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The question of whether management fees are apportionable is a concern for many owners, especially when it comes to correctly and legally compliant billing of service charges for tenants. In this article, you will find out in which cases management costs can be passed on to tenants, what the difference is between WEG management and rental management, and how you as an owner can manage your property efficiently and cost-effectively.
What are administrator fees?
Management fees are the fees that a manager receives for carrying out the management tasks for your property. These tasks can vary greatly depending on the type of management. In the case of condominium management, the focus is on managing the common property, while tenant management takes care of rental matters such as rent payments, utility bills or tenant changes.
The property management company charges the owner a monthly flat rate or an agreed fee for these services. These so-called management costs relate either to the entire community of owners or - in the case of rented units - individually to the owner of an apartment.
Apportionable or not? The legal basis
Whether management fees are apportionable depends on the type of costs and management. In principle, case law - in particular the Federal Court of Justice (BGH) - distinguishes between apportionable operating costs and non-apportionable management costs. The Operating Costs Ordinance (BetrKV) clearly regulates which types of costs may be passed on to tenants.
As a rule, management fees are not apportionable operating costs. According to Section 1 (2) BetrKV, they are administrative costs and are therefore generally not apportionable. However, there is an exception in certain constellations or contractual regulations.
Difference between WEG management and rental management
In a condominium owners' association (WEG), the owners jointly commission a property management company to look after the common property. The management costs incurred are covered by the house fee and affect all members of the community of owners. These management costs are not apportionable to tenants, as they serve to maintain and organize the common property.
Rental management, on the other hand, involves services that are directly allocated to the letting part of the property - for example, looking after tenants, accounting for individual rent payments or preparing the service charge statement. The following also applies here: administration costs are not apportionable items, unless otherwise stipulated in the rental agreement.
Which types of costs are apportionable according to the Operating Costs Ordinance?
So that you as the owner can be sure which costs can be passed on to your tenants, it is worth taking a look at the Operating Costs Ordinance. Among other things, the following are apportionable:
- Water supply
- Heating and hot water
- Property tax
- Building cleaning
- Waste disposal
- Garden maintenance
- Elevator operation
- Lighting of the common areas
Management fees do not appear in this list. They are considered a separate cost block within the property management costs and may therefore not be transferred to tenants without further ado.
You can find more information on this topic in this blog article: Which apportionable service charges can I pass on to my tenants?
When can management fees be passed on to tenants?
In individual cases, it may be possible to pass on management costs to tenants, particularly in the commercial sector or where individual provisions have been agreed in the tenancy agreement. In the case of commercial tenants, there is more contractual freedom so that the parties can also agree to allocate management costs on a flat-rate or pro rata basis.
In the case of residential leases, however, the apportionment of management costs is subject to strict legal requirements. A flat-rate allocation of administration costs can only be demanded if this has been explicitly and effectively regulated in the tenancy agreement and the tenancy agreement has been formulated against the background of the applicable case law. Even then, a clear distinction must be made between operating costs and administration costs.
The influence of the BGH on the administrative cost allocation
The Federal Supreme Court has made it clear in several rulings that management costs - including management fees - are not apportionable in the context of residential rents if there is no explicit legal basis for this. The costs for the manager are considered part of the general management costs of the property and must be borne by the landlord.
This case law protects tenants from being burdened with additional costs that are not related to the ongoing operation of the building, but to its management. For you as the owner, this means that it is generally not possible to apportion management costs unless there is a special contractual provision, for example in the case of commercial units.
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Strategies for indirect cost optimization for owners
Even if management fees cannot be passed on directly to tenants, there are still ways to reduce overall service charges and improve the return on your property:
- Efficient selection of property management: Obtain several offers and compare not only prices, but also services and references. Cost-efficient management with a clear distribution of tasks saves money in the long term.
- Performance-oriented contracts: When drafting contracts, make sure that the tasks and costs are defined transparently. Avoid undifferentiated flat rates that are difficult to verify.
- Digitization of administrative tasks: Use digital tools for accounting, billing and communication. Many modern property management companies now offer platform solutions that reduce administrative work and costs.
- Deduct management costs as income-related expenses: For rented apartments, you can claim management fees against tax. This reduces your tax burden and improves your overall return.
How does the apportionability affect the service charge settlement?
The service charge statement may only include those types of costs that are apportionable according to the Operating Costs Ordinance or have been expressly agreed in the tenancy agreement. The manager's fees are therefore not to be listed there if you only look after residential tenants.
A common mistake in practice is to include administration costs - either inadvertently or deliberately - as "other operating costs" in the statement. The BGH has clarified in several rulings that this is not permitted if there is no clear basis in the tenancy agreement.
What does this mean for commercial tenancies?
Commercial tenants are not subject to the strict requirements of the Operating Costs Ordinance. Freedom of contract applies here. This means: As a landlord/landlady, you can pass on management fees to tenants in commercial tenancy agreements - even on a flat-rate basis - as long as this is clearly and transparently regulated.
This creates a differentiation option for owners of mixed-use properties (e.g. residential + commercial). What is important here is the correct distribution and billing of costs by unit - only the commercially used part may be charged accordingly.
Practical tips for owners on how to avoid costs
Some measures can help to keep administrative costs low overall, even if a direct allocation is not possible:
- Consolidation of service providers: Combine janitorial, cleaning and administrative services to exploit synergies.
- Check the change of property management company: If the services do not match the price, it makes sense to change management while observing the notice periods.
- Negotiate instead of accepting: Even existing management contracts can often be renegotiated or supplemented with flexible modules.
- Check self-administration: With small properties or sufficient experience, self-administration can be worthwhile - especially to reduce the administration fee.
Frequently asked questions from owners about the apportionability of administrator fees
Is it possible to allocate management costs for new tenancy agreements?
Only if these are expressly listed in the rental agreement and clearly distinguished from the operating costs. This is not usual for standard rental agreements in the residential sector and is also legally contestable.
What happens if administration costs still appear in the service charge statement?
Tenants can object to this item and demand repayment. In the event of a dispute, this can lead to legal disputes.
What are the usual administrator fees?
The management costs vary depending on the location, size and condition of the property as well as the scope of services provided by the property management company. In practice, they are usually between €20 and €30 per month per unit.
Conclusion - Correctly classify administrator fees and optimize ancillary costs
For you as the owner, it is important to understand the distinction between administration costs and operating costs. Only the latter are apportionable in accordance with the Operating Costs Ordinance. Management fees are generally not apportionable management costs and must be borne by the tenant - unless the tenancy is a commercial tenancy with corresponding contractual provisions.
However, in order to act economically and increase your return on investment, you should actively participate in the selection, negotiation and control of your property management. Transparent, efficient and digital management can help to reduce costs - even if they cannot be passed on directly to tenants.
The better informed you are about the legal framework and strategic options, the better you can control management costs, optimize the service charge structure and operate your property successfully in the long term.
Do you already know Ralph?
As a modern property management company, Ralph supports you in correctly distinguishing between management fees and operating costs and billing them in a legally compliant manner. If you choose us as your property management company, we will help you to optimize your management costs through transparent cost statements and digital processes while complying with all legal requirements for apportionability.
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