Annual statement

In the real estate sector, annual statement primarily refers to the annual comprehensive statement issued by the condominium owners’ association (WEG), which lists all actual income and expenses for the common property during the past fiscal year. It serves as the basis for additional payments or refunds to individual owners and is required by law. The term is also used in tenancy agreements to refer to the landlord’s annual operating cost statement to the tenant.

Annual Statement in the WEG - Content and Obligations

According to Section 28 of the WEG, the manager of a homeowners’ association is required to prepare an annual statement each year and submit it to the owners for approval at the owners’ meeting. It includes:

• Overall statement: All income (advance housing allowance payments, other revenue) and all expenses (operating costs, maintenance measures, administrative costs) for the common property.
• Individual statements: For each residential unit, the statement shows the portion of the common costs attributable to the respective owner (according to the allocation formula specified in the division plan, usually based on co-ownership shares or living area).
• Reserve Fund: Development of the maintenance reserve fund (formerly the repair reserve fund, renamed by the 2020 WEG reform) showing the current balance, additions, and withdrawals.

The annual statement must be available by the time of the regular owners’ meeting at the latest, which generally takes place in the first half of the year following the end of the fiscal year. Approval requires a simple majority of the owners (§ 25 WEG).

Annual Statement in a Lease Agreement - Operating Cost Statement

In a lease agreement, the annual statement corresponds to the operating cost statement pursuant to § 556 BGB. The landlord must:

• Submit the statement no later than 12 months after the end of the billing period. A later statement is not binding on the tenant (the right to demand additional payment expires).
• List all apportionable operating costs in accordance with the Operating Costs Ordinance (BetrKV): heating, water, sewage, garbage, janitor, building insurance, property tax, stairwell cleaning, etc.
• Clearly state the allocation formula (usually living space, number of occupants, or utility meters).
• Make receipts available for inspection upon the tenant’s request.

The tenant has 12 months after receiving the statement to raise objections. After that, objections are generally not permitted.

Common Errors in the Annual Statement and Their Consequences

Common errors that lead to disputes in practice:

• Non-apportionable costs (e.g., repair costs, administrative costs in rent statements) were included → Tenant may object on a pro-rata basis.
• Incorrect allocation formula → Condominium owners may file an action to set aside the statement.
• Missing overall statement → Approval of the WEG statement is contestable; the landlord’s claims for back payments lapse if the deadline is missed.
• Heating cost statement without consumption tracking → According to the Heating Cost Ordinance (HeizkostenV), at least 50% of heating costs must be billed based on consumption.
• Lack of individual statements in the condominium association → Owners can challenge the resolution, as individual statements are a mandatory component.

Annual statement as a due diligence document when purchasing real estate

When purchasing a condominium, the annual statement is a key document in the due diligence process. We recommend requesting the last three annual statements and paying particular attention to the development of the maintenance reserve, extraordinary expenses, and approved special assessments. A noticeably low reserve balance may indicate a future need for special assessments. Sellers should ensure that the current annual statement has been approved and all outstanding payments have been settled before the purchase agreement is notarized.

It is also worth reviewing the minutes of recent homeowners’ association meetings: renovation measures are often announced there that are not yet reflected in the annual statement but will soon result in special assessments. Well-managed homeowners’ associations (WEGs) have transparent financial statements with traceable cost increases and a solid reserve fund.

Practical Tip for Homeowners in Nuremberg and Franconia

In Nuremberg, our team of real estate agents regularly handles transactions involving condominiums where the homeowners’ association’s annual statement is a key due diligence document. We recommend that buyers request the last three annual statements and pay particular attention to the development of the maintenance reserve, extraordinary expenses, and approved special assessments.

Especially in Nuremberg’s older building stock-such as in the Südstadt, Gostenhof, or Schoppershof neighborhoods-we repeatedly find that reserves are significantly underfunded and that the annual statements conceal structural maintenance backlogs. We’ll show you what matters most in the analysis and, if needed, connect you with experienced attorneys specializing in WEG law from our Nuremberg network.

Frequently Asked Questions

By when must the WEG annual statement be available?

The law does not prescribe a strict deadline, but the WEG annual statement must be submitted to the owners’ meeting for a resolution. This usually takes place in the first half of the year following the end of the fiscal year. If the property manager consistently fails to fulfill this obligation, they may be removed from office and held liable for damages.

Can I challenge the WEG annual statement?

Yes. Erroneous resolutions approving the annual statement can be challenged within one month of the resolution being passed by filing an action for annulment with the competent local court (for Nuremberg: Nuremberg Local Court). Typical grounds for challenge include incorrect allocation keys or the inclusion of non-common expenses.

What happens if the landlord submits the operating cost statement late?

If the landlord has missed the 12-month deadline for submitting the statement, they lose their right to demand back payments from the tenant. However, any credit balance owed to the tenant remains and must be paid out. Missing the deadline does not automatically entitle the tenant to stop making advance payments.

By how much can monthly maintenance fee payments be adjusted?

Maintenance fee payments are reset for the next fiscal year based on the budget (annual forecast). If the annual statement regularly results in high additional payments, this indicates that the monthly advance payments are set too low and should be increased. The adjustment is decided by the owners’ meeting.

What should buyers look for when reviewing a condominium association’s annual statement?

When purchasing a condominium in Nuremberg, we recommend systematically reviewing the last three annual statements for the following key indicators: First, the reserve fund trend-is the reserve fund balance steadily increasing, or is it being depleted by withdrawals for maintenance? A low reserve balance in an older building from the 1960s or 1970s in Nuremberg-Langwasser or Zerzabelshof is a clear warning sign of impending special assessments. Second, extraordinary expenses - were large one-time costs for heating system replacement, roof renovation, or facade restoration billed in previous years, or are these measures still pending? Third, the discrepancy between the budget and actual expenses - if actual costs regularly deviate significantly from the budget, this indicates poor cost forecasting or unexpected damage claims. Fourth, delinquent payments by individual owners - these are visible in the overall statement and burden the condominium association as a whole. We help buyers of condominiums in Nuremberg interpret these key figures and realistically assess the financial health of the condominium association.

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