As an owner or co-owner of an apartment, you incur certain monthly expenses known as maintenance fees. If you rent out your condominium, you can pass on some of these costs to your tenants.
However, caution is advised here. If a condominium association (WEG) has decided to cut costs on maintenance fees, it must be well thought out. It's important to think not only in the short term, but also in the long term. We'll explain how to calculate the maintenance fee amount, which costs can be passed on to tenants, and what you should know about maintenance fees, including where you can potentially save costs.
Definition: What is house money?Link to this section
The term "Hausgeld" refers to an amount that each apartment owner pays to the condominium association (WEG) – usually represented by the property management – at the end of the year to cover the most common costs for the management, administration, and repair of the condominium association. This is stipulated in Section 16, Paragraph 2 of the WEG Act .
The term “Hausgeld” (house fee) has become established in the common usage of a condominium association (WEG), but the legislature does not use this term – rather, the WEG Act refers to burdens and costs.
We also often confuse house money with housing benefit, although these are two different terms. Housing benefit is a government benefit intended to help low-income tenants finance their housing costs. It is regulated by the Housing Benefit Act. House money for a condominium, on the other hand, refers to the costs incurred in a condominium association. It serves to finance communal expenses. The legal basis for house money can be found, as mentioned, in the Condominium Act.
What is included in the house fee?Link to this section
The individual items that comprise the maintenance fee can vary depending on the size and amenities of the property(ies). However, the following are examples of maintenance fee costs:
Insurance premiums (e.g. building and liability insurance)Costs for community antenna systemWater supply and water disposalHeating and hot waterGarbage collectionHouse cleaningElectricity costs for the communal systemChimney cleaningMaintenance costs of the outdoor areaCosts for elevators, caretakers, and other communal facilities.
In principle, you can pass on the aforementioned costs to the tenants. Which costs can ultimately be passed on depends on the agreements in the declaration of division and the rental agreement.
There are also expenses that cannot be passed on to tenants, such as maintenance reserves, certain insurance policies, account fees, or property management costs. These are of particular interest to owners when it comes to saving on maintenance fees.
What does the obligation of apartment owners under Section 16 Paragraph 2 WEG mean?
According to Section 16 (2) of the German Condominium Act (WEG), owners are obligated to bear the costs of the common property, as well as the costs of maintenance and repairs, in proportion to their co-ownership shares. This share is determined based on the co-ownership shares registered in the land register.
The amount of the maintenance fee: How is the maintenance fee calculated?Link to this section
The amount of the maintenance fee is calculated based on the costs borne by the owners. Each owner must contribute their share according to their respective co-ownership share.
How much maintenance fees you have to pay monthly depends on many factors. These can vary considerably depending on the property. One important factor is the age of the building. Maintenance costs are still low for newer apartments, but higher amounts are incurred for older buildings.
The amenities of the residential complex also play a role. Buildings with special features such as elevators or underground parking, as well as older buildings in need of renovation, generally incur higher running costs. The size of the apartment and the specific services provided by the property management company also influence the amount of the maintenance fee. However, the actual costs can vary considerably. Average monthly costs are between €3 and €4.50 per square meter.
Compared to a rental apartment, monthly maintenance costs for a condominium are usually 20 to 30% higher.
The house maintenance fee statementLink to this section
Every year, homeowners receive a Housekeeping bill This is comparable to a invoice for additional costs For tenants: The statement shows the costs incurred for the entire building and how these were allocated to the individual owners. This allows you to understand what your maintenance fee was used for and whether you owe any additional payments or receive a refund.
What regulatory powers do the owners have?
The legislature has granted owners majority voting power on issues of due dates, consequences of default, such as interest, and other ancillary payments. This regulatory authority applies in particular to late payment interest provisions, due date provisions, flat-rate contractual penalties, and a flat-rate relocation fee. Starting in 2007, the controversial flat-rate fee for non-participation in direct debit transactions was also legally regulated as a special administrative expense.
Maintenance fees and vacancy: What do you need to consider?
Even if a condominium is vacant, the obligation to pay the maintenance fee remains. Refunds or additional payments are made according to the annual statement and affect the owner at the time the resolution is passed. Therefore, in the event of a sale, there may be an overpayment or underpayment. To avoid disputes, the handling of the maintenance fee should be clearly regulated in the purchase agreement.
When and how do you have to pay maintenance fees?Link to this section
There are no legal regulations regarding when maintenance fees must be paid. Instead, the submitted individual budget, with its specified monthly advance payments, forms the basis for maintenance fee advance payments. The overall budget contains the projected income and expenditures of the entire property for the planned fiscal year. The cost contribution of the apartment owners is specified in the allocation key in the individual budget.
The wording of the resolution must refer to the individual business plans, and proper administration requires appropriate rounding on the expenditure side and calculations with sufficient certainty. The contribution to the maintenance reserve must also be disclosed. If the business plan is to continue to apply beyond the financial year, this must be explicitly resolved.
What happens if a homeowner does not pay maintenance fees?
Collecting outstanding maintenance fees is one of the management's responsibilities. According to Section 27, Paragraph 1, No. 4 of the Condominium Ownership Act (WEG), the management is authorized to assert claims on behalf of the condominium owners. If an owner fails to meet their payment obligations, the management may initially attempt to collect the outstanding amount out of court. If this is unsuccessful, legal action may be initiated. The basis for claim enforcement is either the appointment of a management administrator or a resolution of the owners' meeting.
A homeowner has no right to withhold advance payments on maintenance fees, even if they believe they can expect a credit balance at the end of the fiscal year. It is therefore recommended to explicitly decide that the budget should continue to apply beyond the fiscal year.
Business plan vs. annual statement: Beware of confusion
Your condominium association's budget represents a forecast of expected income and expenses for the coming year. The monthly maintenance fee is determined based on this plan. The annual statement, on the other hand, is an exact representation of the actual costs and income incurred in the previous year. It serves to highlight any deviations from the budget and determine whether the owners are required to make additional payments or receive refunds.
Deduct house maintenance fees from your taxes: How it worksLink to this section
Good news for landlords: Portions of the maintenance fee can be claimed as tax deductions. Costs that you, as the landlord, incur yourself and do not pass on to the tenants can be deducted as business expenses. However, there is an important limitation: Only the amounts actually spent are deductible. This means that, for example, a maintenance reserve can only be deducted from taxes if the money was actually used for repairs or renovations.
The tax deductibility of maintenance fees depends on the use of the condominium. For owner-occupied apartments, 20% of the costs for household services and tradesmen's services can be claimed as special expenses.
6 tips to reduce your maintenance costsLink to this section
Want to reduce your maintenance fee and save money? Here are our top tips for saving on maintenance fees:
1. Switch to a new property management company
Since property management expenses cannot be passed on to tenants, you must cover the full cost. This is where you can save the majority of your maintenance fees if you're clever about it.
However, the cheapest property management company isn't always one you can rely on 100%. As a condominium owner-occupied property owner, consider how you can limit the management services to save money without compromising on the quality of service.
Ralph Management GmbH operates primarily digitally, but is also available on-site. This has the advantage that many services can be handled conveniently, quickly, and cost-effectively online. Among other things, Ralph offers a detailed overview of all the owners' association's operating costs online, which you can view at any time. Starting at just €19.99 net per month, you have an affordable yet professional property management company at your side that you can rely on.
We would be happy to help you to change property management Leave us a message and we'll get back to you to discuss the details. We answer 100% of inquiries personally.
2. Systematically obtaining quotes when commissioning tradesmen
It happens that condominium associations hire tradespeople because they either know them personally, have been using them for many years, or lack the time to compare quotes for all the work. However, this can result in higher costs.
To save on maintenance fees, condominium associations (WEGs) are strongly advised to compare multiple quotes, and for major renovations, even more than three if possible. Your handyman may reduce his or her quote accordingly. If you blindly follow the quotes of certain companies, you run the risk of overpaying and incurring significant costs.
3. Comparison of providers for the purchase of household electricity and heating costs
Switching your electricity provider or purchasing utility bills like oil, gas, or water from another company can be extremely worthwhile for saving on your utility bill. Sometimes simply expressing your desire to terminate your contract is enough to obtain better terms. We are happy to automatically review our properties to see if we see any potential for optimization in utility and operating costs.
4. Review of insurance policies by an external broker
It may be worthwhile to review the insurance policies taken out by the condominium association from time to time. Consolidating the insurance policies of individual owners and the association could also result in lower premiums, even if they are independent. Contact two or three insurance providers and ask for quotes, or seek free advice from an outside specialist.
5. Caretaker instead of external tradesmen
It may be worthwhile to hire a caretaker through the condominium association to handle minor repairs, chores like gardening, winter maintenance, and/or cleaning. If your caretaker has a certain level of manual dexterity and a few minor repairs need to be done in your property, you can quickly save significant amounts on maintenance fees by avoiding the high cost of certain repairs—a significant cost factor in condominiums.
6. Review of the maintenance reserve
The maintenance reserve is usually a significant cost item in the amount of the maintenance fee. It is used to cover major expenses for the common property, such as facade renovations, a new elevator, etc.
However, even though it's a significant expense, you should proceed with caution if you're thinking about reducing these payments. The amount you should save depends on the age of the property. The older the house, the more you should generally set aside. A competent property manager will analyze the amount of the maintenance reserve based on the long-term maintenance plan.
Maintenance fee and maintenance reserve: Everything you should knowLink to this section
A maintenance reserve (formerly: maintenance provision) is a cash reserve established by the homeowners' association to finance future maintenance and repair measures. It is not necessary to establish a reserve unless requested by an owner. However, if an owner requests it, a reserve must be established, and the amount and purpose must be approved by a majority vote.
The maintenance reserve is earmarked and may only be used for future maintenance and repair measures. General community expenses and costs may not be paid from the reserve. Only in exceptional cases, when a proper basic and reserve level of provisions remains, is recourse to this reserve to bridge liquidity bottlenecks possible.
The amount and allocations to the maintenance reserve
There is no legal requirement for the amount of the maintenance reserve. However, the reserve should be appropriate, and there are various formulas for calculating an appropriate amount. For example, the Peters formula can be used to multiply the construction costs per square meter by a factor of 1.5 and divide by the 80-year lifespan of the building.
Another method involves applying the provisions for social housing, which stipulate that the annual contribution should be between €7 per square meter and €11 per square meter (depending on the age of the building) and €68 per year for garage parking spaces. In the event of a dispute, the courts will decide on an individual basis based on the technical condition of the building, its age and amenities, and its medium-term need for repairs.
Contributions to the maintenance reserve are part of the monthly advance payments for maintenance fees. Both the actual and owed payments toward the reserve must be reported in the annual statement. The former as income, the latter as a separate item. Since December 1, 2020, only the "cropped" information is required in the asset report. If a condominium owner retires, they cannot claim a portion of the reserve. For a commercial owner, the paid-in reserve amounts are only considered business expenses for tax purposes once the reserve is used up.
Do you already know Ralph?Link to this section
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