The maintenance reserve is a key to the financial health of your condominium association. Imagine the roof suddenly needs replacing. Or the elevator breaks down after years of faithful service. Who and how do you pay for such unexpected, often costly repairs in a condominium association? The answer lies in an important, yet often underestimated, aspect of condominium ownership: the maintenance reserve.
What is the conservation reserve?Link to this section
The maintenance reserve, also known as the maintenance reserve, maintenance provision or renewal fund, is a financial cushion that is used by Homeowners associations (WEG) This credit serves several purposes:
to finance maintenance workto carry out necessary repairsand to cope with unexpected costs
The maintenance reserve covers foreseeable costs, such as replacing an outdated heating system, and serves as a financial buffer for unexpected expenses, such as repairs after storm damage. Thus, the maintenance reserve acts as a kind of "savings account" for the homeowners' association, available for both planned and unplanned expenses.
What can be financed from the maintenance reserve?Link to this section
The Maintenance reserve according to the WEG Act of homeowners associations is used for the maintenance and repair of the property. It is intended for measures that joint property benefit.
The following measures can generally be financed from the maintenance reserve:
Renewal and modernization of technical systems:heating systemThermal insulationElevators (inspection and repair)Building and structure:Roof repairsWindow renovationFacade renovationBalcony modernizationInterior of the common property:Repair of the staircasePainting work in common areasGeneral repairs on joint property
Prohibited uses
As a property owner, please note that the maintenance reserve may not be used for the following purposes:
Repairs or maintenance measures in individual condominiums, i.e. the special property Procurement of consumables (e.g. heating oil)
These restrictions ensure that the maintenance reserve is used exclusively for measures that benefit all owners equally and contribute to the long-term preservation of the property.
Does a maintenance reserve need to be created?Link to this section
Yes, the maintenance reserve is mentioned in Section 19 Paragraph 2 No. 4 of the German Condominium Act (WEG) as an example of proper management. Although the WEG Act cites the creation of a maintenance reserve as an example of proper administration, but there is no explicit legal obligation to create a reserve.
Nevertheless, the accumulation of an appropriate maintenance reserve is considered necessary in practice and is common practice in most condominium associations. Regarding the specific amount of the maintenance reserve, the Condominium Act refers to a "collection of an appropriate maintenance reserve."
Can a maintenance reserve be dispensed with?Link to this section
The question of whether Homeowners Whether landlords can agree not to create a maintenance reserve has not been conclusively clarified in legal terms. However, this possibility is certainly discussed in the specialist literature, and some support it. There is no authoritative case law on this topic to date. This is presumably because a maintenance reserve is generally in the owners' interest.
Important: Even if the reserve is waived, maintenance measures must be financed. The following aspects must be considered:
Special leviesWithout reserves, special levies would have to be levied if necessary.Financial burden: Such special levies can lead to considerably greater financial burdens for individual homeowners than continuous savings.Planning security: A reserve offers more planning security and distributes the financial burden more evenly over time.
Who initiates the creation of a conservation reserve?Link to this section
The initiation of the resolution on the maintenance reserve is primarily the responsibility of the property management. This applies unless the reserve formation has already been Declaration of division or community regulations. The condominium administrator acts as an organ or representative of the homeowners' association and thus contributes to ensuring the financial viability of the homeowners' association.
Two scenarios for the creation of reserves for administrations
For condominium managers, two key scenarios arise when establishing a maintenance reserve. In the first case, if no prior determination exists, it is the responsibility of the property management company to initiate a resolution to create the reserve. This requires the manager to actively inform the owners of the need and initiate a vote.
In the second scenario, when the creation of reserves is already stipulated in the Community regulations, the Task of the property management somewhat different. In this case, no separate resolution is required to create the reserve in principle, as this decision has already been made in advance. Nevertheless, it remains the responsibility of the condominium management to initiate a resolution on the specific amount of the reserve. This allows the amount of the reserve to be adjusted to current needs and economic circumstances.
The final decision on the amount of the reserve to be created rests with the owners. They make their decision by resolution, usually based on a proposal from the management.
The advantages of a maintenance reserve for ownersLink to this section
Creating a maintenance reserve in a homeowners association is sensible and necessary for several reasons.
Protection against unexpected costs:A key argument for a maintenance reserve is to protect owners against sudden, costly repairs. For example, severe weather damage caused by storms can result in repair costs of tens of thousands of euros. A well-filled reserve ensures that such unforeseen expenses can be managed and the property is protected.Financial stability of the Community:The maintenance reserve protects individual owners from financial overextension. It prevents less solvent owners from getting into trouble or from solvent owners having to step in for others. This promotes the financial stability of the entire community of owners.Uniform Cost distribution :Regular, smaller payments into the maintenance reserve spread the financial burden on owners over a longer period. This is generally easier to manage than large lump sums when needed.Fairness in transfer of ownership:An appropriate maintenance reserve ensures fairness during transfers of ownership. New owners do not have to pay for wear and tear that occurred before their purchase, as the costs are already proportionally accounted for in the maintenance reserve.ConclusionThe maintenance reserve is an essential component of responsible property management. It provides financial security, promotes the stability of the condominium association, and ensures a fair distribution of costs over time and across changes of ownership.
Amount and calculation of the maintenance reserve: Flexible approaches for homeowners' associationsLink to this section
The German Condominium Act (WEG) allows your condominium association some leeway in determining the amount of the maintenance reserve, as there is no statutory minimum. However, there are several methods for determining an appropriate amount.
Important factors for determining the amount of the reserve
The amount of the maintenance reserve should be determined individually, taking the following factors into account:
Condition of the buildingAge of the propertyStructural substanceFacilities of the building
The calculation of theMaintenance reserveaccording to Peters' formula
The Peters formula provides a structured method for calculating maintenance reserves for condominium associations. It is based on data on maintenance costs and property construction costs.
The formula assumes that over an 80-year period, 1.5 times the original construction cost will be spent on maintenance. Approximately 70% of these costs are attributable to the common property.
Peters’ formula is:
(production costs x 1.5) / 80 years = annual maintenance costs
The calculation of the maintenance reserve according to Section 28 Paragraph 2 II. BV
Although the German Condominium Act (DG) does not prescribe specific amounts for the maintenance reserve, the Ordinance on Residential Calculations under the Second Housing Act (II. BV) provides useful guidelines. These specifications, originally designed for social housing, can serve as a guide for condominium associations.
Section 28 paragraph 2 II. BV recommends the following annual reserve amounts per square meter, depending on the age of the building:
Buildings up to 21 years old:Up to 7.10 euros per m² annuallyBuildings between 22 and 32 years old:Up to 9.00 euros per m² annuallyBuildings over 32 years:Up to 11.50 euros per m² annually
Adjustment of the maintenance reserve: on dealing with over- and underfundingLink to this section
The amount of the maintenance reserve may deviate from the actual needs of the condominium association over time. Here are the options in both cases:
If theMaintenance reserve
Contribution reduction: The Owners' meeting may decide to reduce future contributions to the maintenance reserve.Use for additional purposesSurplus funds can be used for non-essential but value-enhancing measures such as cosmetic repairs.No repayment of the maintenance reserve: A direct repayment of amounts already saved to the owners is not possible.
If theMaintenance reserve
Special levy: The owners' meeting may decide on a special levy to finance urgent repairs or maintenance measures.Contribution increase: An increase in the regular contributions to the maintenance reserve can be decided in order to be better prepared for the future.
Approaching the management of the maintenance reserve correctly
To ensure optimal management of the maintenance reserve and avoid potential emergencies, we recommend taking preventative measures. First, the level of the maintenance reserve should be reviewed at regular intervals.
This allows you to respond promptly to changes in your homeowners' association's financial needs. Based on these provision reviews, contributions can be adjusted as needed to either avoid overfunding or counteract the threat of underfunding.
Another important aspect is the creation and implementation of long-term maintenance plans for the property. These plans help anticipate future expenses and calculate reserves accordingly. By implementing these preventative measures, a balanced maintenance reserve can be built and maintained.
This contributes significantly to the financial stability of the condominium association and helps avoid unexpected financial burdens for you and other owners. Ultimately, a well-planned and managed maintenance reserve leads to cost-effective and proper management of the condominium association property in the long term.
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The maintenance reserve is the financial backbone of every homeowners association. Properly calculating and managing it is crucial for the long-term stability and value retention of your home.
At Ralph, we understand the complexity of this task. Our managers bring in-depth expertise to optimally calculate and manage your maintenance reserve. Invest in the financial security of your condominium association and request it now. a free offer on!
