Common Charges, Service Charges and Returns

It is not always easy to calculate the return on an apartment investment. The tenant's advance for the ancillary costs and the common charges are often included in such calculations, but this is not entirely correct, as both items are merely advance payments and the amount of the advance on the ancillary costs is often inaccurate (for example because it has not been adjusted recently). However, these are often the only figures that are known.

In order to understand the system, it is important to know that in Germany the Group of Owners (all owners who own apartments in a specific building) the WEG (Wohnungseigentümergemeinschaft), authorises and pays for a large portion of ancillary costs of an apartment. These costs include not only thegeneral maintenance costs such as cleaning of the building hallways or electricity for common areas (e.g. for the lights), but also the costs that relate to the apartments themselves, eg. for water, sewage, waste disposal and central heating (in case of central heating), as well as repairs to commonhold property, such as the external walls of the respective apartment. Only gas, if present, as in the case of individual gas heating, electricity, telephone and, in some cases, cable television are billed directly to the individual apartment owner.

Each owner must make a monthly advance payment, the so-called "commonhold contribution” to the property management. The owners agree together on the amount to be paid in a yearly budget, also called the assessment of the commonhold contribution. At the end of each calendar year, the management provides a statement of the costs actually incurred for each apartment and the payments actually received. Certain costs are divided up according to the size of the apartments, e.g. the costs of repairs and cleaning of the building. Where there is measurement equipment showing actual usage (typically for water and heating) certain costs are then usually divided up according to usage.

When an apartment is rented, the tenant must bear the majority of the costs, which are referred to as "recoverable costs" or “transferable costs”, since although the landlord must initially pay these costs to the group of owners, represented by the property management, he or she can recover such costs from the tenant, i.e. request reimbursement. The tenant pays the owner a monthly advance on the ancillary costs (Nebenkostenvorauszahlung=ancillary costs prepayment) and possibly an advance on the heating costs as well, so that this payment does not have to be made completely at the end of the year in a lump sum. The owner has to provide the tenant with a statement of the ancillary costs actually incurred at the end of the calendar year, usually with the help of a "rental contract administration".

You can find a list of the costs below, divided into transferable and non-transferable costs:

  • Real estate tax – has to be paid to the tax office and is non-transferable

Common Charges – transferable part

  • Charge for water supply and sewage disposal
  • Current heating costs (if central heating)
  • Charge for hot water supply
  • Charge for the operation of a lift
  • Street cleaning
  • Waste disposal
  • Building cleaning
  • Disinfestation
  • Garden maintenance
  • Lighting
  • Electricity for common areas
  • Chimney cleaning
  • Property and liability insurance
  • Concierge
  • Common antenna installation
  • Use of laundry equipment
  • Various running costs as per. BetrKVO
  • Small repairs of up to EUR 100

Common Charges – Not transferable part

  • Administration fees
  • Security
  • Contribution to maintenance reserve
  • One-time maintenance and repair costs such as repairs, disinfectation, new installations, renovation or facade-cleaning

In this context, the annual real estate tax is a special case. The owner pays it directly to the tax authority and not to the property management, but he or she can recover it from the tenant. As this item is not listed in the statement that you as the owner will receive from the property management, it is important that you submit the tax bill to the special property management if it is to be charged to the tenant.

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