Watch out for these ancillary costs when buying a home
Owning your own apartment also comes with a lot of costs. Apartment owners not only have to bear the usual ancillary costs, but also expenses for the maintenance and management of a property. All these costs are called housing allowance (referred to as "Hausgeld" in Germany). Anyone who is a member of a home owners' association therefore regularly pays a fixed amount to the manager in order to build up a reserve for these expenses.
Which ancillary costs are included in Hausgeld?
Housing allowance, referred to as Hausgeld in Germany, includes expenses for all costs incurred in connection with the maintenance and care of the property. In the Condominium Act, these expenses are referred to as encumbrances and costs. For example, Hausgeld include ongoing ancillary costs for cleaning, homeowner's insurance, shared electricity in the house, and waste disposal. They also include janitor activities, garden maintenance, maintenance work on the elevator, or heating costs in the case of central heating. In addition, there are other costs that you as the owner cannot pass on to the tenant, but have to bear yourself. These are, for example, the maintenance reserve of the HOA (called WEG in Germany), which is formed for the maintenance of the common property and with which the manager finances measures such as a new facade painting or the staircase renovation. Administrative costs, such as those for managing the owners' association's account, are also included in the housing allowance for condominiums. It is particularly important to calculate this reserve as accurately as possible, because if it is too low, owners may be faced with high additional payments at the end of the year.
Example calculation for housing allowanace
The amount of the housing allowance is determined by the property manager, who prepares a business plan with all expected expenses and income. The difference between these two items results in the amount of the housing allowance. The business plan is decided at the annual owners' meeting; a simple majority is sufficient for this. The manager then sends out the annual statement to show the owners how much they will have to pay. The housing allowance per sqm is on average between 2.50 and 4.50 euros. The apportionment is based on a distribution key, the decisive factor being the co-ownership share. Thus, if an owner owns one tenth of the co-ownership of a house and the housing allowance includes an amount of 8000 euros for the entire ownership, he must participate in the reserve with an amount of 800 euros. However, this does not apply to other utility costs, such as hot water and heating, which must be accounted for in accordance with the Heating Costs Ordinance. In principle, it is also possible to specify other distribution keys for the individual items in the declaration of division if this achieves a fairer distribution of the burden.
Housing allowance or ancillary costs?
The terms ancillary costs and housing allowance are used synonymously in everyday language. Both refer to the monthly advances that you, as an apartment owner, have to pay to the property manager. It acts as a utility bill for apartment owners. However, you cannot pass on the entire housing allowance to the tenant. This means that there is a difference between the housing allowance and the ancillary costs, because apportionment is possible and customary for the latter. Apportionable housing allowance, which is part of the ancillary costs, includes, for example, property tax, electricity, water and gas as well as insurance costs.
Important tips for real estate buyers
When buying a property, the housing allowance plays an important role and should be considered in detail before signing the contract. For this purpose, you can ask the property manager to provide you with the last annual statements. Pay particular attention to which types of costs are included. For example, costs for the communal water supply and a communal elevator, expenses for street cleaning and emptying the jointly used trash cans, or public charges for the property such as property taxes or residents' contributions should be taken into account. If you have the impression that the ancillary costs are disproportionately high, this may well influence the decision to buy. This makes it all the more important to keep an eye on them.
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