What is meant by ...
The term maintenance reserve refers to a provision of an appropriate sum of money by the owners, which is invested in a separate account. This reserve is used for the upkeep or maintenance of the common property and is set aside to pay for major repairs. The administrator is not authorised to pay invoices from the maintenance reserve account without a corresponding resolution of the condominium owners' association. After the end of the financial year, the administrator prepares the annual statement of accounts for all owners and settles the actual costs incurred and the house fees paid.
Living space is in short supply in many German cities. Prospective tenants flock to viewings, bring application folders and in most cases have to continue their search. And even landlords sometimes find themselves in a situation where they need additional living space. In such cases, however, the tenant can only be given notice to quit if they give proper notice of their own requirements.
The house allowance is an advance payment owed to the homeowners' association on the basis of the economic plan. All owners of a flat pay this monthly advance to the account of the homeowners' association (WEG). The account is managed by the corresponding WEG administrator. This advance payment is used for the ongoing management of the building and is similar to an advance payment of service charges by tenants.
The house allowance can basically be divided into three different groups. There are apportionable costs, non-apportionable costs and the maintenance reserve (formerly maintenance reserve). The apportionable costs can be passed on to the tenants as part of the heating and operating costs bill - provided the flat is not occupied by the owner and the flat is rented out. These include items such as water, heating, building management, insurance, waste disposal fees and domestic electricity. The non-allocable items include, for example, management fees, maintenance and bank charges.
Since the beginning of 2022, the cost of living has risen dramatically in Germany and in all European countries. Skyrocketing energy and commodity prices are driving up inflation. In addition to supply bottlenecks and other pandemic-related economic effects, the war in Ukraine is also exacerbating the inflationary trend with a corresponding shortage of supply. More and more people are worried about their livelihoods due to the high inflation rate and want quick support from the state.
What does inflation mean?
Every month, the Federal Statistical Office publishes the results of a consumer index. average price development of all goods and services for private households. The change in the consumer price index compared to the same month of the previous year or the previous year is known as the inflation rate or the Inflation rate labelled.
How does inflation occur?
Inflation occurs as a result of a significant increase in the amount of money in circulation in relation to production. If the money supply in a country grows faster than production, the demand for goods and services increases accordingly, which leads to price increases.
Why do certain assets increase in value?
The determination of value is related to the availability of certain goods on the market. Resources cannot be utilised or increased indefinitely, which means that a higher price can be achieved than for free goods, which are available in unlimited supply. Scarce goods are therefore those whose resources are limited. These include, for example, oil, gold, property or drinking water. A rising money supply therefore means that the value of coveted goods, as in the case of property, increases.
How high is the inflation rate and what are your future forecasts?
The inflation rate in Germany - measured as the change in the consumer price index (CPI) compared to the same month of the previous year - was +4.9 % in January 2022, +5.1 % in February 2022 and +7.3 % at the end of March 2022.
According to experts, we are currently experiencing the highest inflation rate in reunified Germany. The German Council of Economic Experts (Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung) is forecasting a drastic economic slump and an inflation rate of 6.1 % in Germany for 2022 as a whole.
Nevertheless, the outlook for the coming year is optimistic and inflation is expected to fall to 3.4 %.
How can rising inflation be curbed?
The majority of economists are of the opinion that the European Central Bank (ECB) must take immediate action to reduce inflation. One of the immediate measures cited is an increase in key interest rates. The demand is justified by a strong signalling effect, especially in view of the fact that interest rates have been too low for a long time. This has mainly benefited property investors to date. It is therefore foreseeable that the increase in interest rates, particularly for new builds, will drive up sales prices further in addition to the already sharp rise in material prices.
How does inflation affect the property market?
Inflation mainly affects monetary assets. In the case of shares or property, which are tangible assets, there are certain protective mechanisms that can prevent a sharp fall in value. In the case of property, a rising inflation rate can be offset by a simultaneous increase in rental income (e.g. in the case of index-linked rental agreements), which is why security-loving investors are particularly focussed on cash flow properties. (investment properties). Despite the pandemic-related crisis, during which individual distress sales caused prices to fall briefly in 2020, there was a renewed upturn on the property market in the course of the following year 2021. High demand for investment property. The price level in A-locations, i.e. business locations in the centre of a city with the highest footfall, has remained unchanged all round, in some cases rising slightly compared to pre-crisis levels.
The statutory period of notice is stipulated in every tenancy agreement. This is usually three months, but a shorter period can also be agreed. Sometimes, however, it becomes necessary for tenants or landlords to get out of the existing contract earlier. In such cases, a lease cancellation agreement can be negotiated. However, in order to avoid trouble later on, everything should be set out as precisely as possible.
The business plan is a list of the expected costs incurred in the administration and management of the common property. It is the basis for the monthly house fee and also serves to ensure liquidity. The condominium administrator generally prepares the business plan once a year and presents it to the ordinary owners' meeting for approval.
It is often customary for the business plan to be adopted with the addition that it remains valid until a new one is adopted. For each item in the economic plan, a distribution key must be specified for the proportionate bearing of costs. This is generally regulated in the declaration of division. Distribution keys based on square metres or co-ownership shares (MEA) are usually used. The number of units is often used as a basis for some items, such as the administrator's fee or costs for the cable connection.
The landlord can give notice of termination if it is no longer economically viable to let the property. According to the German Civil Code, this is the case "[...] if the landlord would be prevented from making appropriate economic use of the property by continuing the tenancy and would suffer considerable disadvantages as a result [...]".
However, various requirements must be met for this: Firstly, the landlord must state the reason for utilising the property for other purposes. This includes, for example, that he wishes to renovate or modernise the property, sell it or combine several residential units. Another reason may be that the landlord wishes to demolish the building and replace it with a new building. In addition, the new utilisation must be reasonable and appropriate for the property - appropriate in cases where the landlord has to pay off debts or wants to create new living space, for example. If the landlord is prevented from doing so by the tenancy agreement and suffers economic disadvantages, this may result in a realisation notice.
