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Maintenance reserve amount: How is it calculated?

What is the purpose of the home maintenance reserve?

A maintenance reserve is created when residential property is divided into different units. If there are several condominiums in one building, the apartment owners form a community of owners. Every apartment owner not only owns his apartment. He also owns a proportion of the common property.

These include:

  • the property
  • the facade
  • the staircase
  • the communal cellar
  • the heating system
  • the roof

Property obliges and therefore the community of owners is responsible for maintaining the community property. Every apartment owner must contribute to the saving of the necessary reserves. A maintenance reserve in an amount that depends on various factors is paid monthly for this purpose. This reserve is part of the house money and is one of the ancillary costs that cannot be passed on to tenants. The maintenance reserve is nothing more than an earmarked nest egg for repairs. Remember that it is less burdensome to put back a smaller amount a month than to raise several thousand euros ad hoc once. In addition, this financial buffer prevents repairs that are due to be postponed, which could result in expensive consequential damage.

How can you calculate the maintenance reserve?

Is there a formula to calculate the maintenance reserve? Since the reserve is not a legal obligation, the community of owners can decide on the amount of the maintenance reserve. The decision is made by majority vote at the owners' meeting. The formation of a maintenance reserve is only mandatory for social housing.

In order to calculate the maintenance reserve, one orientates oneself on the age of the property. A maximum of 12.50 euros per square meter of living space is calculated.

In the case of other buildings, it is recommended that the maintenance reserve for the house be set up in an appropriate amount (Section 21 (5) No. 4 WEG). The amount of the maintenance reserve depends on the age of the property, its condition and the equipment. A residential building with a swimming pool, winter garden and luxurious roof terrace incurs higher maintenance costs than a standard apartment building.

Calculate the maintenance reserve using Peters' formula

The so-called Peters formula is sometimes used to calculate the maintenance reserve. When determining the amount of the maintenance reserves, an orientation is based on the production costs per square meter. The manufacturing cost is increased by 50 percent and then divided by 80. The result is the value that will in all likelihood have to be spent on maintenance over the next 80 years. The maintenance cost reserves should again be 70 percent of this value annually. If you calculate the maintenance reserve in this way, it turns out to be very high. The risk of not being able to pay for repairs drops to zero - but the costs for homeowners rise immensely. This is also illustrated by the following sample calculation:

  • Production costs per square meter: 3,000 euros
  • Total living space: 1,000 square meters
  • Calculated maintenance costs per year: 3,000 euros x 1.5 / 80 = 56.25 euros / square meter
  • Calculated maintenance costs for the entire house = 56,250 euros
  • 70 percent maintenance reserve per year = 39,375 euros

Calculate maintenance reserve: annual business plan

The annual business plan offers a safe and at the same time practicable method of calculating the maintenance reserve. The property manager creates an annual business plan in which all income and expenses of the community of owners are listed. This individual type of cost planning provides precise information about the amounts already saved and the likely costs. It is possible to set the amount of the maintenance reserve realistically.

Calculate maintenance reserve: II. Calculation Ordinance

An established way of calculating the maintenance reserve is the II. Calculation Ordinance according to Paragraph 28 Paragraph 2 II. BV. The maintenance costs are assigned dynamically and the age of the building is taken into account. If the apartment was ready for occupancy less than 22 years ago, a maximum of 7.10 euros per square meter of maintenance reserves will be charged. If the age of the property is between 23 and 32 years, the value is a maximum of 9.00 euros and for older buildings a maximum of 11.50 euros.

Home Maintenance Reserve: Who will manage the money?

The maintenance reserve for the house is administered by the property manager. Since this specialist can best assess which amount of maintenance reserve is appropriate, he submits a corresponding proposal to the community of owners. The owners decide by majority vote whether to accept this proposal. It is part of the property manager's job to ensure that all owners pay this contribution regularly. The money is deposited in a separate account, whereby short-term availability for unplanned repairs must be guaranteed.

According to Paragraph 20 WEG, each community of owners must commission a property manager to carry out the administrative tasks. It is possible that one of the apartment owners will take over these tasks. In many cases, however, the owners hire a professional service provider.

Maintenance reserve for the house was overcharged

If at the owners' meeting it is found that the maintenance reserve was too high, it is possible to decide to reduce it. The saved amount can be invested in a fixed deposit account with low interest rates. Be aware, however, that you will have to pay tax on the interest on the maintenance reserve. A misuse of the reserve, for example to settle the heating bill, is not permitted.

The maintenance reserve for the house was set too low

A relatively low maintenance reserve for the house lowers the monthly costs. Not only are the owners happy about this, but also potential buyers. However, there is a high risk that the saved reserves will not be sufficient to cover repair costs over the years. Repairs that cannot be postponed or major maintenance projects such as covering the roof must then be financed with a special contribution. High payments of several thousand euros are due immediately. There is no way of refusing to pay the special contribution. If all owners agree, at most one installment payment can be agreed. If no agreement is reached, the apartment owner concerned is forced to sell his apartment.

What happens to the home maintenance reserve when it is sold?

If the apartment is sold, the maintenance reserve for the house is transferred to the new owner. The seller cannot therefore claim back the part of the maintenance reserve he has saved for the house. In practice, this means that owners calculate their share of the maintenance reserve and add this amount to the sales price. Such an approach is justified because the maintenance reserve for the house offers the buyer security.

What is the significance of the maintenance reserve for the tax?

The maintenance reserve for the house should be listed separately in the sales contract. This amount does not count towards the purchase price, so you do not have to pay real estate transfer tax on it. If you rent out the condominium, income-related expenses can be deducted from tax. However, it is not possible to deduct the maintenance reserve from tax, as this does not count towards income-related expenses at the time of payment. When making a deposit, in principle only a transfer is made to another account, without any expenses being associated with it. However, repair costs increase advertising costs. Therefore, you can deduct the maintenance reserve from tax if repairs have actually been paid for. If the reserve is invested at low interest rates according to the owners' association's resolution, you must pay taxes on the interest on the maintenance reserve.

Maintenance reserves amount: The community of owners decides

Although it makes sense to set up a reserve for repairs and renovations, there is no legal obligation to set up a maintenance reserve for the house. It makes sense to enlist the assistance of a professional property manager. This will calculate the maintenance reserve and propose a maintenance reserve amount. The majority decision on the amount of the maintenance reserves applies and the minority must accept it. There is no option to withhold payment of the home maintenance reserve.

Have the condominium valued by a real estate appraiser before buying it. This expert will include reserves that have already been saved in the valuation. The real estate appraiser also explains how the maintenance reserve affects taxes.

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This post was updated for you on: September 10, 2020