A water heater system comprising: a gas burner configured to selectively produce flue gases; a heat exchanger for heating water in the water heater system, the heat exchanger configured to receive one of the water and the flue gases, wherein the water heater system is operable in a heating mode in which the flue gases are flowing through the water heater system to heat the water in the water heater system, and a standby mode in which there is an absence of the flue gases flowing through the water heater system; an exhaust assembly in fluid communication with the heat exchanger, the exhaust assembly including a condensate collector configured to receive the flue gases and condensate produced by the flue gases, the condensate collector including a condensate management portion; and a first temperature sensor positioned to sense a temperature of the condensate within the condensate collector, the first temperature sensor configured to detect a rate of temperature change of the condensate; characterized by: a controller configured to determine a leakage of the water heater system when the rate of temperature change adjusts from a first state to a second state when the water heater system is in the standby mode after the water heater system was in the heating mode, wherein the condensate management portion delays the adjustment of the rate of temperature change from the first state to the second state for a predetermined time period when the water heater system enters the standby mode from the heating mode. a gas burner configured to selectively produce flue gases; a heat exchanger for heating water in the water heater system, the heat exchanger configured to receive one of the water and the flue gases, wherein the water heater system is operable in a heating mode in which the flue gases are flowing through the water heater system to heat the water in the water heater system, and a standby mode in which there is an absence of the flue gases flowing through the water heater system; an exhaust assembly in fluid communication with the heat exchanger, the exhaust assembly including a condensate collector configured to receive the flue gases and condensate produced by the flue gases, the condensate collector including a condensate management portion; and a first temperature sensor positioned to sense a temperature of the condensate within the condensate collector, the first temperature sensor configured to detect a rate of temperature change of the condensate; characterized by: a controller configured to determine a leakage of the water heater system when the rate of temperature change adjusts from a first state to a second state when the water heater system is in the standby mode after the water heater system was in the heating mode, wherein the condensate management portion delays the adjustment of the rate of temperature change from the first state to the second state for a predetermined time period when the water heater system enters the standby mode from the heating mode. a controller configured to determine a leakage of the water heater system when the rate of temperature change adjusts from a first state to a second state when the water heater system is in the standby mode after the water heater system was in the heating mode, wherein the condensate management portion delays the adjustment of the rate of temperature change from the first state to the second state for a predetermined time period when the water heater system enters the standby mode from the heating mode.