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September 06, 2022

Real estate management: Definition, rights and obligations

LivingReal estate management

Rights, obligations and special features

Real estate and its use require a high level of administration. There are various management models for these organizational tasks, depending on the ownership structure and the type of property. What they all have in common is that they serve to maintain and economically care for the property. The tasks of property management or apartment management are complex and varied.

Person with miniature house made of paper next to coins and a calculator

What form of administration is involved?

Different forms of property management are used depending on the form of real estate ownership involved. Rental management is exclusively responsible for rental properties. It serves as the landlord’s representative vis-à-vis the tenant and ensures that the landlord properly fulfills his obligations under Section 535 BGB et seq. Landlords who do not wish to take care of the tasks arising in connection with the tenancy themselves commission this form of management and pay the manager a fee for this. WEG management is responsible for properties that are owned by several parties. Special property management takes on similar tasks, but always acts on behalf of and in the interests of a single owner. Regardless of the type of management: If you are dissatisfied with the manager’s activities, you have the option of lodging a complaint with the local court, which acts as a complaints body against property management companies.

Tasks, duties and costs of property management

The tasks and duties of a property manager encompass a whole range of areas of responsibility that are associated with various obligations. A condominium management company must always act in accordance with the German Condominium Act. The duties of the management are listed there in detail. For example, the condominium administrator must implement the resolutions of the owners’ meeting and ensure that the residents comply with the house rules. In addition, the management is responsible for measures required to maintain the common property as well as the maintenance and repair of the property. A significant part of the management tasks involves bureaucratic activities.

These range from the payment of taxes, waste disposal charges and insurance premiums to the transfer of joint repayments and mortgage interest and the management of monies collected. The WEG administrator is obliged to convene regular owners’ meetings and to keep the collection of resolutions. A tenancy administrator is responsible for ensuring a legally compliant tenancy. Typical tasks here are the selection of suitable tenants, the organization of viewing appointments, the reading of consumption values, the preparation of utility bills and other activities. The costs of managing the property are borne by the owner or the community of owners.

Digital real estate management: How good are they?

In times of digitalization, virtual solutions for property management are increasingly in demand. There are various solutions for digital property management on the market. Ideally, up to 80% of time can be saved by using digital applications for apartment, house and property management. With digital property management, all documents are available in virtual form. Contact between owners, managers and tenants takes place via a portal or an app, and the documents are available and accessible to everyone on a tablet, smartphone or PC. This means that it is no longer necessary for everyone involved to meet in person for any coordination meetings, and there is no longer any need to send important documents by post. Digital management also eliminates the need for the property manager to be close to the property.

Landscape of property management companies in Germany

According to the Federal Statistical Office, there are over 30,000 real estate and property management companies in Germany. The majority of these manage residential properties, while only around 18% are responsible for managing commercial properties. The most common form is probably the classic management of rental properties, although WEG management is also widespread. Special property management is less common. Professional management companies are organized via the Association of Property Managers. However, it is also possible for an owner to be appointed as a property manager if no external manager is to be appointed. The hurdles for taking on this area of responsibility are relatively low. For a long time, it was even possible to take on property management without a business registration, but since August 1, 2018, a business license has been mandatory for a certain number of units to be managed.

To set up your own property management company, you must meet three key requirements. You must have professional liability insurance, provide proof of regular further training amounting to 20 hours in three years and provide proof of your own reliability and orderly financial circumstances. There is a certain amount of discretion with regard to the last point, as the exact form of proof is not regulated. Ideally, you should be able to prove that you have completed further training to become a certified administrator.

In principle, commercial work can be assumed if the management involves more than around 1000 residential units. In this case, the activity must be registered with the trade office.

The property manager is basically the contact person for all organizational matters relating to the property. He takes care of maintenance and repairs, monitors incoming and outgoing payments and also acts as an arbitrator in the event of disputes. The property manager also prepares the annual statement of operating costs.

The costs for management are usually charged either per unit and month or as a fixed percentage of the basic rent. The monthly amount is usually between 20 and 28 euros net, while rates of five to six percent of the basic rent are common for percentage billing. It makes sense to compare offers here.

Various legal forms are permitted for management. If a single person is responsible, it is usually a sole proprietorship. However, a GbR, the GmbH or the limited liability entrepreneurial company are also common company forms. In the case of a GbR, there must be at least two participants. It should be noted that all owners are jointly and severally liable and the GbR cannot act as a WEG management company. The most common form of management that is undertaken by several people is therefore the GmbH.