Quota system

In real estate law, apportionment refers to the distribution of costs, revenues, or risks among multiple parties according to a predetermined percentage-based formula. It is used whenever co-owners, condominium associations, or contracting parties have a joint interest in a property-for example, in the distribution of common area fees, maintenance reserves, or proceeds from a sale. A clearly defined apportionment creates legal certainty and prevents disputes over the proportional sharing of costs.

Apportionment in the Condominium Owners’ Association (WEG)

The apportionment of operating costs, administrative costs, and maintenance reserves is centrally enshrined in the Condominium Act. In principle, the co-ownership share (MEA), expressed in thousandths, serves as the statutory allocation key (Section 16 WEG). However, the association may establish different allocation keys by resolution or agreement-such as allocating heating costs based on living area or elevator costs based on the number of users. Since the 2020 WEG reform, owners’ meetings have had greater flexibility in changing cost allocation keys, which facilitates a more appropriate allocation.

Allocation in Co-ownership and Joint Ownership

In a fractional co-ownership (§§ 741 ff. BGB), multiple persons own a property in proportionate shares. The allocation determines how burdens, costs, and revenues are to be divided. For example, if two unmarried partners purchase an apartment in a 60% to 40% ratio, each bears the running costs in accordance with this ratio and is entitled to an equal share of the proceeds from a sale. The ownership share must be entered in the land register and taken into account in financing decisions-banks often require differentiated liability arrangements when ownership shares are unequal.

Allocation of Real Estate Brokerage Fees and Ancillary Purchase Costs

The allocation of ownership shares also plays a role in the distribution of ancillary purchase costs. Since the enactment of the Act on the Distribution of Brokerage Fees for the Purchase of Apartments and Single-Family Homes (2020), the brokerage fee must generally be split equally between the buyer and seller, provided the broker acts on behalf of both parties. This statutory 50/50 allocation protects buyers from having the entire brokerage commission passed on to them. In practice, deviations are permitted only under strict conditions.

Allocation in Leasehold Rights and Condominium Ownership

Another application of allocation is found in leasehold rights: When a leaseholder constructs a building on land owned by another party, the allocation of the total value between the building and the land value serves as the basis for ground rent calculations, as well as for tax depreciation. The building ratio (the ratio of the building value to the total value, including the land) determines, in the income approach, which portion can be depreciated. This allocation must be clearly documented in the purchase agreement or expert appraisal.

Ratios also play a role in the division of individual ownership and common ownership in condominium complexes. The area ratio specified in the declaration of division determines not only the allocation of costs but also voting rights at the owners’ meeting. Errors in the original determination of ratios can lead to significant injustices over time-especially if the actual usable areas differ from those stated in the declaration of division.

Practical Tip for Owners in Nuremberg and Franconia

In Nuremberg apartment buildings with mixed-use properties-such as commercial units on the ground floor and residential units on the upper floors-the simple MEA formula often leads to inequities in the allocation of heating costs. We recommend that homeowners’ associations in the region review the cost allocation keys every five years and, if necessary, adjust them by mutual agreement to reflect the actual usage situation. For new construction projects in Franconia, it is advisable to carefully define the allocation ratios in the declaration of division from the outset-subsequent changes require notarization and can be costly.

This is particularly true for older existing buildings in Nuremberg that were subdivided in the 1970s or 1980s; the quotas entered in the declaration of division often no longer reflect today’s actual usage patterns. For example, if a formerly smaller commercial unit has been significantly enlarged through renovation without adjusting the MEA shares, the unit may be paying too little in proportionate maintenance fees. We are happy to assist you in reviewing your declaration of division and optimizing the cost allocation ratios-and, if necessary, put you in touch with a specialized WEG property manager or a law firm specializing in condominium law in the metropolitan region.

Frequently Asked Questions

Can the cost allocation ratios in a WEG be changed by a majority vote?

Since the 2020 WEG reform, resolutions to change the cost allocation formula can be passed by a simple majority, provided the change complies with proper management and does not unfairly disadvantage any owner. For permanent deviations from the standard formula, however, unanimity is still required. In case of doubt, legal advice should be sought to avoid contestable resolutions.

What happens if a co-owner fails to pay their share of the costs?

In a fractional co-ownership, the other co-owners may sue the delinquent co-owner for their share of the costs. In a WEG, the community holds a lien on housing expenses pursuant to Section 10(3) WEG, which takes precedence over other real property liens, and may claim late payment interest as well as collection costs. In extreme cases, the condominium unit may be subject to foreclosure.

How is the share determined in the event of a partial sale of the property?

In a partial sale, the buyer acquires a fraction calculated based on the agreed purchase price in relation to the total value of the property. This fraction is entered in the land register and forms the basis for all future apportionments of costs and revenues. An independent appraisal protects both parties from an incorrect apportionment calculation.

How is apportionment handled in the operating cost statement for mixed-use properties?

In mixed-use buildings-commercial on the ground floor, residential on the upper floors-the apportionment of heating costs and general operating costs presents a particular challenge. According to the Heating Costs Ordinance, at least 50 percent of heating costs must be billed based on consumption; the remaining 50 percent can be allocated based on floor area or co-ownership shares. Commercial tenants often have a different consumption profile than residential tenants, which leads to inequities when allocation is based purely on floor area. In such situations, we recommend measuring heating costs using separate heat meters for commercial and residential areas and adjusting the allocation accordingly. In the Nuremberg metropolitan region, where many older buildings in the city center and in Gostenhof have mixed-use properties, this differentiated allocation is a common issue in condominium management. We assist with the analysis of existing cost allocation formulas and the development of practical solutions.

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