Terminate property management: new law!? WEG reform facilitatesthe terminationLink to this section
The new reform of the German Condominium Act (WEG) has significantly simplified the process of terminating a property management contract. The new law, which came into force on January 1, 2020, significantly strengthens the position of property owners. With the modernization of the German Condominium Act (WEMoG) as of January 1, 2020, property owners now have extensive options for terminating a contract and removing the property manager.
No important reason is required to terminate a property management contractAccording to Section 26, Paragraph 3, Sentence 1, Paragraph 5 of the Condominium Act (WEG), the property manager can now be removed from office at any time without the need for a valid reason. This makes it much easier for owners to decide on a new property management company. (However, in most cases, there is a valid reason that leads owners to decide against the current management company and opt for a new or different type of condominium management.)Automatic contract termination:With the dismissal of the property management, the management contract endsautomatically six monthsafter the date of dismissal (Section 26 (3) Sentence 2 of the Condominium Act), and no additional notice of termination is required. It is customary for the term of management contracts to be tied to the appointment of the manager. Therefore, the management contract ends as soon as the dismissal of the manager is decided upon.More flexible termination options:However, if the homeowners' association terminates the management contract before the end of the six-month period, it may do so prematurely, subject to the notice periods agreed in the management contract or the statutory provisions. In cases where there is good cause, even an extraordinary, immediate termination is possible, which terminates the management contract immediately. Therefore, if the manager is dismissed due to extraordinary termination, their management contract ends immediately.A simple majority is sufficient:To dismiss the current property management, a simple majority (more than 50% of the votes) of the owners present at the meeting is sufficient.The meeting is always quorate:Owners' meetings (ETVs) now always have a quorum, even if only a few owners are present. A simple majority at the owners' meeting is sufficient for dismissal. If, for example, only three owners attend the ETV, two votes are sufficient for dismissal. This means that even with a low attendance at the meeting, the property management company can terminate its contract.
These changes give owners more flexibility and control over their choice of property management. They allow them to respond more quickly to dissatisfaction and initiate a contract change without having to overcome lengthy legal hurdles.
We will be happy to advise you on how to ensure a smooth termination process and a successful transition to a new property manager.
Contact us for a personal consultation – we answer 100% of inquiries individually and support you at every step of the process.
Step 1: Obtain offers andconvene a meetingLink to this section
Step 1 of our step-by-step guide to terminating your property management contract. The first step in terminating your property management contract begins with obtaining quotes from alternative managers.
A Google search is often sufficient, but there are also comparison portals such as: Property manager placement , German property managers or Property Manager Scout They will forward your request to various property managers, so you'll receive multiple offers within a few days.
To optimally compare the offers from management companies, we recommend using a standardized service catalog. This will help you clearly compare all the services and costs of the potential new management company. Since important details are often hidden in the fine print, you should ask applicants for precise information.
By carefully considering these criteria, you can make an informed decision about a competent and reliable property manager who best meets the needs of your homeowners association.
Once you have suitable offers from managers, you can plan to terminate the current manager and elect a new manager at the owners' meeting. If the annual meeting is still pending, ask the current management to include the termination resolution on the agenda. They are legally obligated to comply with this request.
This should be done before the meeting invitation is sent out; otherwise, some management companies will even refuse to adjust the agenda within three weeks! If your homeowners association has already held an owners' meeting in the current calendar year, or the current property management company refuses to include the resolution, you can call a so-called extraordinary owners' meeting yourself. This process is straightforward, and we are happy to assist you.
If your homeowners association has already held an owners' meeting in the current calendar year, or if the current property management refuses to include the resolution, you can call an extraordinary owners' meeting yourself. This isn't complicated, but we're happy to help.
The agenda of the owners’ meeting should include the following key resolution proposals:
Termination of the existing management contract and removal of the current managerAcceptance of the new management contract and appointment of the new property management
This structured approach ensures that the termination of your current management and the election of a new manager takes place smoothly and in the interest of the entire community of owners.
Step 2: Conduct of the meeting and decisionLink to this section
On the day of the owners' meeting, the decisive moment is approaching: the resolution to terminate the current management and to elect a new manager will be put to a vote.
This step is of great importance for the future of the homeowners association.
For owners who cannot attend the meeting in person but still wish to cast their vote, there is an important option: You can grant another owner a written proxy. This ensures that your vote as an owner is taken into account in the decision to terminate the manager, despite your absence.
Please note: The power of attorney must be the original. A copy is not sufficient in an emergency and could result in your vote as the owner not being counted. This is especially important when it comes to such a far-reaching decision as terminating the property management contract.
Ready to put your homeowners association in safe hands? Learn how we can save you time and effort.
Contact us for a free, non-binding quoteWe are happy to provide you with advice and support to ensure a smooth transition.
Step 3:Handover Link to this section
Once the changeover is complete, the newly appointed property management company will take care of the handover. Funds, accounts, and documents are transferred. This step is crucial for a smooth transition and can take one to two months, depending on the complexity of the homeowners association. Often, only then can the new property management company truly begin its work.
In contrast to most other administrations,When switching to Ralph there are no costs for your WEGRalph takes care of all the details.
What steps take place in the first 2-3 weeks after the meeting?
Contract signing: As representatives of the condominium owners, the advisory board signs the new management contract.Handover of account opening: With the resolution protocol for termination, the condominium accounts of the previous property management company can be transferred. If the current property manager works with a bank with which we do not cooperate, we will open the condominium accounts for maintenance fees and reserves at DKB on behalf of the condominium.Handover of documentsWe coordinate the collection of all documents with the previous administration. You don't have to worry about anything.Digitization of documents: We digitize important documents and make them accessible to the property owners.Welcome greetingWe will send an initial welcome letter to all owners and, if applicable, inform them of the new IBAN for the new condominium account. We will also provide the new bank details.Billing: We will then take care of the final invoices for the previous yearOnline portal: We sort, review, and label the digitized documents and then activate our portal so that you have access to all important documents, resolutions, and upcoming topics.Certification of the minutes of the resolutionDepending on the declaration of division, we may require your certified signature on the minutes of resolution in order to grant administrator approval in the future. We may contact you separately about this after we have reviewed the minutes. You can then have the minutes briefly certified by our notary or a notary of your choice.
It's important to note that switching to a modern property management company like us doesn't incur any additional costs for the condominium association. We handle all the coordination of all the details, so the condominium association doesn't have to worry about the technical aspects of the handover.
There can be many reasons for changing property managers, but regardless, we ensure that the transition is as smooth as possible.
Our goal is to start working as property managers as quickly as possible so that you, as the owner, can benefit from improved support.
Contract termination: What is the difference between ordinary and extraordinary termination?Link to this section
The management contract can be terminated in two ways: by ordinary termination and by extraordinary termination without notice.
Oneordinary terminationThe management contract can be terminated without giving a specific reason, but must comply with the contractually agreed terms. The standard notice period after the manager's dismissal is six months, unless otherwise stipulated in the contract.An extraordinary, immediate terminationHowever, termination requires a compelling reason that significantly impairs the relationship of trust between the owner and the manager and makes further cooperation impossible. Typical reasons for termination without notice include:Embezzlement of WEG funds,Gross neglect of the administrator's dutiesother important reasons listed in the contract or law
If there is good cause, the management contract must be terminated within two weeks of becoming known. Although the reason for the termination without notice does not necessarily have to be stated, the manager has the right to know it.
In summary, extraordinary termination without notice is only possible if there is good cause. Without good cause, the contractual relationship ends within six months of the administrator's dismissal, unless otherwise agreed in the contract.
We are happy to provide you with a free, non-binding consultation regarding the termination of your property management contract. We will assist you in finding the optimal course of action for your situation and correctly considering all legal aspects.
How do I terminate my contract within 6 months?
Thanks to the latestCondominium Act reform (2020)Notice periods from management contracts are no longer valid. Instead,without exceptiona maximumNotice period of 6 months. Condominium owners have two options for termination.
Option 1: Cancellation of the property management via an owners’ meeting:
A change in the condominium association's management requires a majority vote at an owners' meeting. This is because the management contract was concluded with the condominium association itself, not with individual owners.
If an owners' meeting is planned soon, the condominium owners can include the resolution in the agenda. It is recommended that you send the items to the property manager, ideally by email and registered mail. This will keep you safe, even if the management refuses to include the items. The current property management is legally obligated to include this resolution.
Important tip: This should ideally be done before the meeting invitation is sent out, otherwise some administrations may even refuse to adjust the agenda within three weeks!
If your WEG has already held an owners' meeting in the current calendar year or the current property management refuses to include the resolution, the WEG can independently hold a so-calledextraordinary owners' meetingThis isn't complicated, but we're happy to help you.
The agenda of the owners’ meeting should include the following proposed resolutions.
Termination of the management contract and dismissal of the managerAcceptance of the new management contract and appointment of the new manager
Option 2: Cancellation of the property management by circular resolution:
For you as a property owner, the circular resolution pursuant to Section 23 Paragraph 3 of the German Condominium Act (WEG) offers an efficient "shortcut" for terminating the property manager's contract without holding an owners' meeting. This method is particularly attractive when a quick decision is required.
The process is simple: A motion to remove the property manager is sent in writing to the members of the condominium association. In well-organized condominium associations with lively communication, this circular resolution can completely replace a meeting. However, it is important that all co-owners approve the resolution. A brief confirmation via email or messenger service is sufficient for this purpose.
However, circular resolutions often fail due to a lack of contact information for the property owners. Therefore, the owners' meeting—whether organized by the property manager or convened by the current property manager—often remains the preferred method for removing a property manager.
Important:
After the successful dismissal of the property manager, either by circular resolution or owners' meeting, the management contract ends automatically after a period of 6 months in accordance with Section 26 Paragraph 2 Sentence 2 WEG.Many management contracts contain a clause that directly links the termination of the contract to the dismissal of the manager. In such cases, no additional notice is necessary, and the contract ends automatically upon the legally effective dismissal.
Please always observe the specific contractual terms and legal requirements to ensure a smooth transition of your property management.
When is a premature, immediate termination of theProperty managementpossible?Link to this section
In situations of extreme dissatisfaction with the property manager's performance, there are options for early termination of the relationship – even before the end of the regular contract term. You can consider early termination without notice in accordance with Section 626 of the German Civil Code (BGB) if the continuation of the contractual relationship has become unreasonable for one of the parties.
However, mere dissatisfaction with the administrator's performance is generally not sufficient. Rather, there must be concrete, serious reasons, such as breaches of duty or even criminal offenses, that justify immediate termination of the relationship. In this case, the resignation must occur within two weeks of becoming aware of the reason for termination. The appointment of a new administrator can therefore be completed quickly.
The relevant legal text for the dismissal of a property management company
According to § 626 BGB, termination without notice is subject to certain conditions: That “theContinuation of the employment relationship”unreasonablehas become.
Terminating a condominium management contract: What are the valid reasons for terminating a contract without notice?Link to this section
Are you considering terminating your property management contract without notice and want to end your relationship with your property management company? Check out the following: The following are the most common reasons for termination without notice:
Resolutions are ignored:The administrator does not implement the decisions of the condominium association.Neglect of the owners' meeting: Despite requests, the property management has not convened any meetings for a long time.Inadequate record keeping: WEG documents are kept incorrectly or access is denied.Unauthorized contract award: The administration awards contracts without a resolution or instruction from the condominium owners’ association.Little support for economic planning: The business plan is drawn up late or not at all.Financial irregularities: Condominium funds are embezzled or improperly managed. Condominium funds are embezzled, or the management fails to maintain a condominium account and commingles its private assets with those of the condominium association.
If such reasons exist, the term of the property management contract can be terminated early. However, termination without notice should be carefully considered. It is advisable to seek professional assistance to properly assess the situation.
Management contract & annual statement: Which manager prepares outstanding annual statements?Link to this section
When a property manager terminates a contract or resigns, the question often arises as to who is responsible for preparing outstanding annual statements (operating costs, utility costs, and maintenance fees) – the new manager or the old manager? The answer depends on the timing of the change of manager within the fiscal year.
Responsibility scenarios:
Changes in the first half of the year:If the management contract is terminated and the transition occurs within the first six months of the year, the outgoing manager is no longer obligated to prepare the previous year's financial statements. The term of the new management contract begins early enough for the new manager to assume this responsibility. The outgoing manager is obligated to prepare the financial statements in an orderly manner and to submit all invoices in a well-organized manner.Changes in the second half of the year:If the transition occurs after the first six months of the year, the outgoing administrator is no longer required to prepare the accounts for the current year. Responsibility passes to the new administrator.Outstanding invoices:If the outgoing property management company manager has not prepared the previous year's accounts, the new manager usually takes over this task. However, the costs for these legacy expenses can be billed to the former manager.
The duties of the outgoing administrator:
Regardless of the date of resignation or termination of the contract, the outgoing administrator must fulfil the following obligations:
All documents handed over in an orderly and complete manner.Provide essential information about the condition of the property and the assets of the condominium association.Provide all relevant information that is not clearly stated in the documentation.
The term of the management contract and the timing of the changeover are crucial for who is responsible for outstanding billing. Clear communication between the old and new property management companies, as well as the property owners, is essential to ensure a smooth transition and that all necessary billing is prepared accurately and promptly.
