Once a year, the moment of (financial) truth arrives: a condominium association receives its annual statement. It is a key tool for understanding and tracking the association's income and expenses.
In this article, we'll take a closer look at the condominium association's annual statement. You'll learn what it means for owners, how the statement is structured, and what important information it contains. We'll also give you tips on how to read the statement correctly and what rights you have as an owner.
What is an annual statement?Link to this section
The annual statement, commonly referred to as the condominium association statement or house maintenance fee statement, is the central document for condominium owners, providing information on how the condominium association managed its finances in the past year. It records all income and expenses for the jointly owned condominium property.
A key point is the determination of additional payments or refunds for owners. These arise when the advance payments made do not match the actual costs, i.e., so-called billing peaks.
The annual statement of accounts for condominiums serves primarily to ensure transparency and cost control. It allows condominium owners to view the condominium's financial situation in detail and to monitor and review the work of the property manager.
The content of the annual statementLink to this section
Since there are no fixed specifications for the design and content of the condominium statement, it can look different depending on the administrator.
Essentially, the annual statement of a condominium association (WEG) contains a detailed breakdown of all income and expenses from the previous year. Income includes the owners' maintenance payments, any rental income from common property, and interest income from reserves. Expenses include, among other things, all costs incurred for maintenance, administration, insurance, and utilities and waste disposal services.
The individual bills for the apartment owners and the distribution key used must also be included in the WEG bill.
Another important point in the annual statement is the presentation of the development of the maintenance reserve. This shows how much money is available for future repairs, renovations and modernizations for the condominium association.was saved. In addition, the owners' individual account balances regarding their maintenance fee payments are displayed in order to determine any additional payments or refunds.
In addition to the mandatory information, the annual statement may contain additional information. This includes a certificate from the property manager regarding services and tradesmen's work.
An overview
Revenue:Owners' maintenance feesRental income from shared propertyInterest incomeOther incomeExpenditure:Maintenance (repairs, servicing)Operating costs (e.g. heating, water, electricity)Administrative costs (administrator's fee)InsuranceCleaning and garden careOther expensesDevelopment of the maintenance reserve:Opening inventoryFeedersWithdrawalsClosing inventoryOwners’ account balances:Overview of advance payments made (housekeeping fees)Actual cost sharesDetermination of additional payments or reimbursementBalance sheet:Summary of the overall financial situation of the homeowners associationAs an appendix:List of individual cost itemsMinutes and resolutions of the owners' meeting
Tip: Compare the annual statement with the business plan
A comparison of the WEG statement with the annual WEG's business plan is always insightful. If the figures in the budget and the annual financial statements largely agree, this demonstrates solid administrative work and a good understanding of the budget.
If, despite careful preparation, discrepancies occur in the annual financial statements for the previous fiscal year, an adjustment for the following year is advisable. However, one-off events with temporarily higher costs do not necessarily justify an adjustment to the budget. Valuable tips for reviewing the condominium association's financial statements can be found below.
What is the deadline for the condominium settlement?Link to this section
The WEG Act has deliberately not set a fixed deadline for the condominium association's annual statement to accommodate the varying circumstances of condominium associations. A smaller condominium association with simple financial circumstances may require less time to prepare the annual statement than a larger condominium association with complex income and expenditures.
However, three to six months after the end of the financial year can be considered a guideline. Some courts have even considered a period of three months to be reasonable, while six months may also be acceptable if there are compelling reasons.
Usually, the WEG statement is sent together with the invitation to the annual Owners' meeting This meeting serves, among other things, to discuss and make decisions about the condominium association's annual statement and the maintenance reserve. Following the resolution on the annual statement, additional payments or reimbursements become due, which are listed in the individual statement.
Who prepares the annual statement for the homeowners association?Link to this section
The preparation of the annual condominium association statement is not the responsibility of the association itself, but rather the condominium association administrator, who is required to fulfill this task in accordance with Section 28, Paragraph 2 of the Condominium Act. Unlike tenancy law, which stipulates a 12-month deadline for the utility bill, there is no legally specified deadline for the maintenance fee statement. However, as you already know, as a condominium owner, you have the right to demand that the administration prepare the statement promptly.
Especially if you rent out your apartment, you depend on the timely delivery of the WEG statement in order to be able to prepare your utility bill for your tenant. If the administrator repeatedly encounters delays or errors in the WEG statement, this may be a reason to to change property management Furthermore, your condominium association is not obligated to approve an incorrect annual statement.
Who bears the costs for preparing the annual financial statements?Link to this section
The costs for preparing the maintenance fee statement are borne by the condominium association as a whole, with each individual condominium owner assuming a certain share. The amount of this share is generally based on the respective co-ownership share of the condominium owners or another, previously determined distribution key (see also new WEG law on cost distribution ).
The specific costs for billing are listed in the annual individual billing statement from the condominium association. Unlike other ongoing costs such as caretaker fees or garbage disposal, these costs cannot be passed on to tenants.
Get more information in our article about apportionable house money .
The annual statement when ownership changes: Who has to pay?Link to this section
Changes in ownership can lead to confusion. The annual statement of ownership is always sent to the person registered as the owner in the land register at the time of preparation.
This means that even if the apartment was sold during the year, the original owner will receive the bill. They must then independently reach an agreement with the new owner regarding the allocation of costs.
Missing or delayed annual statement? What you need to pay attention toLink to this section
Proper and timely preparation of condominium management accounts is not only a legal obligation for condominium management, but also a key component and foundation for a trusting relationship with condominium owners. But what happens if the management fails to fulfill this obligation or submits the accounts late? What rights do owners have in such cases? And what consequences does the management face?
Missing billing
Preparing an annual statement and submitting it for approval at the owners' meeting is one of the statutory obligations of property management companies, as stipulated in the management contract and in Section 28 Paragraph 3 of the German Condominium Act (WEG).
Every apartment owner has a right to receive the maintenance fee statement pursuant to Section 21, Paragraph 5, No. 5 of the Condominium Act (WEG), which they can also assert in court. Failure by the management to comply with this obligation may constitute grounds for termination.
Late billing
If the condominium association's annual statement is delivered late by the administration, this can lead to problems for you as a landlord in meeting the statutory deadline for the utility bill to your tenants. This is particularly frustrating because additional payments can no longer be claimed from tenants if the utility bill is delivered late.
This also applies if the WEG administration is responsible for the delay in the house maintenance fee statement (Federal Court of Justice, case number: IIIV ZR 249/15).
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Tips for owners on checking the WEG annual statementLink to this section
A careful examination of the WEG annual statement is essential for apartment owners and the Administrative Board It's important to ensure that all financial transactions have been handled accurately and transparently. A thorough audit helps uncover any errors or discrepancies and builds trust in the administration. To help you with this, we've compiled 10 essential tips for reviewing your annual financial statements:
10 tips
Evidence:Every euro must be documented with a receipt. Proper accounting is essential. Conduct random checks, especially for larger payments.Originals:Trust is good, but verification is better. Insist on originals of invoices, bank statements, and other important documents. Copies could be fake.Account balances:Try this simple test: Do the income and expenses listed on the statement match the actual account balance at the end of the year? Calculate the total of the opening balances, add all income, and subtract all expenses. Does the result match the closing balance? If not, ask your accountant to explain why.Overviews:The property management should provide you with the following documents:Total billing:With all bank account balances.Individual billing:For each individual owner.Development of the maintenance reserve:Both the planned (TARGET) and the actual (ACTUAL) values.Results of the individual billing:Shows whether there are any outstanding maintenance fees (not required by law).Asset overview:Not required by law, but very useful.Carryovers:The various parts of the annual statement must flow seamlessly into one another. Ensure consistent figures for carry-overs.Reserves:Maintenance reserves are an important component of the community's assets. Check whether the reserve levels match expectations and obtain explanations for any discrepancies.Individual billing:Each apartment owner is responsible for reviewing their own individual billing statements. Are the cost allocation keys correct? Have all costs been calculated correctly?Arrears in maintenance fees:Arrears in maintenance fees are a nuisance for the entire community of owners. Check whether these are being recorded and whether the property manager is taking steps to collect them.Explanatory report:A good property manager will include a written report with the condominium settlement, explaining any peculiarities, discrepancies, or liquidity problems.Resolution on the annual financial statements:The resolution regarding the condominium association's statement of accounts must not contain any reservations. The annual statement must be clear, and the result (balance) must be fixed. Subsequent changes to the statement by the administration without a new resolution are not permitted.
Do you already know Ralph?
Clarity and transparency for your condominium association. At Ralph, your Berlin property management company, we know how important accurate and timely annual financial statements are. That's why we prepare them with the utmost care and precision. This way, you always have a clear overview of your community's income and expenses.
Trust in our expertise for transparent and comprehensible billing. Get a free offer and switch to Ralph!
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