What is a WEG account?Link to this section
A homeowners' association bank account, also known as the condominium account, represents the financial foundation of your condominium. This specific joint account serves as a central hub for all financial matters within the condominium. The condominium account manages the monthly maintenance payments of each owner, which are intended to cover common expenses and maintenance of the shared property. The condominium account, sometimes referred to as the condominium owner's personal account, is strictly separate from private accounts and serves exclusively the purposes of the association.
Function and tasks of the WEG accountLink to this section
The condominium account is the financial heart of your condominium association and fulfills various important functions in the daily operations as well as in the long-term financial planning of the condominium association.
Services cover:The primary purpose of the condominium association account is to cover all common costs. These include regular expenses such as the payment of services, including janitorial services, lawn care, and necessary repairs to the shared areas of the complex.Financial reserves:The condominium association account also plays a key role in building up financial reserves. Funds for larger future investments are systematically saved in a separate reserve account. These earmarked funds are available, for example, for extensive renovations such as roof repairs or replacing the heating system.Transparent financial management:Furthermore, the condominium association's own account lays the foundation for transparent financial management. By systematically recording all incoming and outgoing payments, both owners and property management can track how the community funds are being used at any time.
This clear financial management structure, based on a dedicated condominium association account, ensures professional handling of community funds. The strict separation of private finances also reduces potential sources of conflict and creates the foundation for sound financial management of your condominium association.
Condominium accounts vs. trust accounts: What's the difference?Link to this section
Homeowners' association accounts and trust accounts – there's a risk of confusion here. Remember: The key difference lies in the account holder.
With a condominium association (WEG) account, your condominium association itself holds the account, with the property management company merely having the power of attorney. In contrast, with a trust account, the property management company acts as the account holder. Although the funds are intended for the condominium association, legal ownership remains with the property manager. This model, while potentially simplifying administration, carries the risk that your condominium association has less control over the finances.
This arrangement can have consequences, especially in the event of the property management company's insolvency, as the funds are directly tied to the management. A detailed trust agreement is essential here to protect the interests of the condominium association. However, it should be noted that even such an agreement limits the condominium association's direct control. The condominium association has less direct influence over the property's finances, and additional costs may arise.
The question of whether a condominium association's own account or a trust account is more suitable for managing joint condominium funds is a topic of discussion for many condominium associations. Both models have their advantages and disadvantages, which should be carefully considered. While trust accounts were common in the past, condominium associations' own accounts offer greater transparency and security.
Choosing the right account depends on individual factors such as the size of the homeowners association and the complexity of its administration. A well-informed decision based on careful analysis is essential.
Our recommendation:The condominium association's own account meets the requirements for proper condominium management, whereas the trust model simply cannot meet these standards and carries significant risks. Therefore, a condominium association's own account is often the better choice for transparent and efficient management of joint funds.
Administration manages trust accounts – what you can doLink to this section
Let's assume your property manager manages your funds in an escrow account. To protect the financial interests of your homeowners association and ensure maximum transparency, we recommend the following procedures:
Precise contract drafting:A well-written contract between the homeowners association and the trustee is the foundation for transparent and secure escrow account management. This contract must clearly define the responsibilities of both parties and the guidelines for the use of the funds.Transparent account management and regular updates:To ensure maximum transparency, the administration must regularly prepare detailed financial reports. These documents should detail all financial transactions and the current account balance, as well as provide an outlook for future expenditures.Independent control:Conducting regular, independent audits of trust accounts by external professionals such as auditors or accountants can provide additional security and uncover potential irregularities.Strict access restrictions:The community has a right to participate in decisions about the use of common funds. Therefore, major financial transactions should always be approved by the condominium owners or the management board. Access to escrow accounts must be restricted accordingly.Establishment of a finance committee:A finance committee strengthens democratic decision-making within the condominium association. The community can represent its interests in this body and actively participate in shaping financial matters.Preference for WEG own account:Despite all precautions, homeowners associations should generally insist that the management maintain a condominium account in the name of the association rather than using escrow accounts.
Implementing these strategies can significantly contribute to ensuring that your condominium's financial affairs are managed efficiently and in the best interests of all involved. Close cooperation between the management, condominium owners, and the administrative board is key to transparent and secure financial management.
Other important account models: house money account and reserve accountLink to this section
The financial structure of a condominium is also based on two pillars: the maintenance account for day-to-day operations and the reserve account for long-term investments.
The house money account: financing daily business
The maintenance account serves as the primary operating account of the condominium association. It is funded by the owners' monthly contributions and covers all regularly incurred costs. These include the remuneration of service providers such as cleaning staff and caretakers, the payment of operating costs for common areas, and the financing of minor maintenance work. The administrative costs of the property managers are also processed through this account.
In summary, a quick overview of the expenses of the house money account:
Ongoing operating costsMinor maintenanceAdministrative costs
The reserve account: Planning for the future
In contrast, the legally required reserve account serves as financial security for larger investments. This maintenance reserve allows your condominium association to manage extensive renovation work or the replacement of important systems without additional special levies. Typical uses include replacing the roof, renovating the facade, or modernizing the heating system.
In summary, the following expenses are covered by the reserve account:
Large renovation projectsMajor repairsInvestment of reserves
The advantages of separate accounts for your WEG
Establishing separate accounts for maintenance fees and reserves is more than just an accounting formality. This dual-track account management ensures a clear separation between everyday expenses and long-term savings, thus ensuring the long-term financial stability of the condominium association.
Clear financial structuring:By splitting the funds into two accounts, a clear line is drawn between the funds for day-to-day operations and the long-term savings goals of your condominium association. This makes it easier to keep track and plan.Optimized investment strategy:Separate accounts allow you to invest your savings profitably, for example, in call money accounts. This allows you to earn higher interest without restricting your funds' availability.Promoting stability and transparency:This clear breakdown not only supports efficient financial management but also promotes transparency over the use of funds. This strengthens the financial stability of your condominium association and creates a solid foundation for future planning.
Give your property management a power of attorneyLink to this section
By granting a power of attorney for the property management, property owners grant their management comprehensive powers. This allows the management to make decisions independently within the legally prescribed limits and the resolutions of the owners' meeting.
However, to prevent misuse and protect your interests as a property owner, it is essential that the power of attorney sets clear boundaries and that the administrators regularly account for their activities.
Guide to opening an accountLink to this section
Opening a condominium account is the first step toward transparent and efficient financial management. All community income and expenses, from monthly dues to larger investments, are processed through this account. Follow these steps:
The bank selection
Your administration or the administrative board should choose a bank with experience in condominiums. Important criteria include:
Low account management fees and interest on reservesUser-friendly online bankingCompetent customer serviceClear presentation of all account transactionsTechnical interfaces (EBICS/HBCI) to the management software
Required documents
To open your WEG account, the bank needs:
Declaration of division:The official document that defines the division of the building into individual apartments and the rights and responsibilities of the apartment owners.Owner list:A current list of all apartment owners with their contact details.Minutes of the last owners’ meeting:Proof that the owners' meeting has commissioned the administration to manage the account.Powers of attorney:Written authorizations that give the administration the authority to act on behalf of the condominium association.
Account opening and management
The management opens the condominium account and concludes the bank agreement. Access rights must be clearly defined – both for the management and the administrative board.
The administration then informs all apartment owners about:
The new account detailsRegular account balance notificationsIncome and expenditure
All transactions on the condominium association's own account must be carefully documented, and the receipts systematically archived. This ensures transparency and builds trust in the condominium association's financial management.
Different account types for your WEG accountLink to this section
Choosing the right account type is also important for the financial management of a condominium association. Typically, two main accounts are set up at the bank: the checking account as the main condominium association account and the call money account for maintenance reserves.
Current account as a WEG own account
The condominium association's own account is the central checking account of a condominium association. It serves as a central point for all financial transactions related to the jointly owned property.
The most important functions at a glance:
Operational Center:The account is the hub for all ongoing payments.Flexibility:It enables uncomplicated processing of all financial transactions.Efficiency:Payments can be made quickly and securely.
Typical transactions:
Payments to service providers:Cleaners, gardeners, and tradespeople are paid through this account.Payment of operating costs:Bills for electricity, water, heating and other operating costs are paid through this.Revenue:The owners’ monthly maintenance payments go into this account.
Call money account for reserves
The call money account offers a secure investment option for your homeowners' association reserves. Your funds are accessible at any time and are subject to the statutory deposit protection fund.
The most important advantages at a glance:
Protection against inflation:The interest rate increases your balance in nominal terms. This means that the money at least partially protects its value against inflation.Flexibility:You can access the account at any time without having to wait for a notice period.
Typical uses:
Renovations, repairs and renovations are classic examples of what reserves can be invested in a call money account for.
New property management, new account? How to master the financial transitionLink to this section
If you have your Change property management , your condominium association faces numerous challenges. One of the most important tasks is managing the condominium association's own account. This account requires special attention during the transfer process.
Change of administrator: Steps for a smooth transition
Handover of financial documentsThe outgoing management must hand over all relevant documents, such as bank statements, outstanding invoices, and financial reports, to the incoming management. This information provides a comprehensive overview of the financial situation of the condominium association.Updating the powers of attorneyExisting account authorizations from the old administration must be revoked and new ones established for the new administrator. This ensures clear access rights and protects the interests of the condominium association.Bank auditThe new property management company should evaluate with the condominium association whether to retain the existing condominium account or open a new one. Factors such as terms, fees, and the bank's service quality play a role.
Do you already know Ralph?
Are you looking for a reliable solution for managing your condominium account? Ralph will assist you with the smooth opening and management of your account. As your experienced partner, we take care of all the financial matters of your condominium association. From preparing the maintenance fee statement to hosting the owners' meeting and more – we offer you comprehensive services from a single source.
Benefit from our expertise and ensure transparent and efficient management of your joint finances. Switch to Ralph now.
