Real Estate Law
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Unfortunately, it doesn't matter whether there was negligence involved with regard to liability. Whether it was intentional, negligent, or accidental, if your personal property (i.e. the water heater) damages another person's property, then you as the owner are liable for the cost of any repairs to the "injured" party.
The only exception would be if you have a HOA and under the Bylaws the water heaters are their responsibility..
I am very sorry that I don’t have better news, but please understand that I do have an ethical and professional obligation to provide customers with legally correct answers based on my knowledge and experience, even when I know the answer doesn’t make the customer happy...