respond, or its insurer disputes liability, the route is the condominium's lawyer and ultimately the court. I do not provide legal representation in claims matters; where a case gets stuck or is disputed, I help where I can.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) – Section 6:22 limitation, Section 6:519 general liability for damage, Section 6:535 extra-hazardous activities, neighbour-law rules (support of the ground), liability insurance
- Government Decree 191/2009 (IX. 15.) on construction activities – Sections 21/B–21/G compulsory contractors' liability insurance, Section 46(5) the obligation from 15 January 2025
- Condominium Act (Tht., Act CXXXIII of 2003 on condominiums) – powers of the condominium manager and the general meeting
- BKIK (Budapest Chamber of Commerce and Industry): FAQ on compulsory contractor liability insurance (January 2025) – from 15 January 2025, minimum by turnover
