Budget Plan (WEG)

Financial Plan (WEG) - The financial plan is the annual budget of a condominium association, which the property manager prepares in accordance with Section 28 of the WEG and which sets forth the projected revenues, expenses, and the amount of the monthly maintenance fee per unit. It serves as the central management tool for the association’s finances and forms the basis for calculating each individual owner’s monthly maintenance fee.

Structure and Content of the Budget

The budget forms the financial backbone of every condominium association. It is prepared by the property manager for the coming fiscal year and submitted to the owners’ meeting for approval. The budget is divided into:

• Overall Budget: Financial planning for the entire complex
• Individual budgets: Each individual owner’s share, from which the monthly maintenance fee is derived

On the expense side, the budget includes all anticipated costs:

• Ongoing operating costs: Water, sewage, garbage collection, street cleaning, insurance premiums (building insurance, liability insurance)
• Administrative costs, including the property manager’s fee (base fee + any special payments)
• Costs for janitorial services, stairwell cleaning, and landscaping
• Maintenance contracts (elevator, heating, fire alarm systems)
• Maintenance costs for ongoing repairs to common property
• Allocations to the maintenance reserve

The revenue side consists primarily of the owners’ monthly maintenance fee payments, supplemented, if applicable, by interest income on the reserve or revenue from common facilities (e.g., antenna system, communal washing machine).

Cost allocation is generally based on co-ownership shares (MEA), unless the declaration of division or a resolution by the community provides for a different allocation formula (e.g., allocation based on living space, per capita allocation for certain cost items). At the end of the fiscal year, the property manager prepares the annual statement, in which actual costs are compared with budgeted costs.

The Maintenance Reserve in the Financial Plan

A particularly important component of the financial plan is the allocation to the maintenance reserve. This reserve is intended to finance future repairs and renovations to the common property without the need to levy a special assessment. The amount of the annual allocation should be based on the age and condition of the building:

• New construction up to 5 years old: at least 7-10 euros/m² of living space/year
• Buildings 5-15 years old: 10-15 euros/m²/year
• Buildings over 15 years old: 15-20 euros/m²/year
• Old buildings in need of renovation (post-war buildings in Nuremberg): 20-30 euros/m²/year

Setting the reserve fund allocation too low may reduce maintenance fees in the short term, but in the long term it leads to financial bottlenecks and increases the risk of costly special assessments. Special assessments are problematic for all owners-including those who have to take out a loan to cover them-and reduce the property’s appeal when it comes time to sell.

The Budget Plan as a Due Diligence Tool for Purchases

When purchasing a condominium, the budget plan is one of the most important documents to review. It reveals:

• How high are the monthly maintenance fees-and do they include a realistic reserve fund?
• Which items tend to rise (e.g., energy costs, management fees)?
• Are extraordinary expenses planned or already foreseeable (facade renovation, heating system replacement)?
• Does the reserve fund balance correspond to the condition of the building?

A property manager who deliberately sets maintenance fees too low to make the residential complex appear more attractive is acting in breach of duty-but the buyer bears the consequences in the form of special assessments.

Practical Tip for Owners in Nuremberg and Franconia

When purchasing a condominium in Nuremberg and the Franconia metropolitan region, we recommend carefully analyzing the current budget plan. Pay attention to the level of the maintenance reserve in relation to the building’s age, the plausibility of the estimated operating costs, and any missing items. Especially for existing properties from the post-war decades-which are numerous in Nuremberg neighborhoods such as Langwasser, Gibitzenhof, or Schweinau-a solid budget plan provides insight into whether the homeowners’ association is well-managed.

We help our clients interpret financial plans correctly and assess the financial health of a condominium association. We pay particular attention to comparing the reported reserve fund balance with the estimated renovation needs-in our experience, a reserve fund of less than 200 euros per square meter of living space is often insufficient for older buildings in Nuremberg.

Frequently Asked Questions

Does the budget have to be approved anew every year?

Yes, the property manager is legally required to draw up a new budget for each fiscal year and submit it for approval. If no new budget is approved, the most recently approved budget remains in effect until the owners’ meeting adopts a new one. Owners should insist that the budget is calculated realistically and is sufficiently detailed-blanket lump-sum items are a red flag.

What happens if I disagree with the budget?

As an owner, you can vote against the budget at the owners’ meeting and submit amendments. If the plan is nevertheless approved by a majority vote, you have the option to file a lawsuit to challenge the decision within one month. Until a court decision is reached, the approved plan remains in effect and the maintenance fees must continue to be paid. We recommend always having any claims to challenge the decision reviewed by an attorney at an early stage.

What role does the budget play in the tax return?

For owners of rented apartments, the budget plan is an important basis for the tax return. Allocable operating costs can be claimed as income-related expenses, as can administrative costs and-at the time of the actual outflow of funds for a specific measure-maintenance services financed from the reserve fund. We recommend submitting the budget plan and the annual statement to your tax advisor.

Can the monthly maintenance fee for the current property manager be deducted as income-related expenses?

Yes. The monthly maintenance fee consists of several components, most of which are deductible as income-related expenses for rental apartments: operating costs (to the extent not passed on to the tenant), administrative costs, and the maintenance portion. Contributions to the maintenance reserve, on the other hand, are only deductible once the reserve is used for specific measures-simply accumulating the reserve does not immediately have tax benefits.

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