1. Dear Matt, it is purely a financial decision whether you settle the matter or not. However, from an objective point of view, if the tenant is claiming 3.2k for medical expenses, then settling the claim for 4k is good business. If there is a dispute, you will easily spend this much in legal fees. Secondly, you can most certainly make a corresponding claim against the neighbour who was responsible for the leak. Ultimately, the release of water from one property to another constitutes a nuisance.
2. The nuisance gives rise to a claim for damages in law. However, your cause of action is against the neighbour and not against the management company. You cannot make the management company liable for failing to ensure the leak was remedied in early course. That was not something within their power or control. However, you can make the neighbour who caused the leak liable.
3. So any money you pay out to the tenant you can recoup from your neighbour who caused the leak. Additionally, if you had to carry out repairs in your own flat, then you can recover for the costs of these repairs as well.
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