The maintenance reserve in the WEG: amount, use and tips

The maintenance reserve is an important key to the financial health of your condominium. Imagine the roof suddenly needs replacing. Or the elevator gives up the ghost after years of faithful service. Who and how do you pay for such unexpected, often costly repairs in a COA? The answer lies in an important but often underestimated aspect of condominium ownership: the maintenance reserve.

What is the maintenance reserve?

The maintenance reserve, also known as the maintenance reserve, maintenance provision or renewal fund, is a financial cushion that is invested by condominium owners' associations (WEG). This balance serves several purposes:

1. to finance maintenance work
2. to carry out necessary repairs
3. and to cope with unexpected costs

The maintenance reserve covers foreseeable costs, such as the replacement of an outdated heating system, and serves as a financial buffer for unexpected expenses, such as repairs following storm damage. The maintenance reserve thus acts as a kind of "savings account" for the community of owners, which is available for both planned and unplanned expenses.

What can be financed from the maintenance reserve?

The maintenance reserve in accordance with the Condominium Act is used for the maintenance and repair of the property. It is intended for measures that benefit the common property.

The following measures can generally be financed from the maintenance reserve:

1. Renewal and modernization of technical equipment:
   • Heating system
   • Thermal insulation
   • Elevators (inspection and repair)
2. Building and structure:
   • Roof repairs
   • Window renewal
   • Facade renovation
   • Balcony modernization
3. Interior of the common property:
   • Repair of the staircase
   • Painting work in communal areas
4. General repairs to the common property

Non-permitted uses

As a condominium owner, please note that the maintenance reserve may not be used for the following purposes:

1. Repairs or maintenance measures in individual condominiums, i.e. the separate property
2. Procurement of consumables (e.g. heating oil)

These restrictions ensure that the maintenance reserve is used exclusively for measures that benefit all owners equally and contribute to the long-term maintenance of the property.

Does a maintenance reserve have to be formed?

Yes, the maintenance reserve is mentioned in Section 19 (2) No. 4 of the German Condominium Act (WEG) as an example of proper management. Although the WEG Act mentions the formation of a maintenance reserve as an example of proper management, there is no explicit legal obligation to form a reserve.

Nevertheless, the accumulation of an appropriate maintenance reserve is considered necessary in practice and is common practice in most condominium owners' associations. As far as the specific amount of the maintenance reserve is concerned, the Condominium Act refers to a "collection of an appropriate maintenance reserve".

Can a maintenance reserve be waived?

The question of whether condominium owners can agree not to form a maintenance reserve has not been conclusively clarified in law. However, this possibility is certainly discussed in specialist literature and in some cases affirmed. To date, there is no authoritative case law on this topic. This is presumably due to the fact that a maintenance reserve is generally in the interests of the owners.

Important: Even if the reserve is waived, maintenance measures must still be financed. The following aspects must be considered here:

1. Special levies: Without a reserve, special levies would have to be raised if necessary.
2. Financial burden: Such special allocations can lead to considerably greater financial burdens for individual homeowners than continuous savings.
3. Planning security: A reserve offers more planning security and distributes the financial burden more evenly over time.

Who initiates the formation of a maintenance reserve?

The initiation of the resolution on the maintenance reserve is primarily the responsibility of the property manager. This applies if the creation of reserves is not already stipulated in the declaration of division or community rules. The condominium administrator acts as an organ or representative of the community of owners and thus contributes to ensuring the financial capacity of the community of owners.

Two scenarios of reserve formation for administrations

There are two main scenarios for condominium administrators when determining a maintenance reserve. In the first case, if no prior determination exists, it is the responsibility of the property manager to bring about a resolution to form the reserve. This requires an active initiative on the part of the manager to inform the owners of the necessity and initiate a vote.

In the second scenario, if the creation of reserves is already stipulated in the community regulations, the property management's task is somewhat different. In this case, no separate resolution is required to form the reserve in principle, as this decision has already been made in advance. Nevertheless, it remains the duty of the condominium management to initiate a resolution on the specific amount of the reserve. This makes it possible to adjust the amount of the reserve to current needs and economic circumstances.

The final decision on the amount of the reserve to be formed lies with the owners. They make their decision by passing a resolution, usually based on a proposal from the management.

The advantages of a maintenance reserve for owners

There are several reasons why it is sensible and necessary to form a maintenance reserve in a condominium owners' association.

• Protection against unexpected costs: One of the main arguments in favor of maintenance provisions is to protect owners against sudden, costly repairs. For example, storm damage caused by storms can lead to repair costs of several tens of thousands of euros. A well-filled reserve ensures that such unforeseen expenses can be managed and the property protected.
• Financial stability of the community: The maintenance reserve protects individual owners from being financially overstretched. It prevents less solvent owners from getting into difficulties or solvent owners from having to step in for others. This promotes the financial stability of the entire community of owners.
• Even cost distributionRegular, smaller payments into the maintenance reserve spread the financial burden for owners over a longer period of time. This is generally easier to manage than large one-off payments when needed.
• Fairness in the event of a change of ownership: An appropriate maintenance reserve ensures fairness in the event of a change of ownership. New owners do not have to pay for wear and tear that occurred before they acquired the property, as the costs are already included in the maintenance reserve on a pro rata basis.
• Conclusion: The maintenance reserve is an essential component of responsible property management. It offers financial security, promotes the stability of the condominium and ensures a fair distribution of costs over time and across changes of ownership.

Amount and calculation of the maintenance reserve: flexible approaches for condominium owners' associations

The German Condominium Act (WEG) gives your condominium some leeway when determining the amount of the maintenance reserve, as no statutory minimum amount is prescribed. Nevertheless, there are several methods for determining an appropriate amount.

Important factors for determining the amount of the reserve

The amount of the maintenance reserve should be determined individually, taking into account the following factors:

1. Condition of the building
2. Age of the property
3. Structural substance
4. Equipment of the building

The calculation of the maintenance reserve according to Peters' formula

Peters' formula offers a structured method for calculating the maintenance reserve for condominium owners' associations. It is based on data on the costs of maintenance and production costs of properties.

The formula assumes that 1.5 times the original construction costs must be spent on maintenance over a period of 80 years. Around 70% of these costs are attributable to the common property.

Peters' formula is:

(production costs x 1.5) / 80 years = annual maintenance costs

The calculation of the maintenance reserve pursuant to Section 28 (2) II. BV

Although the Condominium Act does not stipulate any specific amounts for the maintenance reserve, the Ordinance on Residential Property Calculations under the Second Housing Act (II. BV) provides useful guidelines. These guidelines, which were originally designed for social housing, can serve as a guide for condominium owners' associations.

§ Section 28 (2) II. BV recommends the following annual reserve amounts per square meter, depending on the age of the building:

• Buildings up to 21 years old: up to 7.10 euros per m² per year
• Buildings between 22 and 32 years old: Up to 9.00 euros per m² per year
• Buildings over 32 years old: up to 11.50 euros per m² per year

Adjusting the maintenance reserve: how to deal with over- and underfunding

The amount of the maintenance reserve may deviate from the actual needs of the homeowners' association over time. Here are the options for action in both cases:

If the maintenance reserve is too high

1. Reduction of contributions: The owners' meeting can decide to reduce future contributions to the maintenance reserve.
2. Use for additional purposes: Surplus funds can be used for non-essential but value-enhancing measures such as cosmetic repairs.
3. No repayment of the maintenance reserve: A direct repayment of amounts already saved to the owners is not possible.

If the maintenance reserve is too low

1. Special apportionment: The owners' meeting can decide on a special apportionment to finance urgent repairs or maintenance measures.
2. Increase in contributions: An increase in the regular contributions to the maintenance reserve can be decided in order to be better prepared for the future.

The right approach to managing the maintenance reserve

In order to ensure optimum management of the maintenance reserve and avoid possible emergency situations, we recommend taking preventive measures. First of all, the amount of the maintenance reserve should be reviewed at regular intervals.

This makes it possible to react to changes in your COA's financial requirements at an early stage. Based on these reviews of the provision, the contributions can be adjusted if necessary, either to avoid overfunding or to counteract the threat of underfunding.

Another important aspect is the creation and consideration of long-term maintenance plans for the property. These plans help to predict future expenditure and calculate the reserve accordingly. By implementing these preventive measures, a balanced maintenance reserve can be built up and maintained.

This contributes significantly to the financial stability of the condominium and helps to avoid unexpected financial burdens for you and other owners. Ultimately, a well-planned and managed maintenance reserve leads to cost-effective and proper management of the condominium property in the long term.

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The maintenance reserve is the financial backbone of every community of owners. Calculating and managing it correctly is extremely important for the long-term stability and value retention of your condominium property.

At Ralph, we understand the complexity of this task. Our administrators have the in-depth expertise to calculate and manage your maintenance reserve in the best possible way. Invest in the financial security of your condominium and request a free quote now!