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Removal of the property manager: Step-by-step instructions for termination

Portrait of Julius Gunnemann
Julius Gunnemann
Abberufung des WEG Verwalters

Removal of the administrator: What you need to knowLink to this section

Ideally, a condominium association (WEG) works with its property management company on a long-term basis. However, if the relationship is to be terminated, condominium owners must be aware of the legal situation regarding the removal of the manager. How and when is removal possible? We've summarized the essentials for you.

Dismissal of the administrator is possible without an important reasonLink to this section

The removal of property managers is a common issue in condominium law. The new Condominium Modernization Act (WEMoG), which came into force on December 1, 2020, has significantly simplified the requirements for removal. For example, the condominium management can now be removed at any time without the need for a valid reason. It is sufficient if the condominium owners are dissatisfied with the manager's performance or if they find a more favorable provider.

This new regulation also applies to property management contracts concluded before the WEMoG (Federal Housing Act). Accordingly, property managers appointed before the WEMoG, whose dismissal was originally tied to a fixed term, can now be dismissed without good cause. Clauses in old property management contracts or provisions in the declaration of division with community regulations are no longer relevant since the 2020 reform.

Dismissal is decided by apartment owners in owners’ meetingLink to this section

The decision to remove a property manager usually rests with the property owners, who vote by a simple majority, i.e., more than 50 percent of the votes cast. Alternatively, the removal can also be resolved in writing by all owners. If such a resolution is not possible, an individual owner can also apply for removal in court if a prior resolution would clearly be futile.

The administrator has the right to take legal action against a termination or dismissal that he or she believes is unjustified. The importance of the important reason for the dismissal is likely to become irrelevant.

When dismissing the administrator, observe a 6-month notice periodLink to this section

Upon notice of the manager's dismissal, the manager's status as a corporate body expires immediately. However, the contractual relationship between the homeowners' association and the property management company continues. This means: If the property owners dismiss the management company, the management company may immediately cease its work, but remains contractually bound to the homeowners' association for a while. According to Section 26, Paragraph 3, Sentence 2 of the German Condominium Act (WEG), the management contract then ends no later than six months after the manager's dismissal.

The property management company is entitled to the contractually agreed management fee until the end of the notice period or for a maximum of six months, less any savings in expenses or income otherwise earned. For fixed-term contracts, the tenant is entitled to the pro rata management fee for this period.

In short: The management contract ends automatically six months after the dismissal. The six months begin on the date of the manager's dismissal (Section 26, Paragraph 3, Sentence 2 of the Condominium Act). In this case, no additional notice of termination is required.

However, if the condominium association wishes to terminate the management contract before the expiry of the six-month period, this is possible in accordance with the notice periods agreed in the management contract or the statutory provisions.

Extraordinary termination without notice for an important reasonLink to this section

Since the reform of the German Condominium Act (WEG), a property manager can be dismissed without good cause. Another option is the extraordinary, immediate termination of the property management contract.

The difference between termination and dismissal: Termination of a property management contract requires a valid reason. If the property management contract is terminated in this way, the contract ends upon receipt of the notice of termination without notice. In addition to the dismissal resolution, a separate resolution regarding the termination of the property management contract must also be observed.

Possible reasons for extraordinary termination of the management contract without notice:

Poor accounting and transparency:failure to prepare business plans and annual accounts, dishonesty in financial management or late preparation of the annual accountsRepeated failures:The administrator repeatedly fails to pay outstanding bills or renew insurance contracts, resulting in financial disadvantages for the community.Ignorance of owner complaints:The property manager does not respond to legitimate complaints from the condominium association regarding deficiencies in the property or its management.Neglect of administrative tasks:Failure to carry out proper maintenance and repairViolation of the WEG:The administrator disregards the provisions of the Condominium Act, for example by embezzling funds or failing to properly keep minutes of meetings.Danger to owners:The property manager commits crimes against the property owners or endangers their safety.Breach of trust and conflicts of interest:The administrator awards contracts to companies or service providers in which he or she has a stake without disclosing this.Publication of false information:The property manager disseminates false information about the financial situation of the condominium association or deceives the owners about the condition of the property.

Basics of appointing a WEG administratorLink to this section

When choosing a property manager, it's important to understand the legal distinction between the appointment and the property management contract. Why is this important?A well-drafted property management contract ensures clarity and avoids future disputes. It forms the basis for a successful collaboration between the property manager and the condominium association.

Appointment of the administrator:The administrator is appointed by a resolution of the owners’ meeting in accordance with Section 26 (1) WEG and establishes an organizational relationship.The management contract:The management contract, on the other hand, is a civil-law contract between the condominium association and the property management company that governs the specific activities. It is concluded in writing and, in addition to general terms such as contract term, termination, and remuneration, should also contain specific provisions on the following topics:Collection of arrearsMaintenance provisionConclusion and termination of contractsCooperation with the Advisory BoardConducting owners' meetingsFive-year term of office:The term of office of an administrator is limited to a maximum of five years. There is no automatic renewal. After this period, a new administrator must be elected.Forms:Professional associations and publishers offer helpful templates for management contracts. These can serve as a basis and should be adapted to the individual needs of the condominium association.

Basic information on the administrator's dutiesLink to this section

The administrator's duties are essentially regulated in Sections 19, 20, 27, and 28 of the Condominium Act (WEG). Since the recognition of the partial legal capacity of the condominium association in 2007, the administrator represents the condominium owners as co-owners of the common property and the association itself as a corporate representative. Therefore, the administrator's duties and his or her powers of representation were comprehensively formulated in Section 27 (old version until 2020). With the WEG reform, the structure of the regulation was significantly streamlined.

A core part of the property management's work is the implementation of maintenance measures. The property management team conducts regular inspections and takes care of maintenance measures. Cost estimates are obtained for major projects. The preparation of the business plan and annual financial statements, as well as the holding of owners' meetings, are other core areas of management.

Whether the administrator's powers can be effectively defined in the management contract is controversial. Approval of the management contract by resolution should clarify that the duties defined therein correspond to those provided for in Section 27. An alternative option is to adopt a permanent resolution on specific areas of responsibility, within which the administrator may operate.

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