Year-End Settlement

Year-end statement is a term commonly used in the real estate industry to refer to the statement of utility costs or total property management costs for a property, issued to tenants or homeowners at the end of the year or shortly thereafter. The term is not a legal term in its own right, but is used synonymously with “operating cost statement” (in a lease agreement) or “WEG annual statement” and emphasizes the temporal reference to the past calendar year.

Distinction: Year-End Statement, Operating Expense Statement, and WEG Annual Statement

The three terms refer to related but not entirely identical documents:

• Year-End Statement (general): Any form of annual final statement for the management costs of a property-a general or umbrella term.
• Operating cost statement (tenancy law): The formally regulated statement issued by the landlord to the tenant pursuant to § 556 BGB and the Operating Cost Regulation (BetrKV). It must be provided no later than 12 months after the end of the billing period.
• WEG Annual Statement (Condominium Law): The overall and individual statement for the common property to be prepared by the property manager pursuant to Section 28 of the WEG (German Condominium Act), which is submitted to the owners’ meeting for approval.

In practice, the contents largely overlap: In all cases, the focus is on comparing advance payments made (rent, advance payments for utilities) with actual costs incurred, as well as determining any additional payments or refunds.

Content and Structure of a Proper Year-End Statement

A correct year-end statement must contain at least the following:

1. Accounting period: Usually the calendar year (January 1 to December 31), but may also differ.
2. Total costs per cost item: A list of all apportionable costs by type (heating, water, trash, insurance, property tax, etc.).
3. Allocation formula: Explanation of how the costs were allocated to the individual units.
4. Share per unit: The amount attributable to each tenant/owner.
5. Advance payments made: Total of the installments paid during the billing period.
6. Balance: Additional payment or refund.

For heating costs, the Heating Costs Ordinance applies additionally: At least 50% of heating costs must be billed based on individual consumption (meter reading); the remainder may be allocated based on floor area.

Deadlines and Legal Consequences for the Year-End Settlement

In a tenancy agreement, the 12-month deadline under Section 556(3) of the German Civil Code (BGB) is considered the most important deadline: The landlord must submit the statement no later than the end of the twelfth month following the end of the billing period. If the landlord misses this deadline, they lose their claim for additional payment but not their right to withhold any credit owed to the tenant. The tenant, in turn, also has 12 months after receiving the statement to raise and substantiate objections. If the tenant misses this deadline, their objections are generally barred.

Furthermore, the tenant has the right to reduce their advance payments appropriately if the landlord consistently fails to provide a statement-that is, if it is evident that the landlord is not fulfilling this obligation. In practice, however, we recommend that tenants first request the statement in writing and consult a specialist attorney before suspending payments.

Year-End Statement and Digitalization

An increasing number of property management companies and landlords in the region are relying on digital billing portals through which tenants and owners can view, comment on, and raise objections to their year-end statements online. This not only improves transparency but also speeds up processing times. The legal binding effect depends on the agreed method of delivery-for the statement to trigger a deadline, receipt in text form (mail or email) is generally still required.

Practical Tip for Property Owners in Nuremberg and Franconia

As a landlord in Nuremberg, Fürth, or Erlangen, we recommend sending out the year-end statement as early as the first quarter of the following year-on the one hand, to comfortably meet deadlines, and on the other, because timely and transparent statements strengthen the relationship of trust with tenants and minimize disputes. Use a professional property manager or billing software to avoid errors in allocation keys and non-apportionable cost items.

Especially in Nuremberg apartment buildings with decentralized hot water systems or communal heating, the Heating Costs Ordinance and the use of consumption metering devices (heat cost allocators, heat meters) must be observed with particular care. In practice, errors in heating cost billing are the most common source of disputes over additional payments. If you have questions about correct preparation or disputes with tenants regarding a year-end statement, we can help you connect with qualified professionals from our Nuremberg network (property managers, attorneys specializing in tenancy law).

Frequently Asked Questions

Does the year-end statement always have to end on December 31?

No. Landlords and tenants can agree on a different billing period in the lease agreement (e.g., July 1 to June 30). The fiscal year of the condominium association may also differ from the calendar year, provided the community bylaws allow for this.

What costs may the landlord not pass on to the tenant?

In particular, the following costs are not apportionable: maintenance and repair costs, administrative costs (property manager’s fees), costs associated with vacancies, and costs not listed in the Operating Costs Ordinance (BetrKV), unless they were expressly agreed upon as apportionable in the lease agreement.

What can I do if my landlord’s year-end statement contains errors?

Carefully review the statement using the supporting documents (right of inspection under § 259 BGB), the allocation formula, and the Operating Costs Ordinance. File written objections within 12 months of receiving the statement. After this period expires, objections are generally barred (§ 556(3) sentence 5 BGB). In unclear cases, we recommend consulting a tenants’ association or a lawyer specializing in tenancy law.

What happens if heating costs in the year-end statement were allocated solely based on floor area?

If your landlord, contrary to the Heating Costs Ordinance, has billed heating costs entirely based on living space instead of at least 50% based on consumption, you can challenge the statement to that extent. The law also provides for a right to a 15% reduction on the portion of heating costs billed based on floor area (Section 12 of the Heating Costs Ordinance). You can assert this right even after the 12-month objection period has ended.

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