A change of managing company, a new bank account, a mislaid payment slip, a premium notice sent to an old e-mail address – and six months later, when a pipe bursts, the building finds out that its insurance has not been in force for months. As a broker, this is one of the most unpleasant situations I come across, because the loss is real, while on paper the contract no longer exists. The Civil Code sets out the legal consequences of non-payment precisely, and policy conditions follow it; on the building's side, the question is rather how to avoid getting to this point and, if it happens anyway, what can still be saved. This article goes through the procedure, the possibility of reinstatement and the question of liability.
- Under Section 6:449 of the Hungarian Civil Code (Ptk.), the insurer sends a written reminder setting a thirty-day grace period from the date the reminder is sent; if that also passes without payment, the contract terminates retroactively to the due date – any loss in the intervening period remains uncovered.
- Within one hundred and twenty days of termination, the policyholder may ask in writing for cover to be reinstated; the insurer may reinstate it – it is not obliged to – against payment of the outstanding premium and, under Hungarian policy conditions, typically a no-claims declaration.
- Paying the premium is the non-transferable obligation of the policyholder – the building; if the representative or the managing company failed to pay, they may be liable towards the building, but this is no excuse towards the insurer.
How does the contract terminate because of non-payment?
Under Section 6:449(1) of the Hungarian Civil Code (Ptk.), if the premium due is not paid, the insurer – warning of the consequences – sends the policyholder a written reminder to pay, setting a grace period of thirty days from the date the reminder is sent; if the grace period expires without payment, the contract terminates retroactively to the due date, unless the insurer enforces the premium claim in court without delay. Thirty days is the statutory minimum; some Hungarian policy conditions allow longer – one condominium wording, for example, sets a forty-day grace period.
The “retroactive effect” is the key point: if the grace period expires, cover ends not on the day of expiry but on the original due date – so there is no cover even for a loss occurring during the grace period if the premium is ultimately not paid. If, however, payment is made within the grace period, the contract continues without interruption. Where a loan-security (mortgagee) clause is registered for flats, the insurer also notifies the bank of the termination, which may have separate consequences under the loan agreements. Good practice for handling the premium is summarised in the article on premium payment.
Where does the reminder go – and why does it go unnoticed?
The insurer sends the reminder to the policyholder's address known to it: the building's postal address, or the e-mail address of the representative or the managing company, as recorded on the policy. When the managing company or the common representative (the building's elected manager) changes, or the registered address or e-mail address changes, this is exactly the detail that is not updated – the reminder arrives, just not where anyone reads it. Under Section 6:452 of the Civil Code, the policyholder must report changes in material circumstances in the manner and within the time limit set in the contract; Hungarian policy conditions typically allow a short period for this, of a few days or two weeks. The same applies to the method of payment: if the old managing company paid by direct debit, the direct debit does not start automatically with the new managing company. The renewal premium notice is sent by the insurer – the building has to make sure there is someone to receive it. The tasks involved in a changeover are detailed in the article on changing the managing company and the checklist for a change of representative.
Can it be reinstated? The 120-day rule
Under Section 6:449(2) of the Civil Code, if the contract terminated because a subsequent premium was not paid, the policyholder may ask the insurer in writing, within one hundred and twenty days of the date of termination, to reinstate cover; the insurer may reinstate cover under the conditions of the terminated contract, provided that the premium previously due is paid. Three points are worth highlighting. The insurer may reinstate cover – it is not obliged to. Hungarian policy conditions typically require a no-claims declaration, and cover restarts upon reinstatement: loss occurring between termination and reinstatement is typically not paid. And the hundred and twenty days run from the date of termination – that is, from the retroactive due date – not from when the building noticed.
If the insurer does not reinstate cover, or the deadline has passed, a new contract is needed: with a new risk assessment, possibly on different conditions, and when quotes are requested, insurers ask about the period without cover as well as the claims history. The new policy's cover runs from its own start date – until then, the building is without cover. The procedure is shown in the article on how switching works; the only difference here is timing: instead of working to the renewal date, the aim is the earliest possible start.
Who is liable for the failure?
Towards the insurer the answer is simple: the policyholder, i.e. the condominium. Non-payment of the premium is an objective fact; from the insurer's point of view it makes no difference whether the representative forgot, the managing company did not take it over, or the bank returned the transfer. Towards the building, the picture is more nuanced. Under Section 43(1) of the Condominium Act (Tht.), the representative must implement the resolutions of the general meeting, take all necessary measures for the maintenance of the building and collect the common charges – paying the premium for the insurance voted for on time is part of these duties. The representative is in a mandate-type legal relationship with the building and may be liable under the general rules of civil law for damage caused to the building by their failure; with a managing company, the framework is given by the mandate contract together with the Civil Code. If a loss occurred during the period without cover, the building may claim the difference from the party at fault – with evidence, through legal channels, not automatically. Under Section 28(1) of the Condominium Act, dismissing the representative is the exclusive competence of the general meeting.
One misconception is worth dispelling: arrears in common charges by individual residents do not terminate the building's insurance, because the building pays the premium in a single sum. With persistently high arrears, however, the building's liquidity – and through it the security of premium payments – can genuinely come into question; this is one of the points the representative needs to watch.
What should the building do now – and what in advance?
- If a reminder has arrived: pay within the grace period, and ask the insurer for written confirmation that the contract continues without interruption.
- If the contract has already terminated: submit a written reinstatement request within one hundred and twenty days, paying the outstanding premium at the same time; in the meantime, do not leave the building without cover – if the insurer does not reinstate cover, a new contract is needed without delay.
- In advance: the premium should be a budgeted item of the common charges; two contacts – the representative and a second person – should be registered with the insurer; and when the managing company or the representative changes, the handover list should include the method of premium payment and the next due date.
As a broker, if the building lets me know – a reminder has arrived, or the contract has already terminated – I help put together the reinstatement request and, if needed, compare the market for new cover. Paying the premium, notifying changes and signing the request, however, remain the building's non-transferable obligations – no one else can do these on its behalf.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) – National Legislation Database (Nemzeti Jogszabálytár)
- Condominium Act (Tht., Act CXXXIII of 2003 on condominiums) – National Legislation Database (Nemzeti Jogszabálytár)
- Colonnade ATLASZ Társasház Biztosítás (condominium insurance) – policy conditions and customer information (2023)
- Hungarian Civil Code (Ptk.) Section 6:449 – Failure to pay the premium (Hatályos Jogszabályok Gyűjteménye / Collection of Legislation in Force, net.jogtar.hu)
- ingatlan.com Tudástár (knowledge base) – Duties and liability of a condominium's common representative
