From December 1st, 2020, new rules will apply in condominium law, after the Reform Act was announced in the Federal Law Gazette on October 22nd, 2020 (Federal Law Gazette I 2020, page 2187). There are significant changes due to new regulations. WEG administrators and apartment owners must consider this in the future.
You can find the new regulations that have been adopted on the subject of modernization, refurbishment, certified administrators and much more here.
WEG reform has come into force
The WEG reform came into force on December 1st, 2020. The reform law brings significant changes for WEG administrators and apartment owners.
Numerous new rules in condominium law came into force on December 1st, 2020 after the Reform Act was promulgated in the Federal Law Gazette on October 22nd, 2020 (Federal Law Gazette I 2020, p. 2187).
That will change with the 2020 WEG reform
The “Act to Promote Electric Mobility and Modernize the Home Ownership Act and to Change Costs and Land Register Regulations (Home Ownership Modernization Act - WEMoG)”, as the WEG Reform Act is called in full, leads to numerous changes to the Home Ownership Act.
Refurbishment and modernization will be easier
Resolutions on the implementation of structural changes to the common property or the approval of structural changes are simplified. Pursuant to Section 20 (1) of the new WEG, these will in future be possible with a simple majority without the consent of all the owners affected by a measure.
In principle, those owners who have approved the measure have to bear the costs. However, all apartment owners have to bear the costs according to their co-ownership share if the measure has been resolved with more than two thirds of the votes cast and more than half of the co-ownership shares (Section 21 (2) No. 1 WEG-new). In turn, the costs should not be borne by all owners if the structural change is associated with disproportionate costs. This restriction is intended to protect individual owners from excessive financial demands.
A distribution of the costs to all owners is also provided if the costs of the measure amortize within a reasonable period of time (Section 21 (2) No. 2 WEG-new). What is to be understood as an appropriate period of time is not stipulated by law. According to the justification for the law, the assumption developed by the case law on the so-called modernizing repair, according to which the period should generally be ten years, cannot be statically transferred. Depending on the specific measure, the period can also be exceeded, for example to enable sensible energy-efficient renovation measures at the expense of all apartment owners.
In order to simplify the renovation and modernization of residential complexes, every apartment owner is entitled to the installation of a charging facility for an electric vehicle, barrier-free expansion and conversion, measures to protect against burglary and access to a fast internet connection at their own expense ( Section 20 (2) WEG-new).
Entitlement to a certified administrator instead of proof of competence for a business license
A central point of contention during the discussions on the WEG reform was whether a mandatory certificate of competence for commercial administrators will be introduced, as the Association of Real Estate Managers Germany (VDIV) has been calling for for years.
In the course of the committee deliberations, the Union and the SPD agreed on a compromise line: In terms of trade law, there will be no binding proof of expertise even after the WEG reform. Proof of a certain qualification is therefore still not a prerequisite for the issuing of a business license according to § 34c of the trade regulations. However, Section 19 (2) No. 6 WEG-new gives every apartment owner the right to request the appointment of a certified administrator - and thus proof of expertise - as part of proper administration.
According to Section 26a, Paragraph 1 of the WEG-neu, a certified administrator can be described as anyone who has verified before a Chamber of Commerce and Industry that he has the legal, commercial and technical knowledge required to work as an administrator. The Federal Ministry of Justice and Consumer Protection regulates the exact structure of the certification in a statutory ordinance.
The right to appoint a certified administrator exists for the first time two years after the WEG reform came into force so that the certification process can be developed and introduced.
People who have already been appointed as administrators of a homeowners association when the WEG reform comes into force are considered to be certified administrators for another three and a half years for the homeowners of this association. Administrators who already have practical experience should be given some time to take the exam, says the reasoning. This at the same time relieves the audit offices and leaves them capacity for the young administrators.
An exception to the right to appoint a certified administrator exists in smaller systems for cases of self-administration. This exception presupposes that the system consists of fewer than nine separate property rights and that an apartment owner has been appointed as manager. In such a case, if a third of the apartment owners (by head) demand the appointment of a certified administrator, one must be appointed.
The further training obligation for administrators introduced in 2018 remains unaffected by the regulations for certified administrators, so that administrators must also prove 20 hours of further training within three years in the future.
Community as responsible for administration
In order to eliminate the often difficult distinction whether in individual cases the community of apartment owners or the apartment owners themselves are the bearers of rights and obligations, the community will in future be the bearer of the entire administration, which acts through its organs (owners' assembly as a decision-making body, administrator as a representative body).
More powers for administrators
The administrator’s decision-making and representation powers will be expanded in the course of the WEG reform. However, the extension of powers is not as extensive as foreseen in the original draft law.
In future, the administrator can decide on his own responsibility, without passing a resolution, on measures that are of subordinate importance and do not lead to significant obligations. This is provided for in Section 27 (1) No. 1 WEG-new. According to the explanatory memorandum, the size of the installation should be a measure of the importance of a measure and the significance of the resulting obligations. As the size of the system grows, the number of measures that the manager can and must take independently grows.
According to the reasoning, depending on the individual case, in addition to minor repairs, the conclusion of supply and service contracts to a limited extent or the judicial enforcement of house money claims should belong to the group of measures that the administrator can carry out independently and without a resolution by the owner.
The original draft law stipulated that administrators could carry out measures on their own responsibility, “about which a resolution is not required”. This has often been criticized as being too extensive.
Section 27, Paragraph 2 of the WEG-new gives apartment owners the opportunity to define those measures themselves, which they want the administrator to be responsible for. To do this, they can set up value limits or catalogs of measures. It is also possible to make individual actions by the administrator (e.g. payments above a certain amount) dependent on the consent of an apartment owner, the management board or a third party.
External power of attorney for administrators
In future, administrators will have power of representation for the community in external relationships, according to Section 9b (1) WEG-new. For the conclusion of a loan agreement or a property purchase agreement, however, this requires a resolution by the apartment owner. According to the reasons for the law, such a resolution can either relate to a specific transaction or generally to transactions of this type.
The original draft law provided for unrestricted powers of representation for the administrator, which was criticized as being too extensive.
Owner meetings and decision-making are simplified
Thanks to the reform of the WEG, owner meetings can be made more flexible in the future and opportunities offered by digitization can be better used.
For example, in Section 23 (1) of the WEG-new, the owners have the power to decide to enable owners to take part in the owners' meeting online. However, this does not include the possibility of abolishing face-to-face meetings by majority vote in favor of pure online owner meetings.
In future, an owners' meeting will also have a quorum regardless of the number of owners present or represented or the number of co-ownership shares. Section 25 (3) of the WEG in its previous form is deleted. This should avoid the effort and costs for repeat meetings.
The notice period for owners' meetings is extended from two to three weeks (Section 24 (4) sentence 2 WEG-new). The original draft law provided for the summons to be doubled to four weeks.
In the future, apartment owners can also request a call-up in text form, e.g. by email (Section 24 (2) WEG-new). The law currently requires the written form. In addition, it is made easier for apartment owners to convene an owners' meeting themselves if it is not possible for the manager or the chairman of the advisory board to convene.
In future, circular resolutions will only need to be in text form instead of in writing (Section 23 (3) WEG-new). This is intended to open up the possibility of using electronic means of communication such as e-mail, Internet platforms or apps in order to make a circular resolution. The frequently raised demand to generally lower the quorum for circular resolutions, which previously required unanimous vote, was not reflected in the reformed law. However, the apartment owners can decide in future with regard to specific resolution items that a decision can be made on this in the circulation procedure with a majority of votes (Section 23 (3) sentence 2 WEG-new). The justification for the law cites as an application example the case that a resolution cannot be passed in an owners' meeting due to insufficient information. The owners could then decide to make up for the resolution by means of a majority vote in circulation.
In Section 24, Paragraph 6, Sentence 1 of the WEG-new, it is expressly standardized that the minutes of the owners' meeting must be drawn up immediately after it has ended.
Collection of resolutions will not be abolished
Even after the WEG reform, the obligation to collect resolutions remains. The original draft law intended to abolish the collection of resolutions and replace them with a retention requirement.
Right to inspect administrative documents
Article 18 (4) of the new WEG gives every apartment owner a statutory right to inspect the administrative documents vis-à-vis the community.
More flexible decision on how to pay
In the future, apartment owners will be able to make more extensive decisions on cost allocation. While this power is limited according to the current legal situation to the allocation of costs for measures in individual cases and requires a qualified majority, § 16 para. 2 WEG-new provides that the owners in future with a simple majority of votes and independently of the individual case on the allocation of individual costs or certain Can decide types of costs.
Administrative advisory board will be more flexible
The regulations on the administrative advisory board are also being adapted by the reform of the WEG. In this way, apartment owners can flexibly determine the number of advisory board members in the future by resolution. The definition of three advisory board members currently contained in Section 29 (1) WEG is no longer applicable.
In order to motivate more owners to make themselves available as an administrative advisory board, the liability of honorary advisory boards is limited to intent and gross negligence (Section 29 (3) WEG-new).
In addition, the administrative advisory board is expressly given the supervision of the administrator as a task area in Section 29 (2) WEG-new.
Easier removal of the administrator
Apartment owners' associations will be able to separate from an administrator more easily in the future. The removal of the manager is no longer dependent on the existence of an important reason, but the apartment owners can remove the manager at any time (Section 26 (3) WEG-new). The management contract ends no later than six months after the dismissal.
Legal action against the community
As a result of the reform of the WEG, the regulations on avoidance and nullity actions will also be redesigned. Since the community will be responsible for the administration in future, such actions will be directed against the community instead of - as under the current legal situation - against the individual apartment owners.
Cost decision at the expense of the administrator will be abolished
Section 49 (2) WEG, according to which the court can impose legal costs on the administrator in the event of gross negligence, will be deleted in the course of the WEG reform. The apartment owners are adequately protected by material and legal claims for damages, it says in the justification for the draft law.
Entry in the land register of resolutions amending the agreement
Resolutions changing the agreement, which are made on the basis of a statutory or legal opening clause, are effective according to the current legal situation even without entry in the land register against buyers of residential property. In order to ensure better protection of buyers, resolutions that the owners have made on the basis of a legal opening clause will in future need to be entered in the land register in order to have an effect on legal successors (Section 10 (3) WEG-new).
Future homeowner association
In order to eliminate legal uncertainties in connection with the legal figure of the “evolving homeowner community”, the WEG reform provides that the community of homeowners will be created as a one-man community with the creation of the land registers.
In future, first-time buyers of residential property will be able to take part in the decision-making process as soon as the property is handed over (Section 8 (3) WEG-new). This means that the legal figure of “future homeowners” developed by the case law is also reflected in the law.
Extension of special ownership
The reform of the WEG extends the ability to own property to open spaces such as parking spaces and terraces (Section 3, Paragraph 1, Clause 2, Paragraph 2, WEG-new). The current practice of establishing special rights of use in such areas similar to private property leads to legal uncertainty, according to the explanatory memorandum.
Subject matter and content of the annual statement
The WEG reform provides for new regulations for annual accounting. The resolution on the annual billing is limited to the peak billing period (Section 28 (2) WEG-new); however, the arithmetic unit itself is no longer the subject of a resolution in the future.
In addition, administrators will in future be obliged to prepare an asset report after the end of a calendar year (Section 28 Paragraph 4 WEG-new). This must contain a description of the maintenance provision and a list of the main joint assets. The maintenance reserve / maintenance reserve is named “maintenance reserve” to make it clear that it is not just a balance sheet item, but available assets.
Withdrawal of home ownership
With the reform of the WEG, the regulations on the deprivation of home ownership are adjusted. In Section 17 (2) of the new WEG, it is generally formulated that a violation of the obligations that exist towards the community can justify deprivation of property. According to the reasoning, this may be a breach of the obligation to bear the costs.
But no decision-making authority for contractual penalties
According to the original bill, homeowners should be given the power to impose penalties in the event that an owner breaches their duties. However, this has not found its way into the law.
Harmonization of tenancy and condominium law
In order to harmonize tenancy and condominium law, tenants of separate property units will in future be obliged to tolerate construction work in the condominium complex (Section 15 new WEG).
The WEG reform also provides for harmonization with regard to the billing of operating costs. In the case of rented condominiums, the cost allocation applicable in the WEG will in future also be decisive in the relationship between the renting owner and the tenant (Section 556a (3) BGB-new). Currently, the living space is decisive under tenancy law, while the WEG provides for a cost allocation according to co-ownership shares.
WEG reform: Final version of the law
The changes due to the reform of the WEG result from the version of the WEMoG decided by the Bundestag and Bundesrat.
Explanations of the individual changes can be found in the federal government’s draft law of April 27, 2020.
There were still changes to the draft in the course of the legislative process. These changes and their justification can be seen in the recommendation of the Legal Affairs Committee on September 16, 2020. This was the basis of the version that was finally adopted.
WEG reform: schedule
The changes to the condominium law came into force on December 1st, 2020.
The draft law for the reform of the WEG was discussed in the first reading in the Bundestag on May 6, 2020 and referred to the committees for further discussion. An expert hearing took place in the Committee on Legal Affairs and Consumer Protection on May 27, 2020. There were then a few major changes to the draft law.
On September 17, 2020, the Bundestag finally approved the reform in the second and third readings, and on October 9, 2020 the Federal Council finally gave the go-ahead. On October 22nd, 2020 the law was finally announced in the Federal Law Gazette.
According to the original planning, the changes to the condominium law should have been finally adopted in the Bundestag on June 19, 2020. However, this schedule could not be kept.
WEG reform: background and course
The last WEG reform came into force on July 1, 2007. The Condominium Act was thoroughly turned inside out at the time. Numerous questions raised by the reformed law have meanwhile been clarified by the case law of the BGH. However, questions remained unanswered and practice struggled with one or the other regulation.
More than ten years after the WEG reform in 2007, known weaknesses in the law were to be eliminated. This project was also included in the 2018 coalition agreement, which states:
“We will reform the regulations of the condominium law and harmonize them with the ** tenancy law ** in order to facilitate the preparation and implementation of decisions by the apartment owners on structural measures, especially in the areas of accessibility, energy-efficient renovation, the promotion of electromobility and burglary protection.”
The Justice Ministers' Conference on 6th and 7th June 2018 started a new amendment to the WEG with the decision to set up a working group. This should examine which legislative measures can, for example, counteract the renovation backlog in residential complexes; furthermore, it should be examined which legislative measures can promote a more efficient management of common property.
Then at the beginning of July, at the invitation of the Federal Ministry of Justice and the Bavarian Ministry of Justice, a first association meeting took place, in which a “Discussion draft for a law for sustainable living in residential property” and the “Discussion draft of a law to promote accessibility and electric mobility in rental and Condominium Law ”. The associations had the opportunity to comment on the drafts until September 10, 2018.
The federal-state working group met five times between November 2018 and May 2019. The results of the meetings were incorporated into a final report, which was presented on August 27, 2019. On the basis of this report, the draft bill for a WEG reform, presented on January 13, 2020, was developed, which was the basis of the reform that was ultimately decided. The aim was to complete the new WEG reform with the changes to the Condominium Act by the end of the legislative period, i.e. by 2021 at the latest.