Discharging the administrator: the most important aspects and laws

The discharge of the administrator is an important part of the annual owners' meeting and an important instrument in condominium law. As property managers, we would like to inform you about the key aspects of this complex topic and explain the legal basis and practical consequences.

What does it mean to relieve administrators?

The discharge of property managers is a formal resolution of the community of owners, by which the owners confirm to the managers that they have carried out their activities properly. This discharge resolution relates to a specific period, usually the past financial year, and is usually passed together with the approval of the annual statement of accounts.

The legal basis for the discharge can be found in the German Condominium Act (WEG) and in the respective community regulations. Resolutions are passed at the owners' meeting and require a proper invitation as well as sufficient information about the management activities.

Good to know: This deadline for convening the WEG owners' meeting exists.

Legal significance and consequences of the discharge

The discharge can have different legal effects depending on how it is formulated and understood:

• Positive acknowledgement of debt: The community of owners acknowledges that the administrator has carried out his/her duties properly
• Negative acknowledgement of debt: The community of owners waives any known claims against the administrator

Case law makes a clear distinction between these two variants, as they have different consequences for possible claims for damages.

An important aspect of the discharge is the potential waiver of claims against the administrator. If the owners grant discharge, they can generally no longer assert claims for compensation for actions that were already known at the time of discharge.

Effects on future claims

The granting of discharge has far-reaching consequences for possible future claims against the property management company. As a rule, no claims for damages can be asserted for the period in question after an effective discharge, unless the defects were fraudulently concealed.

Requirements for effective discharge of the property management

Various requirements must be met for a discharge to be legally effective:

Proper adoption of resolutions

• Legitimate invitation of the condominium owners to the owners' meeting
• Inclusion of the agenda item "Discharge" in the invitation
• Achieving the required majority in accordance with WEG law
• Recording of the decision

Complete information basis

The owners must be informed about all key management processes:

• Submission of the annual financial statement
• Explanation of additional payments and adjustment amounts
• Presentation of significant administrative actions
• Disclosure of problems or difficulties

In the event of serious violations such as embezzlement or gross errors in management, a discharge of the administrator may be ineffective or lose its legal effect.

The right to discharge of the administrator

In principle, every property management company is entitled to discharge if it has carried out its activities properly. This entitlement arises from the management contract and the general provisions of WEG law.

Refusal of discharge

The community of owners can refuse to discharge the COA administrator if:

• there are errors in billing or administration
• The property management company has not properly fulfilled its obligations
• Claims for damages against the administrator exist
• The administrative documents are incomplete

The role of the management advisory board

The advisory board plays an important role in discharging the administrator:

• Examination of administrative documents
• Advice for owners in the decision-making process
• Detection of problems or errors
• Recommendation for or against discharge

Special situations and exceptions to the discharge of the property management company

In certain cases, partial discharge is also possible, in which only certain areas of administrative activity are covered by the discharge. This can be useful if there is still a need for clarification in individual areas. A discharge that has already been granted can be subsequently revoked under certain conditions:

• In the event of fraudulent misrepresentation by the property management company
• If material information has been concealed
• In the event of serious breaches of duty that subsequently become known

Recommendations for practice

As an experienced property management company, we recommend the following procedure to owners' associations:

Before the owners' meeting:

• Provide all relevant documents in good time: Request all important documents from the manager at least two weeks before the condominium owners' meeting, including the detailed annual statement of accounts, receipts for major expenses, minutes of the management advisory board and an overview of all measures and repairs carried out. These documents should be prepared in a complete and comprehensible manner so that all owners have sufficient time to review them.
• Thorough review of the annual statement: Take enough time to go through the statement point by point. In particular, check the plausibility of the cost items, the distribution of allocations according to co-ownership shares, the justification of additional contributions and adjustment amounts as well as the proper bookkeeping. If there are any uncertainties or anomalies, you should ask the administrator about these in writing before the meeting.
• Clarification of open questions with the administrator: Take the opportunity to speak directly with the administrator or submit written questions in advance of the meeting. This applies to questions about the accounts as well as specific administrative actions, decisions or problems that have arisen during the reporting year. Open communication before the meeting can considerably shorten subsequent discussions.

During the meeting:

• Detailed discussion of contentious issues: As a homeowners' association, do not allow yourself to be put under time pressure and discuss all problematic aspects of the management activities openly and objectively. All owners should have the opportunity to express their concerns or ask questions. It is important that the property management company responds to all points of criticism and provides plausible explanations.
• Documentation of all key aspects in the minutes: Make sure that all important points of discussion, statements by the property management company and the basis for the decision to approve the actions of the property manager are recorded in detail in the minutes of the owners' meeting. This not only serves to ensure traceability at a later date, but is also legally important in the event that questions about the discharge of the property manager arise at a later date.
• Clear wording of the discharge resolution: Make sure that the discharge resolution is formulated precisely and clearly defines the period and areas of activity for which discharge is granted. Avoid vague formulations that could lead to legal uncertainties later on. In the case of reservations or partial discharge, these should be explicitly stated and justified.

After the discharge:

• Archiving of all relevant documents: Ensure that all documents relating to the discharge, including the annual statement of accounts, the minutes of the meeting and all receipts, are properly archived. These documents should be accessible to all owners and kept for at least the statutory retention period of ten years.
• Define improvement measures for the future: Use the findings from the discharge discussion to agree on concrete improvements for future administration. These could be more regular reports, improved communication channels, more precise billing or more intensive monitoring of certain areas. Record these agreements in writing and review their implementation regularly.

Do you already know Ralph?

The discharge of the administrator is a complex issue with many legal consequences. A careful examination of the management activities and a well-considered decision are therefore important for you as a community of owners. In the event of uncertainties or more complex issues, you should not be afraid to seek expert advice. We will be happy to answer any further questions you may have on this topic or other matters relating to condominium management.

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