Maintenance Management Systems for Condominium Owners’ Associations under the German Condominium Act

Andreas Saxinger and Miriam Hansel

ERES from European Real Estate Society (ERES)

Abstract: In Germany many buildings owned by condominium owners’ associations were erected in the 1960s and 70s. Obviously, these owners’ associations now need to implement efficient maintenance management systems. In practice, however, there are often conflicts of interests between the different owners and it is difficult for them to come to an agreement. Owners often underestimate maintenance and repair costs and try to avoid building up reserves for contingencies as long as they can. In some cases deferred maintenance is the unfortunate consequence.Under German Law (Condominium Act) there are no binding rules how maintenance management systems can be implemented by condominium owners’ association. The property manager of the condominiums, appointed by the owners in accordance with the German Condominium Act, is of crucial importance in this process. As an expert, he usually knows the condition of the building better than the owners. Instead of waiting for defects to occur, the property manager should inform owners timely about the repairs and replacements, which are to be expected in the next few years. He should encourage owners to increase the monthly rates payable for contingencies. It is highly recommended to avoid, that owners are required to make special payments to cover the repair costs, because the contingency sum is not high enough. Some owners might not be able to pay the amount required within a few weeks.Research on four buildings, all located in Munich, erected between 1965 and 2004 and owned by different condominium owners’ associations shows, that the two conventional methods that are common in Germany to calculate maintenance and repair costs are not sufficient for property managers to successfully implement maintenance management systems. Firstly it is essential for property managers to prepare a 5-year-forecast of the expected maintenance and repair measurements required on the basis of the condition of the building. Secondly property managers are required to calculate on this basis the estimated maintenance and repair costs. Thirdly owners should decide in accordance with this forecast to adjust their monthly rates for contingencies. Thus maintenance and repair costs can be covered completely by the reserve, the owners have paid in advance for contingencies.

Keywords: Condominium Owners%27 Association; Contingencies; Maintenance; Property Manager; Repair Costs (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-07-01
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