Can service charges be automatically passed on to tenants?

Apportionable ancillary costs cannot be automatically passed on to tenants. It must be clearly stated in advance in the tenancy agreement whether the ancillary costs are included in the rent or not.  

However, you do not have to break down each individual factor; it is sufficient to state in the rental agreement that the operating costs are not included in the rent. It does not matter whether they are actually operating costs or not. Legally, this refers to all ancillary costs that can be passed on to the tenants. 

If, as a landlord, you would like to know exactly which service charges may be allocated in your rented apartment, take a look at the Operating Costs Ordinance (BetrKV). This specifies what is meant by operating costs and which specific types of costs you are allowed to pass on to tenants. § Section 1 contains a general definition, while section 2 provides a detailed list of apportionable service charges. The following sections provide further explanation and give you an overview of apportionable service charges and what they mean.

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What are operating costs?

The German Civil Code (BGB) and the Operating Costs Ordinance (BetrKV) regulate exactly which expenses relating to residential property can be borne by tenants, provided this is stipulated in the tenancy agreement. It also specifies exactly what operating costs are in terms of apportionable ancillary costs. The term "operating costs" covers various items. Specifically, these are expenses that are regularly incurred through the use of buildings, land and facilities. Below you will find an overview of the apportionable ancillary costs.

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Which ancillary costs can be passed on to the tenants?

Which expenses related to your residential property can be transferred to your tenants/occupants is prescribed by law. These are the following items: 

1. property tax

As property tax is one of the regular running costs of a property, it can be passed on to tenants in accordance with the Operating Costs Ordinance. The amount of property tax is determined by the respective municipality and can therefore vary from region to region.

2. insurance costs

The apportionable ancillary costs that landlords do not have to bear themselves include, for example, home and landowner's liability insurance, oil tank insurance, elevator insurance and glass and building insurance. 

3. costs for waste collection and street cleaning

The fees for waste disposal and the costs of street cleaning, including the costs of winter maintenance, are apportionable operating costs. However, the acquisition costs for waste containers must be borne by the owners. These costs cannot be apportioned.

4. warm operating costs - heating

The apportionable ancillary costs also include heating costs. All costs relating to heating (and hot water) can be allocated to tenants as "warm operating costs". These are billed based on consumption. Heating costs include both fuel consumption and the costs of maintaining and operating the heating system. However, the law stipulates that at least 50% of these total costs, but no more than 70%, can be charged to tenants. 

5. warm operating costs - hot water

The operating costs for the hot water supply include both the costs for the central hot water system (e.g. maintenance, inspection) and the costs for the provision of hot water (e.g. delivery, cleaning of appliances). These costs can be passed on to the tenants.

6. costs for lighting

The costs incurred by lighting the common areas around the property can be passed on to the tenant. But again, this only applies to the electricity costs incurred, not to new lamps or light bulbs. These are considered maintenance costs and must therefore be borne by the landlord. 

7. wastewater charge

Wastewater is one of the running costs and can therefore be passed on to the tenant. Both the fees for using the public sewer system (sewer and drainage fees) and the operating costs for any in-house drainage pump are apportionable operating costs that you as the landlord can pass on to the tenants.

8. costs of building cleaning

If the stairwells and other common areas of the property are cleaned by a cleaning company, these costs can be passed on to the tenant. 

9. costs for the janitor

If there is a janitor for the entire property, some of the costs can be transferred to the tenant. Partially because a distinction is also made here as to which activities are carried out for the business and which are purely repair costs - which must be borne by the landlord. This category also includes all costs directly associated with the janitor's employment, such as his or her salary, social security contributions and other non-cash benefits.

Example: Although there is a janitor for the property, he or she only takes care of repairs such as changing light bulbs or replacing broken windows. These are repairs that must be borne by the apartment owners.

10. costs for garden maintenance

Apportionable ancillary costs also include the maintenance of gardens, playgrounds and paths. If there is a garden around the property, the costs of maintaining it, such as mowing the lawn or cutting bushes, can be passed on to the tenant. This also includes the planting of new trees, bushes and flowers. 

11. cable connection, television antenna, satellite dish

According to the Operating Costs Ordinance, all "audiovisual reception facilities" can be passed on to tenants. This item includes both the ongoing operating costs of the facilities (electricity) and the costs for their maintenance. In addition, there are the monthly basic charges for the broadband connections.

12. costs for the washroom

The costs of running the communal laundry room can also be charged to the tenants. If there is a laundry room in the rental property, the associated costs such as electricity consumption and maintenance work may be passed on to the tenants.

13. costs for the chimney sweep

The operating costs also include the expenses for the chimney sweep - even if there is no fireplace in the apartment. 

14. costs for the elevator

The operating costs of an elevator can also be passed on to the tenants. In particular, the costs for electricity consumption and regular maintenance of the elevator are apportionable. These costs are passed on to all tenants, including those who live on the first floor and may use the elevator less frequently.

15. other operating costs

Other operating costs include all costs that are incurred in accordance with Section 1 of the Operating Costs Ordinance and are not listed under the aforementioned items. A typical example of this is cleaning the gutters.

What are non-recoverable ancillary costs?

Not all service charges are apportionable. In addition to the apportionable service charges, there are costs that are borne exclusively by the landlord. These include, in particular, maintenance and repair costs. Administrative costs such as tax advice or insurance are also the responsibility of the landlord/landlady. Similarly, interest on property financing, taxes and irregular maintenance work, such as cutting down a tree, are not borne by the tenant

Empty apartment? What to do in the event of vacancies?

If an apartment is not rented out, the costs still continue to run. Vacancies can therefore be quite costly for landlords. However, there is one advantage: when a property is vacant, landlords can claim the incidental costs incurred as income-related expenses for tax purposes and thus reduce their tax burden.

Apportionable ancillary costs must be included in the rental agreement

Although the Operating Costs Ordinance provides a framework, it is ultimately the tenancy agreement that determines which costs you, as the landlord, are allowed to pass on to your tenants. An explicit agreement in the tenancy agreement is mandatory. Even if new types of costs arise after the contract has been concluded, these can generally be passed on, provided no restrictions are stipulated in the contract.

An example: If the tenancy agreement mentions operating costs in general, costs incurred later for garden maintenance may also be passed on to the tenant

Distribution key regulates distribution among the tenants

There are various options for allocating operating costs. In principle, billing is based either on a distribution key or on the living space. An individual distribution key is particularly useful for a small number of tenants with different consumption levels in order to ensure fair distribution. For example, the costs for waste collection can be divided according to the number of residents. For heating and hot water costs, a legally prescribed consumption-based billing system applies.