Friday, April 19, 2024
Calculate Maintenance Reserve
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1. Which input parameters are required to calculate the maintenance fee?
Please provide the
- costs of production,
- the total area of the building,
- the private area
- and a percentage for the fraction of the common property on the total maintenace fee.
2. What is the maintenance reserve fund?
The maintenance reserve fund must be formed due to German law
§21 Abs. 5 Nr. 4 WEG (Wohnungseigentumsgesetz)
in an appropriate manner to be able to finance necessary repairs
for the property.
The estimation of an appropriate amount of the maintenance reserve fund
is often done with the Peters' formula.
The amount of the maintenance fee is then agreed on in the home owner's
meeting and can be found in the budget plan.
The maintenance reserve fund is built up by the monthly payments of the
home owners - the so called maintenance fee. Its purpose is to provide
financial means for necessary upkeep and repairs of the property.
Since such measures are usually quite expensive, the maintenance reserve
fund is continually filled so that home owners do not have to pay large
one time payments and have a financial reserve.
3. Where can I find informations about the maintenance reserve fund?
You may find information about the maintenance reserve fund in the documents
of the annual statement provided by your property administration.
Usually, there is a document containing the words 'Development of the
maintenance reserve fund' or something similar. This is a detailed
compilation of incoming and outgoing cashflow of the maintenance
reserve fund.
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4. Taxation of the maintenance fee?
In Germany, the maintenance fee is transferred on a monthly basis
to the property administration. If your property is let, then the
rent is considered as income from rent and leasing according to German tax law.
As is customary for most income types, it is possible to deduct
income-related expenses. However, according to tax law the payments
for the maintenance reserve fund do not count as income-related expenses
in the moment of the cashflow. They may be deducted, once the
property administration spends the maintenance reserve fund on actual
repairs. The deduction as income-related expenses may be performed
proportionate in case. If you need more details, a tax accountant
might be able to provide you with proper advice.
5. Is the maintenance reserve fund reimbursed when selling the property?
No, the maintenance reserve fund is not reimbursed when you sell the property,
since it belongs to the administrative assets according to German law
§10 Abs. 7 Satz 3 WEG.
6. What is Peters' formula?
To estimate the annual payments for the maintenance reserve fund,
often Peters' formula is applied. This formula is based on empirical data
and was deduced by statistically analysing actual payments for
maintenance reserve funds of properties. Peters' formula is based on
the assumption, that you need 1.5 the production costs of the building
within 80 years for the maintenance of the building. The production costs
of a building include for instance construction costs, the architect,
expenses for the planning commission and more. According to Peters,
about 65-70% of the total maintenance costs are applied for the common
property in case of a multi-family house. The remainder is assigned to
the personal property.
The calculation according to Peters' formula is performed as follows:
$$\text{MR per year} = \frac{1,5\times\text{PC}}{80 \ \text{years}} $$
MR = maintenance reserve per square meter (m2)
PC = production costs per square meter (m2)
The maintenance reserve per year and per square meter for the owner
community is calculated according to Peters as follows:
$$\text{MRC per year} = \frac{\text{MR per year}\times 70 \%}{100 \%}$$
MRC = maintenance reserve per m2 for the owner community
The total amount of the maintenance reserve per year for the owner community
is obtained by multiplying with the total area:
$$\text{TC per year} = \text{MRC per year}\times \text{TA}$$
TC = total amount of the maintenance reserve for the owner community
TA = total area
Please feel free to use our online calculator above to perform this
calculation. In the results you then find the maintenance reserve
for the owner community as well as for the personal property as
total values and values per square meter.
7. What happens with the maintenance reserve in the case of an insolvency of the property administration?
If you have contracted a property administration for the administration of
your property, they are required by German law
§27 Abs. 5 WEG to keep the maintenance reserve separate from their
own assets. This is very important, since in case of an insolvency of the
property administration company, the maintenance reserve would be
included in the remaining bankruptcy estate of the company.
Additionally, the property administration company should keep the accounts
in the name of the owner community and not in their own.
It might be a good idea to check with your property administration company,
if these requirements are fulfilled.
8. What are the production costs of a real estate property?
The production costs of a building include
for instance the construction costs, the architect, expenses for the
planning commission, costs for planning the construction and more.
They are summarized in the German hints for the income tax law
(
H 6.4 EStH zu
§6 EStG Einkommensteuergesetz).
Obviously, it is easier to name the production costs for a newly constructed
building instead of an old one.
9. What is the total area?
The total area refers to the whole building
of which you have provided the production costs.
If you want to calculate the maintenance reserve for personal property in
a multi-family house, please provide the total area of the whole
multi-family house.
10. How to calculate the maintenance reserve for an apartment?
If you want to calculate the maintenance reserve for personal property
in a multi-family apartment house, please provide the private area
in our free online calculator.
11. How to calculate the maintenance reserve?
In Peters' formula usually about 70% of the
total maintenance costs are required for the common property, while 30%
are applied to the personal property.
Since this formula is only an opinionated assumption vaguely based on empirical data, we
give you the freedom to provide your own percentage values in our
online calculator.
12. Is the maintenance reserve considered in the property search of Investby.Immo?
Yes - if the offeror of the real estate investment provided a value for
the payments to the maintenance reserve fund, then this is taken into
account in the calculation of the net return,
which you may use as search parameter in our
property investment search.
Last modifed: Jan 28, 2022
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