The billing tip: optimizing costs in the WEG

The term "settlement peak" comes up again and again in connection with the annual statement and the economic plan of a COA. In this article, we would like to explain to you how you can better understand the settlement peak and how you can actively contribute to optimizing the costs in your COA.

What is a settlement peak?

The settlement peak is the difference between the planned and actual costs in a COA annual statement. It is calculated by comparing the budgeted house charges in the business plan and the actual settlement amount of the costs incurred.

This does not take into account overdue or defaulting house charges or advances on house charges that have actually been paid. However, special charges levied in the financial year are to be taken into account when calculating the settlement peak.

Explanation: This is how the settlement peak actually arises

In the business plan, the property management prepares a forecast of the expected income and expenditure of your homeowners' association for the coming financial year. On this basis, the house fee is paid by all owners. At the end of the financial year, a comparison is made between the actual expenses incurred and the income generated.

If the income deviates from the actual costs for the property, this is referred to as a settlement peak. The settlement peak therefore describes the amount that arises when the actual ancillary costs of a property or the expenses of a homeowners' association are higher than the amounts previously calculated and covered by advance payments.

The consequence: For owners, this means that they have to make an additional payment to cover the difference between the advance payments made and the actual costs for the billing year.

Reasons for the billing spike can include unexpected repairs, increased ancillary costs or changes in building maintenance requirements. We will explain other reasons for the billing spike later.

Settlement peak vs. settlement balance: the difference

When we talk about the settlement peak, we need to differentiate the term from the settlement balance. In contrast to the settlement peak, where the planned house charges are compared with the actual costs, the settlement balance takes into account the actual house charges paid. It represents the difference between the actual costs and the actual income and can result in either a credit or a deficit.

If all owners have duly paid their house rent, the following calculation applies: settlement balance = settlement peak.

Positive settlement peak and negative settlement peak

A billing peak can occur in two forms: as a positive billing peak and as a negative billing peak.

A positive settlement peak occurs when the income of the community of owners exceeds the costs for the relevant financial year. In this case, the community generates a financial surplus - a desirable outcome for the WEG.

• Example of a positive settlement peak: A condominium owner pays 300 euros per month in house fees, which corresponds to an annual amount of 3600 euros. However, the actual costs for the property only amount to 3300 euros. This results in a positive settlement peak (credit balance) of 300 euros.

In contrast, a negative settlement peak occurs when the income of the community of owners is not sufficient to cover the costs for the financial year. As you already know, this leads to a shortfall, which can be caused by unexpected repairs to the common property, increased operating costs or general price increases, for example.

• Example of a negative settlement peak: A condominium owner pays 300 euros per month in house fees, which corresponds to an annual amount of 3600 euros. However, the actual costs for the property amount to 4000 euros. In this case, there is a negative settlement peak of 400 euros.

Who will bear the cost of settlement?

The question of who bears the settlement peak only arises in the case of a negative settlement peak. In the case of a positive settlement peak, only the "affected" homeowners have a claim against their homeowners' association.

A negative settlement peak, on the other hand, is borne jointly by all owners in accordance with the distribution key set out in the community rules. In the absence of such an agreement, the owners bear the negative settlement peak in accordance with their co-ownership shares, as stipulated in Section 16 (2) sentence 1 WEG.

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When is the settlement peak due?

With the WEG reform of 01.12.2020, the determination of the settlement peak was newly regulated. In accordance with Section 28 (2) sentence 1 WEG, the owners now decide exclusively on the financial consequences of any deviation from the business plan. The settlement peak itself is legally determined by the resolution on the annual statement of accounts.

As soon as the annual statement of accounts of the community of owners has been drawn up and a settlement peak has been determined, any additional payments are due. Their due date is decided at the owners' meeting and recorded in the resolution on the WEG annual statement of accounts.

Key points:

• Six-month deadline: The annual statement must be prepared within six months of the end of the billing period.
• Reasonable period: A period of three to six months after the beginning of the following year is generally considered reasonable.
• Deviating regulations: If other deadlines have been agreed in the declaration of division or in the management contract, these shall take precedence.

As a rule, the owners are given a reasonable period of time to settle the settlement result, i.e. the additional amounts. These deadlines are important in order to give the owners sufficient time and at the same time ensure the solvency of the community.

If apartment owners do not pay their contribution

The punctual payment of additional claims in the event of settlement peaks is one of the obligations of condominium owners. If owners fail to meet this obligation, this has individual consequences.

After the administration has initially sent out-of-court reminders in order to reach an amicable agreement, it can take legal action if payment is not made. These can range from a reminder procedure to compulsory enforcement.

However, it is always in the interests of all owners to avoid such situations, as non-payment by individual owners jeopardizes the financial stability of the community and causes unnecessary costs that ultimately have to be borne by everyone.

What are the causes of billing peaks?

The billing spike in a community can have many reasons, from repairs to new regulations.

• Important repairs: Sometimes unexpected repairs to the roof after a storm, the failure or repair of central systems such as heating or elevators or urgent renovation work on the facade or basement area are necessary.
• Rising operating costs: Whether it's energy prices for electricity, gas or heating oil, rising costs for water and wastewater or increased charges for waste disposal and street cleaning - all of these can lead to a spike in bills.
• New laws: Legal changes to energy-saving measures, changes in the municipal fee schedule or adjustments to fire protection or other safety regulations may require investments and thus lead to a peak in invoicing.
• Modernization measures: If approved measures to renovate common property or the installation of photovoltaic systems are carried out, these costs can also cause a settlement peak for the co-owners.
• Administration costs: Increases in the costs of the condominium administrator, legal fees or costs for holding owners' meetings and passing resolutions can also play a role.
• Vacancy: The effects of vacancies on the redistribution of operating costs or costs for the maintenance of vacant units can also be reasons for a billing spike.
• New usage behavior: An increase in the number of residents in the house or increased consumption of water or heating can also lead to a billing spike.

What happens to the settlement peak in the event of a change of ownership?

A frequent point of contention in the event of a change of ownership is who has to pay for a possible additional payment or who receives a credit balance.

In principle, the owner in whose "term of office" the settlement peak occurred is always responsible for the costs. The decisive factor here is the time at which the community of owners decides on the annual statement of accounts, and therefore also the individual statement of accounts (Section 28 (2) sentence 1 WEG). This resolution is only legally valid for the condominium owners who are entered in the land register at this time. This was determined by a ruling of the Federal Court of Justice on 2.12.2011 - V ZR 113/11.

• Example: A change of ownership takes place during the current financial year. The property management prepares a separate statement for both the old and the new owner for the respective period. Nevertheless, the new owner must make the additional payment to the community if he or she is entered in the land register as the owner at the time of the resolution on the annual statement.

However, a credit balance from a positive settlement peak will only be paid out to the purchaser if the seller has paid the house rent in full in accordance with the economic plan.

Summary: Facts about the settlement peak at a glance

• The settlement peak is the difference between the planned (target house charges) and the actual costs in a COA annual settlement.
• The settlement balance takes into account the actual house charges paid, while the settlement peak compares the planned house charges with the actual costs.
• Consequence for owners: Owners must make an additional payment to cover the difference between advance payments and actual costs.
• Positive settlement peak: Income exceeds costs (surplus).
• Negative settlement peak: Income is not sufficient to cover the costs (shortfall, additional payment required). This is borne jointly by all owners according to the distribution key or co-ownership shares.
• It is legally established by the resolution on the annual statement of account. Additional payments are due as soon as the annual statement has been drawn up and the due date has been decided at the owners' meeting.
• Causes of billing peaks: Unexpected repairs, rising operating costs, new laws and regulations, modernization measures, rising administration costs, vacancies or changes in usage behavior.
• In the event of a change of ownership: The owner who is entered in the land register at the time of the resolution on the annual statement is responsible for the contribution.

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