The term "billing peak" frequently crops up in connection with the annual financial statements and the budget of a condominium association. In this article, we'd like to explain how you can better understand the billing peak and how you can actively contribute to optimizing costs in your condominium association.
What is a billing peak?Link to this section
The billing peak is the difference between the planned and actual costs in a condominium association's annual bill. It results from the comparison of the economic plan estimated house fees and the actual billing amount of the costs incurred.
Arrears or delinquent maintenance fees, as well as actually paid maintenance advances, are not taken into account. However, special levies collected during the fiscal year are to be considered when calculating the billing peak.
Explanation: This is how the billing peak arises
In the budget, the property management prepares a forecast of the expected income and expenditure of your Homeowners association for the coming financial year. All owners pay the maintenance fee on this basis. At the end of the financial year, a comparison is made between the actual expenses incurred and the income generated.
When income differs from the actual costs for the property, this is referred to as a billing peak. A billing peak describes the amount that arises when the actual utility costs of a property or the expenses of a homeowners' association exceed the previously calculated amounts covered by advance payments.
The consequence: For owners, this means that they have to make an additional payment to cover the difference between the advance payments made and the actual costs for the billing year.
Reasons for the billing peak can include unexpected repairs, increased extra costs or changing requirements for building maintenance. We'll explain further reasons for the billing spike later.
Billing peak vs. billing balance: the difference
When we talk about the billing peak, we need to differentiate between the term and the billing balance. Unlike the billing peak, which compares the planned maintenance fees with the actual costs, the billing balance takes into account the maintenance fees actually paid. It represents the difference between the actual costs and the actual income and can result in either a credit or a deficit.
If all owners have their House fee have been paid properly, the following calculation applies: billing balance = billing peak.
Positive billing peak and negative billing peakLink to this section
A billing peak can occur in two forms: as a positive billing peak and as a negative billing peak.
A positive accounting surplus occurs when the homeowners' association's income exceeds its expenses for the relevant fiscal year. In this case, the association generates a financial surplus—a desirable outcome for the homeowners' association.
Example of a positive billing peak:A homeowner pays €300 per month in maintenance fees, which equates to €3,600 per year. However, the actual costs for the property amount to only €3,300. This results in a positive billing balance (a credit balance) of €300.
In contrast, a negative billing peak occurs when the homeowners' association's income is insufficient to cover the costs for the fiscal year. As you already know, this results in a shortfall, which can be caused, for example, by unexpected repairs to the common property, increased operating costs, or general price increases.
Example of a negative billing peak:A homeowner pays €300 per month in maintenance fees, which equates to €3,600 per year. However, the actual costs for the property amount to €4,000. In this case, a negative billing amount of €400 arises.
Who bears the billing peak?Link to this section
The question of who bears the billing spike only arises in the case of a negative billing spike. In the case of a positive billing spike, only the "affected" condominium owners have a claim against their condominium association.
A negative billing peak, however, is borne jointly by all owners, in accordance with the amount specified in the community regulations. Distribution key If such an agreement is missing, the owners shall bear the negative billing surplus in proportion to their co-ownership shares, as stipulated in Section 16 Paragraph 2 Sentence 1 WEG.
When is the billing peak due?Link to this section
The WEG reform of December 1, 2020, introduced new regulations for determining the billing peak. According to Section 28, Paragraph 2, Sentence 1 of the WEG, the owners now decide exclusively on the financial consequences of any deviation from the budget. The billing peak itself is legally determined by the resolution on the annual statement.
Once the homeowners' association's annual statement has been prepared and a billing peak has been identified, any additional payments are due. Their due date is decided at the homeowners' meeting and recorded in the resolution on the homeowners' association's annual statement.
Key points:
Six-month period:The annual statement must generally be prepared within six months of the end of the accounting period.Reasonable period:A period of three to six months after the beginning of the following year is generally considered appropriate.Deviating regulations:If other deadlines have been agreed in the declaration of division or the management contract, these shall take precedence.
Typically, owners are given a reasonable period of time to settle the settlement, i.e., the additional amounts. These deadlines are important to give owners sufficient time while ensuring the community's solvency.
If homeowners do not pay their contribution
The timely payment of additional charges in the event of billing peaks is one of the obligations of property owners. Failure to fulfill this obligation will result in individual consequences.
After initially sending out out-of-court reminders to reach an amicable settlement, the administration can initiate legal action if payment is not made. These can range from dunning proceedings to foreclosure proceedings.
However, it is always in the interest of all owners to avoid such situations, because non-payment by individual owners jeopardizes the financial stability of the community and causes unnecessary costs that ultimately have to be borne by everyone.
What causes billing peaks?Link to this section
Billing spikes in a community can have many causes, from repairs to new regulations.
Important repairs:Sometimes unexpected repairs to the roof after a storm, the failure or repair of central systems such as heating or elevators, or urgent renovation work on the facade or basement area are necessary.Rising operating costs:Whether it is energy prices for electricity, gas or heating oil, rising water and sewage costs or increased fees for waste disposal and street cleaning – all of this can lead to a billing spike.New laws:Legal changes to Energy saving measures , changes in the municipal fee schedule or adjustments in fire protection or other safety regulations can require investments and thus lead to a billing peak.Modernization measures:If agreed measures to renew common property or install photovoltaic systems are implemented, these costs can also cause a billing spike for the co-owners.Administrative costs:Increased costs for the condominium administrator, legal fees, or costs for holding owners' meetings and passing resolutions can also play a role.Vacancy:The impact of vacancies on the redistribution of operating costs or costs for the maintenance of vacant units can also be reasons for a billing spike.New usage behavior:An increase in the number of residents in the building or increased water or heating consumption can also lead to a billing spike.
What happens to the billing peak when there is a change of ownership?Link to this section
A common point of contention when ownership changes is who has to pay any additional payment or who receives a credit.
In principle, the owner during whose term of office the billing peak occurred is always responsible for the costs. The decisive factor here is the time at which the owners' association decides on the annual billing, and thus also on the individual billing (Section 28 (2) Sentence 1 of the Condominium Act). This decision is legally valid only for the condominium owners registered in the land register at that time. This was determined by a ruling of the Federal Court of Justice dated December 2, 2011 – V ZR 113/11.
Example: A change of ownership occurs during the current fiscal year. The property management company prepares separate statements for both the old and new owners for the respective period. Nevertheless, the new owner must make the additional payment to the association if they are registered as the owner in the land register at the time the resolution on the annual statement is passed.
However, a credit balance from a positive settlement peak will only be paid to the purchaser if the seller has paid the maintenance fee in full in accordance with the budget.
Summary: Facts about the billing peak at a glanceLink to this section
The billing peak is the difference between the planned (target house fees) and the actual costs in a WEG annual statement.The billing balance takes into account the actual maintenance fees paid, while the billing peak compares the planned maintenance fees with the actual costs.Consequence for owners: Owners must make an additional payment to cover the difference between advance payments and actual costs.Positive billing peak: Revenues exceed costs (surplus).Negative billing peak:Income is insufficient to cover costs (shortfall, additional payment required). This is borne jointly by all owners, according to the distribution key or co-ownership shares.It is legally established by the resolution on the annual statement. Additional payments are due as soon as the annual statement is prepared and the due date has been approved by the owners' meeting.Causes of billing peaks: unexpected repairs, rising operating costs, new laws and regulations, modernization measures, rising administrative costs, vacancy or changes in usage behavior.In the event of a change of ownership: The owner who is registered in the land register at the time the resolution on the annual statement is passed is responsible for the contribution.
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