The maintenance reserve is a fixed expense for the owner of a condominium. But how high should it be, which items are paid from the maintenance reserve, to whom is it paid and is it returned when the apartment is sold?
What is a maintenance reserve for condominiums?
Condominiums are part of a larger residential building. Work has to be carried out on these buildings from time to time for foreseeable or unforeseeable reasons. Natural, foreseeable reasons include, for example, maintenance work that is carried out to repair weather-related damage. Unforeseeable defects to the common property can be caused by a storm, flooding or water damage to the water pipes, for example.
The owners of the condominiums in a building form a maintenance reserve, also known as a maintenance reserve. It is used to pay for repairs to the common property and thus serves to maintain the value of the building. The maintenance reserve is set up in a separate account by the administrator of the residential building and may only be used for maintenance measures.
What can the maintenance reserve be used for?
What specific repairs can be made to the common property and paid for from the maintenance reserve?
- The renovation of the roof
- Repair of the staircase
- Renovation work on the building façade
- Repairs to the elevator
- Renovation work on the balconies
Renewal or maintenance measures for a central heating system
What expenses, on the other hand, may not be deducted from the owners’ maintenance reserve?
- Maintenance measures and renovations within the apartments
- New kitchens or bathrooms in the apartments
- Current operating costs
If the condominium administration has to overcome an acute financial bottleneck, the maintenance reserve can be used for this under certain circumstances. However, this requires a vote by the owners of the apartments. If the majority resolution is passed, the reserve can be used for a maximum period of three months to pay the house charges.
How high should an appropriate maintenance reserve be?
The “Verordnung über wohnungswirtschaftliche Berechnungen nach dem Zweiten Wohnungsbaugesetz” (Ordinance on Housing Calculations under the Second Housing Act) provides a guideline for the appropriate amount of a maintenance reserve. In § 28 Maintenance costs, you can read that such a reserve should be between € 7.10 and € 11.50 per square meter of living space. The exact amount depends on the year in which the property was completed.
The owners’ association of the residential building decides on the exact amount of the maintenance reserve. It is set out in the economic plan and must be decided on annually. The amount of each apartment owner’s contribution is based on a fixed formula. In most cases, this distribution key is the number of square meters of the individual apartments.
What can the homeowners' association do if the maintenance reserve is too high or too low?
In 2015, a condominium owner was granted in a court case that his maintenance reserve of € 2.50 per square meter of his apartment at the time was too low. The court used the aforementioned regulation as a legal basis to justify this decision.
If the maintenance reserve was previously too high, the owners of the apartments can decide to reduce the amount. If the surplus money already paid in is not needed in the near future, it can earn interest at a higher rate in a fixed deposit account. This money cannot be accessed in the short term. For this reason, it must be ensured that it does not actually need to be used in the foreseeable future.
How do you calculate the amount of the maintenance reserve?
There are several ways of calculating a maintenance reserve. These are described in detail in the following section.
The calculation of the maintenance reserve according to Peters' formula
If several people are part of a community of owners, there is an obligation to deposit an appropriate amount of money annually in a separate account as a maintenance reserve. This reserve is often included in the house rent. On average, the maintenance reserve in Germany is around €2.70 per month and square meter of the apartment.
How high the monthly payment should actually be can be calculated using Peters’ formula. For an apartment building with a total area of 650 square meters, let’s assume construction costs of around €1,800 per square meter. The formula assumes that a residential building will require one and a half times as much maintenance over 80 years as was used to build it. This results in the following calculation:
1,800 x factor 1.5 = € 2,700 / 80 years = € 33.75 x 650 square meters = € 21,937.50 maintenance costs per year.
In this example, the maintenance reserve is € 2.81 per month per square meter.
The calculation according to the 2nd Calculation Ordinance of the Housing Act
Based on the Second Calculation Ordinance of the German Housing Act, the maintenance reserve amounts to a maximum of € 7.10 per year if the building is less than 22 years old. The maintenance reserve applied is staggered; the year in which the residential building was ready for occupancy serves as a guide. For our example calculation, this means a maintenance reserve of €4,615 per year. This results in a sum of € 0.59 per square meter and month.
The recommendation of the Association of Private Builders (VPB)
The Verband Privater Bauherren considers a maintenance reserve of €1 per square meter per month to be sufficient to maintain all communal areas. For our example, this results in a maintenance reserve of:
650 x 1 x 12 = € 7,800 per year
Who manages the maintenance reserve?
The WEG stipulates that every residential complex must have a property manager. In smaller buildings, this task is often performed by a co-owner. If it is a large residential complex, a professional service provider is usually chosen to take on this task. The maintenance reserve is paid in by the owners of the apartments together with the house money, but must be kept separate from other funds by the management and stored separately.
How should the maintenance reserve be invested?
A long-term plan can be drawn up for a large number of repairs. This money can be kept in an account with high interest rates. In this way, the owners of the home can benefit from the investment.
Of course, it should be borne in mind with such an investment that the money cannot be accessed in the short term. It should therefore be money that is guaranteed not to need to be used in the near future.
Can the maintenance reserve for a rented apartment be allocated to the rent?
The maintenance reserve is one of the costs that must be borne by the property owner by law. They can therefore not be passed on to the tenant under any circumstances. Other costs to which the same regulation applies are, for example, the costs for property management, costs for damage assessments or bank fees that are due as part of property management.
What happens to the maintenance reserve when a condominium is sold?
If you sell your condominium, you are not entitled to have the maintenance reserve paid out. This is transferred to the new owner of the apartment when it is sold.
What should home buyers look out for with regard to the maintenance reserve?
As a home buyer, you should make sure that the maintenance reserve for the residential building is calculated appropriately. If it is too high, this will result in reserves that may not need to be drawn on. This money can be invested at high interest rates, but means higher overall expenditure for the homeowners. If the maintenance reserve is set too low, there will be a bottleneck during major renovation work. This should be avoided at all costs.
What tax aspects are associated with the maintenance reserve?
The maintenance reserve cannot be claimed for tax purposes at the time of payment. However, if repairs are made to the house, you can itemize your percentage share of the total amount in your tax return.
