Rental management: its advantages and disadvantages, costs and tasks

Tenancy management, WEG management, WEG administrator, property management, condominium management - these terms are often used interchangeably and can easily be confused. So what does rental management really do? And which form of management is the right one for property owners and condominiums? This article sheds some light on the subject and explains the differences.

The right form of management makes all the difference: rental management and other options

Professional property management and administration is extremely important for owners and requires specific skills and a high level of commitment. When it comes to the management of apartment buildings or residential units in larger properties, a suitable form of management must be found. Two types of management have emerged: rental management and condominium management or property management.

Why the right form of management is so important

The choice between rental management and condominium management or property management has far-reaching consequences for property owners. A deeper understanding of these forms of management is important for you as the owner and your apartment in order to:

1. Fulfill your legal obligations correctly
2. Optimally managing financial aspects
3. Exploit the full potential of your property

Definition: What a rental management company does

Rental management is a comprehensive service for owners of rental properties and takes care of the rental management of individual rented residential units in apartment buildings, single-family homes or residential complexes. Tenancy management is also responsible for looking after the tenants.

As a representative of the landlords, the tenancy manager acts as a kind of central interface to various parties, including tenants and service providers. In doing so, the tenancy manager not only works reactively, but actively pursues the objectives and interests of the landlords.

The tasks of the rental managers go beyond the mere management of rented residential units and include:

• Administrative tasks
• Legal matters
• Technical aspects

The exact scope of services is defined in an individual management contract and can be flexibly adapted to the needs of each unit. They retain the option of performing certain services themselves as landlords if they wish.

The legal framework for rental management explained simply

German tenancy law, anchored in Sections 535-597 of the German Civil Code (BGB), forms the basis for renting residential property. These provisions regulate the rights and obligations of landlords and tenants in detail.

Although there is no legal obligation to commission a rental management company, this can make a significant contribution to compliance with legal regulations and to increasing the value of apartments and properties.

Key aspects of tenancy law briefly summarized

The BGB focuses on the following key areas:

• Protection of property rights
• Legal basis for rental agreements
• Regulations on rent increases
• Requirements for the condition of the living space
• Solutions for typical conflict situations

Professional rental management can therefore efficiently handle the complex and time-consuming aspects of letting apartments. It relieves the burden on landlords and ensures that all legal, administrative and technical requirements are expertly fulfilled for each unit.

Legal tasks of rental management

With the following legal skills, rental administrators relieve the burden on landlords considerably and ensure legally compliant management of residential and rental properties.

Rental management companies act as legal representatives for landlords and provide the following services:

• Coordination and conclusion of service contracts
• Dunning procedure in the event of late payment by tenants

Increasingly, legal disputes are also part of the range of tasks of tenant management:

• Representation in court proceedings (with explicit power of attorney)
• Processing of complaints regarding: outstanding payments from tenants, evictions in the building, claims for damages
• Commissioning and communication with lawyers
• Enforcement of ownership rights in court

Of course, professional rental management is also characterized by:

• Continuous updating of legal expertise
• Competent handling of rent increases within the legal framework
• Proactive intervention in the event of legal challenges

Administrative tasks in rental management

Competent rental managers also take care of comprehensive administrative tasks.

They advertise vacant residential units and are responsible for organizing and conducting viewings with potential tenants. If a tenancy is established, the tenancy management team will take care of drawing up and concluding tenancy agreements.

Another important aspect is the implementation of legally compliant rent increases in order to adjust the rent to the current market situation and increase the profitability of the property.

Rental management includes the monitoring and booking of incoming rent payments to ensure a clear overview of the financial situation of the rental properties. Rent management also includes processing rent reduction applications, in which the justification and scope of the rent reduction are checked in order to avoid legal disputes.

As part of payment transactions, invoices from utility companies and service providers are settled in order to ensure the supply of the property and fulfill contractual obligations.

The preparation of operating cost statements is also an essential part of payment transactions in order to present the costs to tenants in a transparent and comprehensible manner.

The issuing of reminders in the event of payment arrears in order to request payment from tenants and, if necessary, to take further steps is also a task of rental administrations. If payments are not made, legal action is taken to collect payment in order to enforce the landlord's claims.

The rental management team is generally available as a point of contact for tenants with questions and conflicts in order to find quick and efficient solutions. Example: In the case of insurance and damage reports, they are the first point of contact for reporting the damage and coordinating further steps.

Technical tasks of rental management

The rental management carries out regular property inspections to assess the condition of the property. The technical facilities are also checked for functionality in order to identify potential problems at an early stage.

The rental management department is the first point of contact for tenants in the event of technical problems and receives damage reports. It assesses and prioritizes the need for repairs in order to initiate the necessary measures as quickly as possible.

The rental management team also informs the landlords of any necessary work and obtains their consent. It then organizes and monitors repairs and maintenance to ensure that the work is carried out professionally and on time.

The rental management supervises service providers such as janitors, cleaners and gardeners. It checks the quality of external services to ensure that the property is always in a well-maintained condition.

The rental management team conducts apartment viewings with potential tenants and manages the keys for the rental properties. When tenants move in and out, it draws up handover reports documenting the condition of the apartment. These reports are archived so that they can be referred to if required.

When does rental management make sense?

It makes sense to opt for professional rental management if the size of the property portfolio places a heavy burden on the owner, as the administrative workload increases considerably if there are several rental properties and rental management can save time and resources.

Rental management is also advisable if the owner's time capacities are limited, as limited availability or physical distance make self-administration more difficult and rental management takes on time-consuming tasks and can guarantee a constant presence.

A lack of specialist expertise in legal matters, accounting and the rental market can also speak in favour of rental management, as professional managers minimize legal risks and optimize returns.

For complex properties, such as commercial properties or mixed-use properties that require specific expertise, rental management companies often offer specialized services.

Tip: Carry out a cost-benefit analysis comparing the costs of self-management with those of professional rental management. Take into account potential savings and efficiency gains through the expertise of a rental management company.

Ultimately, the decision for or against rental management should be based on a careful analysis of your individual situation. In many cases, outsourcing to experts not only saves time and stress, but also increases the profitability of the real estate investment.

Tenancy management, WEG management and condominium management (SEV): the difference

Rental management

• Focus: Support and management of individual residential units (rental apartments) on behalf of the owners.
• Tasks: Finding tenants, concluding rental agreements, collecting rent, invoicing operating costs, maintaining the residential unit, communicating with tenants.

WEG management

• Focus: Management of the common property and the common interests of a condominium.
• Tasks: Organization of the WEG, holding of owners' meetings, preparation of economic plans, maintenance of the common property, external representation of the WEG.

Special property management (SEV)

• Focus: Management of the special property (condominium) within a WEG on behalf of the individual condominium owner(s).
• Tasks: Similar to rental management, but taking into account the special features of condominium law and the common rules of the WEG. Often taken over by the WEG management.

Overview: the difference summarized

• Rental management vs. SEV: While rental management takes care of the needs of an individual rental apartment, SEV also observes the rules and obligations within a condominium.
• WEG administration vs. SEV: The WEG administration takes care of the administration of the common property, while the SEV represents the interests of the individual apartment owner in his/her apartment.

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The tasks of WEG management and property managers

§§ Sections 27 and 28 of the German Condominium Act (WEG) define the basic scope of duties of condominium management. This can be extended or adapted by a stipulation in the declaration of division or resolutions of the community of owners. The specific rights and obligations of the property management company are set out in the management contract. This regulates, among other things, specific responsibilities and tasks, the amount of the costs for the property management and any additional services to be remunerated.

Organization of the owners' meeting

One of the most important tasks of property management is to hold the annual owners' meeting. This must take place at least once a year and all owners must be invited in person. The condominium management is responsible for the preparation and follow-up of the meeting, which includes convening, chairing and taking minutes as well as recording new resolutions in writing for the collection of resolutions.

Administrative and legal tasks of WEG management

In addition to organizing the condominium owners' meeting, the condominium administration also monitors all incoming and outgoing payments of the condominium owners' association. This includes setting up and managing bank accounts for the WEG. The property management company may also represent the condominium in debt collection proceedings.

As part of accounting, the property management is responsible for preparing the annual accounts and the annual asset report. For this purpose, an economic plan is drawn up for the coming year, which contains proposals for cost savings. In addition to the current business plan, property managers also plan the necessary allocations to the maintenance reserve. This is used to manage larger investments, such as modernization or renovations to common property.

Maintenance or modernization work can also be suggested by the property management company. A professional property management company is fully informed about innovations and changes to the law and can therefore provide the condominium with comprehensive advice.

In the event of legal conflicts that require support, property managers organize cooperation with a legal advisor and take care of communication. In addition, the property manager can represent the condominium as a contact and contractual partner vis-à-vis third parties, such as the janitor service or the refuse collection service.

As the representative of the WEG, the property management company can terminate existing service contracts or conclude new ones in consultation with the WEG advisory board or following a vote at the WEG meeting.

Technical tasks of the property management

The technical tasks of property management generally include monitoring the condition of the property and assigning work orders to maintain and improve the property. A modern property management company can also provide owners with comprehensive advice on important issues such as maintaining and developing the value of the property.

The property manager is obliged to carry out regular inspections of the common property. The manager assesses the structural and technical condition of the property, such as stairwells, elevators, cellars, heating and satellite systems. Compliance with legal requirements, such as the organization of winter maintenance, also falls within the technical area of responsibility.

Following the inspection, the property management company contacts the homeowners' association with the results and suggestions on how to proceed with any necessary repairs. Once the homeowners' association has decided on the necessary measures, the property management company commissions the relevant service providers and monitors the implementation of the required services.

As you can see, the technical support provided by the property management company can be quite extensive. The exact services are specified in detail in the respective management contract, depending on requirements.

Tips for choosing the right property management company: what's important

Whether rental management or property management: choosing the right management is crucial for the success and value retention of your property. Regardless of the type of management, there are key aspects that you should consider.

Professional competence

Sound knowledge of the German CondominiumAct (WEG-Gesetz) is essential in order to make legally sound decisions and represent the interests of the owners. Professional management of legal and financial matters, such as preparing annual accounts and holding owners' meetings, is also important for you.

Communication and transparency

Good management informs you as the owner regularly and comprehensively about all relevant developments in the building, such as upcoming repairs, maintenance measures or changes to the house rules. The finances and decision-making processes should be presented clearly and comprehensibly to ensure transparency.

Efficiency and responsiveness

When it comes to maintenance measures and repairs, a quick solution to problems is required to avoid unnecessary delays and costs. An established network of reliable service providers, such as tradespeople or janitors, is particularly advantageous here to ensure that your condominium receives good services at fair prices.

Reputation

Positive references from other owners' associations and proven experience in long-term partnerships with owners and service providers are always important indicators of a trustworthy and reliable rental and property management company.

Do you already know Ralph?

Ralph offers you transparent, efficient and cost-effective solutions. You can rely on our expertise for carefree and transparent management of your condominium. Do you have questions about management costs, property management costs, rental management services or other areas relating to the management of your rental property? We are here for you! Get in touch with us now and request a free quote. We look forward to hearing from you!