German Property Management Fees and Owners’ Associations Explained

If you own a divided-ownership apartment in Germany, you will usually need to pay a monthly property fee to a management company. But is the property fee actually the same as a management fee? What is the difference between the two? This article looks at what a German owners’ association actually does, what a building’s property fee covers, and how German property management companies help owners manage a building.

German Property Management Companies

Every divided-ownership building in Germany needs a property manager (Hausverwalter) to help run the building, which is why property management companies exist — handling the building’s day-to-day management, maintenance and periodic repairs. An owners’ meeting is also held every year to report to owners on all matters relating to the building’s management. The property management company estimates next year’s budget based on how the building has actually been managed in the past, and this is then put to a vote by the owners at the meeting. German law requires at least one owners’ meeting to be held each year, so that owners are kept informed of how the building is being managed.

The Owners’ Meeting

Usually about two weeks before an owners’ meeting, the property management company sends out an invitation letter along with the agenda items to be voted on that day, giving owners enough time to understand and consider them. If the meeting is due to approve the previous year’s financial report, that report is included as well. Most owners’ meeting agendas cover the building’s management financial report, the property’s operating accounts, next year’s budget, and building repairs and routine maintenance. The following year’s budget in particular determines how much each owner will be charged in property fees, so German owners are encouraged to attend in person, raise any questions or objections directly, and take an active part in the discussion to protect their own interests.

What the Property Fee Covers

The property fee is a monthly cost every owner in a German building has to pay, and it can be broken down into three parts: building service charges, the maintenance reserve fund, and the management fee.

Building Service Charges (Lasten)

These are consumption-based costs, such as waste disposal, electricity, water, drainage and snow-clearing fees, internet and cable TV, and in some buildings even heating costs. In principle, all these costs come with clear bills and are shared among all owners on a cost basis. Next year’s budget is approved at the annual owners’ meeting, owners prepay monthly in advance, and the actual bills are then reconciled at year-end, with owners paying more or receiving a refund based on actual usage.

Maintenance Reserve Fund (Instandhaltungsrücklage)

Most German buildings have a substantial amount of shared infrastructure — such as water pipes, elevators and exterior walls — that needs upkeep and requires funding, and these items also need to be inspected and maintained on a regular schedule. So German buildings maintain their own maintenance fund, contributed to monthly by all owners, and any building repairs are then paid for out of this fund. The monthly contribution to this fund can be decided by a collective vote of all owners at the owners’ meeting. It is worth noting that this cost cannot be passed on to tenants — it must be paid by the owner.

Management/Operating Fee (Kosten der Verwaltung)

This is the fee paid to the property management company, also shared by all owners. Besides helping owners handle the building’s day-to-day operations, the property management company also helps manage communication with tenants, acting as the link between owners and tenants and helping the two sides communicate.

The three items above cover what owners pay to handle the building’s affairs, large and small, and in practice they can generally be handed over to the management company to administer as the owners’ agent. Of course, if owners are unhappy with how the building is being managed, they can raise this at the owners’ meeting, where all owners vote and can decide on a new service provider for the following year. It is also worth noting that the property fee is payable whether or not an owner’s unit is vacant. We therefore recommend that, before buying any property, you understand its past management history and its various management costs clearly.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.