Property management is associated with various terms. At first glance, most people are not aware of how these can be defined and what tasks they perform. On the contrary, the different terms and their particularities tend to cause confusion for many tenants and owners. In this article, we will focus on WEG management. We get to the bottom of the meaning of this term, analyze the various tasks of this form of management and discuss the costs. We also explain the advantages of condominium management and what you need to pay particular attention to.
Why do you need a property management company?
A property management company comes into play when an owner rents out their property. Controlling rental income, hiring service providers, handing over apartments to new tenants and bookkeeping take up a lot of time and are beyond the knowledge of most homeowners. It is therefore possible to hand over the management of the building to a professional property management company. Such management is required if you do not have the time to manage your property yourself. This process also involves numerous accounting and legal tasks. Homeowners often cannot and do not want to take on these tasks themselves. For this reason, it is extremely useful to be able to fall back on a professional property management company to take care of everything.
What is a homeowners' association (WEG)?
It often happens that a residential building does not belong to a single owner. According to the official definition of the legislator, a homeowners’ association is the entirety of the owners of a residential complex. The appointed notary draws up community regulations and a declaration of division. These must be notarized. They regulate how the individual parties in the homeowners’ association interact.
Important to know for tenants and owners: The abbreviation WEG is used for both the term “Wohnungseigentümergemeinschaft” and the “Wohnungseigentumsgesetz”. There is therefore a risk of confusion. As the owner of an apartment in a community of owners, you are subject to certain obligations and rights. These are set out in the community rules, the declaration of division and the WEG Condominium Act. The task of managing a residential building can be undertaken by the community members themselves. However, external management is often commissioned. We will now take a closer look at the aspects of WEG management.
What does a property management company do?
In principle, it can be said that a property management company must take on all tasks that have been contractually agreed. There is no legal regulation in this context. This makes it all the more important to draw up a good contract. The management company takes on all tasks associated with the management and letting of a residential complex. It is a vicarious agent of the landlord, as the management takes on tasks that would otherwise be the responsibility of the owner or that can be outsourced as sub-tasks. This includes, for example, the re-letting of apartments, which can also be delegated to an estate agent.
The following things can fall within the remit of a property manager:
- Receivables management
- Commissioning of service providers
- New rentals of apartments
- Control of rental income
- Handover for new tenants
- Checking the systems and the property
- Rent increases (rent index, graduated rent, etc.)
- Implementation of various maintenance measures
- Preparation of rental agreements
- Accounting
- Service charge settlement
- Payment of fees and invoices
The legal basis of the WEG administrator
The German Condominium Act (Wohnungseigentumsgesetz) legally regulates the tasks to be fulfilled by the condominium management. Sections 20 to 29 are of particular interest in this context. According to sections 21 to 25, the management of the common property is the responsibility of the condominium owners of the residential complex and, according to sections 26 to 28, of the appointed administrator. If the condominium owners’ association has appointed an advisory board, this must comply with the provisions of Section 29 of the German Condominium Act.
In special individual cases, the community rules, the condominium management agreement, case law and the resolution of the condominium owners’ association may result in further tasks for the condominium management. It is not possible to restrict the tasks of the condominium management as regulated by law. Not even if this is the wish of the homeowners’ association.
The tasks of WEG property management at a glance
In a condominium owners’ association, there is indeed a legal basis on which the condominium management must act. The management of the common property includes commercial, technical and legal management. The interests of all homeowners must be the focus here. In the case of the condominium owners’ association, the condominium management assumes all legally defined tasks for the common property. Special property management is commissioned to manage the condominiums.
Commercial tasks
The commercial tasks of condominium management include the following aspects:
- Participation in apartment sales
- Management of savings, current and fixed-term deposit accounts
- Accounting and invoice control, as well as document verification
- Preparation and review of business plans
- Preparation or initiation of heating bills
- Accounting
- Checking incoming and outgoing money
- Review of monthly house payments, monthly debit position and dunning process in the event of late payment
- Disposition and administration of monetary transactions, managing and processing direct debit entries
- Liquidity planning, accounting, debt collection and profitability vis-à-vis the condominium owners
- Regulation of personnel matters in the communal property (janitor, administrative councils, waste management officers, etc.)
- Calculate requirements for special allocations
Technical tasks
- Instruction of janitors and craftsmen
- Commissioning of experts
- Monitoring of various properties (through inspections)
- Arrangement of damage repairs by professional third parties
- Organization of maintenance and renovation work (planning, awarding, monitoring and invoicing); includes the areas of tendering, price inquiries, awarding of contracts, notification of defects, compliance with warranty claims, invoice control
- Carrying out insurance settlements
- Development of various utilization concepts
- Recording of consumption values (including electricity, water and heating)
- Performing various traffic safety duties (including compliance with technical regulations, fire protection and TÜV inspections)
- Ordering keys
- Reimbursement in the event of damage reports (both polluter and insurer)
Legal tasks
- Assistance with claims for house charges, appeals against resolutions and court hearings
- Legal representation of the community of owners
- Negotiations and conclusion of maintenance contracts
- Procurement of permits under public law through negotiations with the relevant authorities
- Compliance with all legal regulations and framework conditions
- Application of current case law and legislative changes
- Initiation of dunning procedures and legal action in the event of payment arrears
- Review and conclusion of contracts (e.g. maintenance or insurance contracts)
- Representation with lawyers and in court
- Execution of legal services in accordance with § 5 of the Legal Services Act
Organizational tasks
- Preparation of resolution minutes and minutes of meetings
- Establishment of and compliance with house rules
- Attending court and local appointments
- Correspondence with tenants and owners of rented apartments
- Management of the resolution collections
- Complaints management
- Development of measures to avoid legal disadvantages and to meet deadlines
- Creation and distribution of notices and circulars to the members of the condominium owners’ association
- Planning and holding the owners’ meeting (including agreeing the date, agenda and minutes)
What is the advisory board and what tasks does it perform?
The tasks to be assumed by the management advisory board can be found in the legislation in Section 29 of the Condominium Act.
It is the condominium owners themselves who can appoint a management committee by majority vote at the owners’ meeting. Three of the condominium owners form a committee consisting of two assessors and a chairman. This regulation only ceases to apply if a unanimous resolution is passed by the condominium owners. In this case, the management advisory board may exceptionally consist of only two persons. If this resolution is not contested within the specified period, the decision, which is actually unlawful, can be effectively enforced.
The management advisory board does not act as a representative of individual condominium owners or the community of owners, nor does it have any authority to act in any way. The management advisory board is responsible for supporting the condominium administrator in his tasks and taking on an advisory role. It should also be emphasized at this point that a condominium owners’ association is fully capable of acting and functioning even without an administrative advisory board. It is therefore not a legal requirement to establish an advisory board.
If a condominium community has decided to appoint a management advisory board, it should review the condominium accounts, cost estimates, the economic plan and the accounts before the condominium owners’ meeting takes place. The advisory board takes an advisory position. The management company of the condominium owners’ association is not necessarily obliged to follow the advice of the management advisory board. After all, it only has duties towards the condominium owners’ association.
How WEG management differs from rental management
If a residential complex is a homeowners’ association, several administrative positions must be filled. The WEG administrator looks after the common property of the residential building. If, for example, the elevator in a residential complex needs to be renovated, this falls within the remit of the condominium management. If, on the other hand, an owner wants to replace the fitted kitchen in their apartment, this is basically not part of the duties of the WEG administrator.
Today, there are numerous management companies that offer professional rental management in addition to condominium management. There are also property management companies that focus exclusively on rental management. In contrast to condominium management, the interests of the condominium owners’ association are of no interest to the rental manager. He represents the interests of the individual owner. His tasks may include issuing rental agreements, enforcing rent increases and finding new tenants for units in the multi-party building. As a rental manager, he may not charge a commission for brokering. However, it can be contractually stipulated that the rental manager receives a fixed fee for brokering the apartments. The rental manager does not have to take care of the organization of the WEG meeting
How WEG management differs from condominium management
The condominium manager is also responsible for managing the individual property. They can be commissioned by the owner to be the contact person for the tenant of the apartment and, for example, to prepare the annual service charge statement. Many owners decide to commission the condominium management company to manage the individual property as well. This provides them with an inclusive package that combines numerous tasks.
What does WEG management cost?
The costs of condominium management are generally between €18 and €30 per condominium per month. This depends on the size of the residential complex and the region. Some management companies calculate the monthly costs on the basis of a percentage of the basic rent. In this case, it is five to six percent.
In addition, additional tasks and their remuneration must be set out in a contract. Some special activities involve a great deal of work and must therefore be regulated separately.
The self-administration of the homeowners' association as an alternative
On December 1, 2020, the German Condominium Act was reformed. Since then, it has become more difficult to take the management of a condominium into your own hands. However, it is not impossible. If all owners of the condominium owners’ association agree, it is not necessarily necessary to commission a professional management company to manage the condominium in accordance with Section 6a (2) and Section 9b (1) of the German Condominium Act.
Owners consider this if they have had bad experiences with condominium administrators in the past, are afraid of the costs or cannot find a suitable administrator for their condominium association (see“When does self-administration make sense for a condominium association?“).
Is the WEG suitable for self-administration?
If the owners of a residential complex decide not to appoint a professional manager to organize their condominium, this has a number of consequences, some of which can be serious. This is because the person who will take over the management is largely a layperson. They will carry out the tasks on a part-time basis and may even act as a voluntary administrator for the COA. All owners should clarify the following aspects together before finally deciding on self-administration:
- What are the costs of self-administration?
- Are there owners in the WEG who can take over the administrative tasks?
- What are the advantages and disadvantages of self-administration of a condominium?
- Is the WEG suitable for self-administration?
Wohneigentümer e.V. has drawn up two practical checklists that the owners of a residential complex can go through together during a meeting to decide whether to have their condominium managed by a third party or to opt for self-administration.
Management by an internal administrator
The owners of the condominium jointly decide to appoint a person from their own ranks as the condominium administrator. The obligations and remuneration should be set out in a contract. In this way, a generally valid basis can be created from which all parties can proceed. Verbal agreements cannot be made with such binding force. The contract protects both the owners and the appointed management.
As soon as an internal manager receives a fee for their work, the Professional Licensing Act for Residential Property Managers becomes relevant. In addition, from December 1, 2022, the owners of a residential complex will be entitled to appoint a certified manager. The corresponding legal regulation has not yet been issued by this date, which is why it is still unclear what requirements will be placed on the certification of a condominium property manager. As an internal COA administrator, the fee must always be taxed, which is why it makes sense to consult a tax advisor.
The "real self-administration"
In the case of “genuine” self-administration of a COA, all owners are equally responsible for taking on the administrative tasks in the COA. This involves some additional work. For example, all contracts must be signed by all owners of the WEG. The legal reform no longer provides for the owners to be able to appoint a co-owner as condominium administrator by resolution. However, it is still possible for a co-owner to take on a range of tasks and carry out certain tasks with the help of a representative authorization. The owners of a COA draw up a schedule of responsibilities in which the areas of responsibility are clearly assigned. In this way, everyone knows which tasks fall within their area of responsibility. Communication is transparent and misunderstandings can be avoided. The owners have the necessary powers to distribute the contracts in their area of responsibility and to carry out legal transactions with third parties.
Software for property management
Managing a condominium owners’ association involves a great deal of effort. It is possible to delegate the tasks to several members of the WEG or to commission a professional WEG management company. Nevertheless, it is easy to lose track when analyzing and checking the individual areas of responsibility.
Property management has also arrived in the modern age. There are several digital tools that make it much easier to organize the tasks of condominium management. For example, such software can be used to create accounts. Or the meter readings can be clearly recorded and all data stored securely. The digital tool can be used to view how many assets and reserves the managed residential property has. If necessary, reminders can even be drafted and sent.
With the help of innovative software, it is now much easier for professional condominium administrators and homeowners’ associations in self-administration to maintain an overview and carry out all condominium administration tasks in a legal and comprehensive manner.
Conclusion
If you are a co-owner of a residential complex, you have to deal with your obligations. The management of common property is sometimes complex. In principle, a condominium owners’ association can opt for self-administration. However, some important rules must be observed to ensure that all legal requirements are met.
Due to the complexity of the administrative tasks, many condominium owners’ associations decide to use a professional management company. The costs for this depend on the region and the size of the residential complex, among other things.
The tasks of a condominium management company include commercial, technical, legal and organizational aspects. While some areas of responsibility are based on case law, other sub-tasks can be defined contractually. It is also possible to use the management company for rental management and special property management in addition to condominium management.
