As the owner or co-owner of an apartment, you incur certain monthly expenses, which are referred to as house expenses. If you rent out your condominium, you can pass on some of these costs to your tenants.

But caution is advised here. If a condominium has set itself the goal of saving money on house expenses, this must be well thought out. It is important to think not only in the short term, but above all in the long term. We explain to you how to calculate the amount of the house fee, which costs can be passed on to tenants and what you should know about house fees and where you can sometimes save costs.

Definition: What is the house allowance?

The house allowance is an amount that each homeowner pays to the condominium association - usually represented by the property management company - at the end of the year to cover the most common costs for the management, administration and maintenance of the homeowners' association. This results from Section 16 (2) of the WEG Act.

The term "Hausgeld" has become established in the common parlance of a WEG, but the legislator does not use it - instead, the WEG Act refers to charges and costs.

We also often confuse housing benefit with housing allowance, but these are two different terms. Housing benefit is a state benefit designed to help low-income tenants finance their housing costs. It is regulated in the Housing Benefit Act. The house allowance for a condominium, on the other hand, refers to the costs incurred in a condominium owners' association. It is used to finance common expenses. As mentioned, the legal basis for the house allowance can be found in the Condominium Act.

What is included in the house allowance?

The individual items that make up the house fee can vary depending on the size and furnishings of the property or properties. However, the following cost items can be cited as examples for the house fee:

• Insurance premiums (e.g. building and liability insurance)
• Cost of community antenna system
• Water supply and water disposal
• Heating and hot water
• Garbage collection
• House cleaning
• Electricity costs for the community facility
• Chimney cleaning
• Maintenance costs of the outdoor facility
• Costs for elevator system, janitorial services and for other common facilities.

In principle, you can pass on the costs mentioned to the tenants. Which costs can ultimately be allocated depends on the agreements in the declaration of division and the tenancy agreement.

There are also expenses that cannot be passed on to tenants, such as maintenance reserves, certain insurances, account fees or the costs of property management. These are of particular interest to owners when it comes to saving on the property management fee. 

What does the obligation of condominium owners according to Section 16 (2) WEG mean?

In accordance with Section 16 (2) WEG, the owners are obliged to bear the costs of the common property as well as the costs of maintenance and repair in proportion to their co-ownership shares. The proportion is to be determined on the basis of the co-ownership shares entered in the land register.

The amount of the house fee: How is the house fee calculated?

The amount of the house fee is calculated from the cost items that must be borne by the owners. Each owner must bear his/her share in accordance with the respective co-ownership share.

How much house money you have to pay each month depends on many factors. These can vary significantly depending on the property. One important factor is the age of the building. Maintenance costs are still low for new apartments, but higher amounts are incurred for older buildings.

The features of the residential complex also play a role. Buildings with special features such as elevators or underground parking as well as older buildings that require more extensive renovation generally incur higher running costs. The size of the apartment and the specific services provided by the property management company also influence the amount of the house fee. However, the actual costs can differ significantly. On average, the monthly costs are between 3 and 4.50 euros per square meter.

Compared to a rented apartment, the monthly costs of a condominium are usually 20 to 30% higher in house fees.

The housekeeping bill

Every year, condominium owners receive a statement of service charges. This is comparable to a service charge statement for tenants. The statement shows which costs have been incurred for the entire building and how these have been allocated to the individual owners. This allows you to see what your house money has been used for and whether you have to pay anything extra or receive a refund.

What regulatory powers do the owners have?

The legislator has granted the owners the majority decision-making power on issues relating to due dates, consequences of default such as interest and other ancillary benefits. This regulatory power relates in particular to default interest regulations, due date regulations, flat-rate contractual penalties and a lump sum for relocation costs. From 2007, the controversial lump sum for non-participation in direct debit transactions was also regulated by law as a special administrative expense.

House rent and vacancy: What do you need to consider?

Even if a condominium is vacant, the obligation to pay the house rent remains in force. Repayments or additional payments are made in accordance with the annual statement of accounts and affect the owner at the time the resolution is passed. In the event of a sale, there may therefore be an overpayment or underpayment. To avoid disputes, the handling of the house money should be clearly regulated in the purchase contract.

When and how do you have to pay house money?

There is no statutory regulation as to when the house allowance must be paid. Instead, the individual economic plan submitted with the fixed monthly advance payments forms the basis for the advance payments of the house rent. The overall management plan contains the expected income and expenditure for the entire property for the planned financial year. The cost sharing of the condominium owners is specified via the distribution key in the individual economic plan.

The wording of the resolution must refer to the individual management plans and proper management requires appropriate rounding up on the expenditure side and a calculation with sufficient certainty. The contribution to the maintenance reserve must also be shown. If the business plan is to continue to apply beyond the financial year, this must be expressly resolved.

What happens if an owner does not pay the house rent?

The collection of outstanding house allowance payments is one of the tasks of the management. Pursuant to Section 27 (1) No. 4 WEG, it is entitled to assert claims on behalf of the WEG. If an owner does not meet their payment obligation, the management can first try to collect the outstanding money out of court. If this is unsuccessful, legal action can be taken. The basis for the enforcement of claims is either the appointment of the administrator or a resolution of the owners' meeting.

A condominium owner has no right to withhold payments on account, even if the person believes that they can expect a credit balance at the end of the financial year. It is therefore advisable to expressly decide that the business plan should continue to apply beyond the financial year.

Business plan vs. annual accounts: beware of the risk of confusion

The business plan for your condominium is a forecast of expected income and expenditure for the coming year. The monthly house fee is determined on the basis of this plan. The annual statement, on the other hand, is an exact representation of the actual costs and income incurred in the past year. It serves to show the deviations from the business plan and to determine whether the owners have to make additional payments or receive repayments.

Deduct house expenses for tax purposes: This is how it works

Good news for landlords: Parts of the house allowance can be claimed for tax purposes. Costs that you as a landlord bear yourself and do not pass on to the tenants can be deducted from tax as income-related expenses. However, there is one important restriction: only amounts actually spent are deductible. This means, for example, that a maintenance reserve can only be deducted from tax once the money has actually been used for repairs or renovations.

The tax deductibility of the house allowance depends on the use of the condominium. For owner-occupied apartments, 20% of the costs for household-related services and handyman services can be claimed as special expenses.

6 tips for reducing the cost of house maintenance

Would you like to reduce the amount of house maintenance and save money? Here are our best tips for saving money on house maintenance:

1. Switch your property manager

Since the expenses for the property management cannot be passed on to the tenants, you have to bear the full costs. This is where you can save the largest part of the housekeeping fee, if you are smart about it. 

However, the cheapest property management company is not always one that you can rely on 100%. As a COA, consider to what extent you can limit the services of the management to save money and still not have a loss in the quality of service. 

Ralph Management GmbH mainly operates digitally, but is of course also there for you on site. This has the advantage that many services can be carried out conveniently, quickly and cost-effectively online. Among other things, Ralph offers a detailed overview of all operating costs of the community of owners online, which you can view at any time. From as little as 19.99 euros net per month, you have an inexpensive but professional property management company at your side that you can rely on. 

We would be happy to help you change your property management company. Leave us a message and we will get back to you to discuss the details. We answer 100% of inquiries personally.

2. systematically obtaining offers when commissioning tradespeople

Sometimes COAs hire tradespeople because they either know them personally, have been using them for many years or don't have the time to compare offers for all activities. But this can mean higher costs. 

In order to save on house fees, condominiums should urgently compare several offers, or even more than three if possible for larger renovations. Under certain circumstances, your builder will reduce his claim accordingly. If you blindly follow the offers of certain companies, you run the risk of paying too much and creating a large cost factor. 

3. Comparison of suppliers for the purchase of domestic electricity and heating costs.

Switching electricity providers or buying from a different company for utilities such as oil, gas or water can be extremely worthwhile in order to save money on your home. Sometimes it is enough to express the wish to terminate the contract in order to obtain better conditions. We are happy to automatically check our properties to see if we see any potential for optimizing ancillary costs and operating costs. 

4. review of the insurance policies by an external broker

It may be worthwhile to review the insurance policies taken out by the condominium association from time to time. Similarly, combining the insurance policies of the individual owners and the community could result in lower premiums, even if they are independent of each other. Contact two or three insurance providers and get a quote, or get free advice from an outside specialist.

5. janitor instead of external tradesmen

It can be worthwhile hiring a janitor through the homeowners' association to carry out minor repairs, work such as garden maintenance, winter services and/or cleaning. If your janitor has a certain amount of manual dexterity and can take care of a few small jobs in your property, you can quickly save large sums of money on the house fees by not having to pay for certain repairs - a cost factor for condominiums that should not be underestimated.

6. Review of the maintenance reserve

The maintenance reserve is usually a significant cost item in the amount of the house rent. It is used to pay for larger expenses for the common property, such as a facade renovation, a new elevator, etc. 

However, even though it is a large expense, care should be taken here if you are thinking of cutting back on these payments. How should be saved depends on the age of the property. As a general rule, the older the house, the more should be set aside. A competent management will analyze the amount of maintenance reserve based on the long-term maintenance plan.

House charges and maintenance reserve: everything you need to know

A maintenance reserve (formerly: maintenance provision) is a reserve of money set aside by the community of owners to finance future maintenance and repair measures. It is not necessary to set up a reserve as long as no owner requests it. However, if an owner requests this, a reserve must be set up and the amount and purpose must be decided by a majority vote.

The maintenance reserve is earmarked and may only be used for future maintenance and repair measures. General expenses and costs of the community may not be paid from the reserve. Only in exceptional cases, if a proper basic reserve and reserve amounts remain, recourse to bridge liquidity bottlenecks is possible.

The amount of and allocations to the maintenance reserve

There is no legal requirement for the amount of the maintenance reserve. However, the reserve should be appropriate and there are various formulas for calculating an appropriate amount. For example, Peters' formula can be used to multiply the production costs per square meter by a factor of 1.5 and divide by 80 years of building life.

Another method is to use the provisions of social housing, according to which 7 euros per square meter to 11 euros per square meter per year (depending on the age of the building) and 68 euros per year should be set aside for garage parking spaces. In the event of a dispute, the courts decide individually according to the technical condition of the building, its age and furnishings and the medium-term need for repairs.

The additions to the maintenance reserve are part of the monthly advance payments for the property. Both the actual payments and the payments owed to the reserve must be shown in the annual statement. The former as income, the latter as a separate entry. Since 01.12.2020, only the "cropped" information is required in the property report. If a condominium owner leaves, he or she cannot request a payment share from the provision. For a commercial owner, the paid-in reserve amounts are only considered business expenses for tax purposes once the reserve has been used up.

Do you already know Ralph?

Now we would like to introduce you to Ralph, an innovative solution for the management of your condominium. Ralph is a state-of-the-art property management company from Berlin: Ralph combines software with experience. We automate many of the repetitive processes of property management with our specially developed software. This allows us to free up our experienced managers so that they can concentrate on the essentials and have more time for their customers. Our strength lies in our ability to proactively drive forward various issues simultaneously and to manage even complex refurbishments. 

Are you interested? Then visit our property management costs information page and don't hesitate to contact us to arrange a meeting now. Our team is at your disposal and looks forward to helping you.