Apportionable ancillary costs: overview for owners and tenants

Service charge bills often give rise to questions and uncertainty among tenants. Which costs are actually apportionable? And how does a landlord ensure that the billing is legally compliant? It is also important for owners to know how to deal with these costs in a legally correct manner and which items are relevant for tax purposes when financing a property. In this article, we provide you with an in-depth overview of the most important types of service charges, contractual principles and practical tips for checking the statement.

Allocable service charge types: Which service charges can landlords pass on to tenants?

In principle, the obligation to apportion service charges is governed by Section 2 of the Operating Costs Ordinance (BetrKV). This defines various types of costs that landlords can pass on to their tenants in the tenancy agreement - provided this has been contractually agreed.

An overview of the most important apportionable service charges

• Property tax: Can be passed on with a corresponding provision in the tenancy agreement.
  
  
• Water supply: Consumption costs, basic charges and maintenance costs of the water supply system.
  
  
• Drainage costs: Fees for wastewater disposal and sewer use.
  
  
• Heating costs: fuel consumption, costs for operation and maintenance of the heating system, from October 2024 also electricity costs for heat pumps
  
  
• Hot water supply: Operating costs of central systems and maintenance costs.
  
  
• Elevator operation: electricity and maintenance costs, also for first floor residents.
• Street cleaning and waste disposal: Charges for refuse collection and winter service.
• Building cleaning: Cleaning of stairwells and communal areas if outsourced.
• Garden maintenance: maintenance of green areas and playgrounds.
• Lighting: electricity costs for communal areas.
• Chimney sweep: Costs for sweeping and inspection work, if not included in the heating costs.
• Insurance: Residential building and liability insurance.
• Janitor costs: Salary for janitor services (repair costs are not apportionable).

Non-recoverable ancillary costs

In contrast, certain costs are not apportionable and must be borne by the owner, including

• Repair costs (e.g. lighting systems)
• Purchase of new equipment such as waste garbage cans
• Administrative costs or legal expenses insurance

Important: Apportionable ancillary costs must be explicitly agreed in the tenancy agreement. Without a clear contractual basis, apportionment is generally not permitted.

Contractual protection: How is apportionability regulated in the rental agreement?

Precise wording in the tenancy agreement is crucial so that landlords can correctly allocate operating costs to tenants. Here are some best practices:

• Reference to the Operating Costs Ordinance (BetrKV): a blanket reference such as "The tenant shall bear the operating costs in accordance with Section 2 BetrKV" is considered sufficient and covers all 17 types of ancillary costs.
• Breakdown of costs: Particularly in the case of gross cold rents, the service charge items should be clearly separated to enable subsequent apportionment.
• Specification of realistic advance payments: An advance payment that is set too low can lead to additional payments and conflicts.

If you require assistance in drafting or reviewing rental agreements, we recommend that you seek professional advice from legal experts, as we do not provide legal advice.

Tax aspects: Which ancillary costs are deductible for real estate financing?

The tax treatment of ancillary costs depends largely on whether the property is owner-occupied or rented out.

For rented properties

• Interest costs for loans: Fully deductible as income-related expenses if the loan is used to purchase or renovate the rented property.
• Incidental purchase costs: Land transfer tax, notary and land registry costs as well as estate agent's commission are claimed pro rata over the depreciation period of the property.
• Maintenance costs: Repairs and minor renovations can be deducted directly as income-related expenses, provided they do not exceed 15% of the acquisition costs within three years.
• Operating cost allocations: Costs for building insurance or garden maintenance, for example, reduce the taxable rental income.

For owner-occupied properties

• Service charges are generally not tax-deductible. There are exceptions in the case of energy-related renovations or if there are work-related costs for a second home.
• For tailor-made financing advice, we recommend the competent advisors at [von Poll Finance](https://home.von-poll.com/de-de/baufinanzierung).

Regional differences in ancillary costs in Germany

Service charges vary considerably from region to region - an aspect that landlords should take into account when arranging the rent:

• In North Rhine-Westphalia, service charges are higher on average, with Bonn or Essen, for example, recording relatively high costs in a nationwide comparison.
• Bavaria has lower service charges, for example in cities such as Regensburg or Rosenheim.
• This is mainly due to different charges for waste water, waste disposal and additional municipal costs.

The current Betriebskostenspiegel 2023 of the German Tenants' Association shows rising trends in ancillary costs - nationwide, the average is currently around EUR 2.51 per square meter per month. Heating costs in particular have risen significantly in recent years.

Checking the utility bill: tips for tenants

Tenants can check their service charge statement carefully to ensure that only admissible costs are being charged:

Formal check:

• Was the statement prepared on time (within 12 months)?
• Are the period, allocation key and cost breakdown complete?

Material check:

• Are all costs apportionable (see Operating Costs Ordinance)?
• Do the keys correspond to the contractual agreement (standard living space, number of persons for water if applicable)?
• Right of inspection: Tenants are entitled to inspect the receipts within 30 days of being requested to do so.

If there are any doubts or ambiguities, it is worth having the statement checked by a specialist. Here too, we would like to point out that we do not provide legal advice and recommend contacting a specialist lawyer or tenants' association in case of doubt.

Risks associated with incorrect service charge statements

If service charge statements are not drawn up correctly, the following consequences may arise:

• Loss of entitlement to additional charges: if the 12-month deadline is met and formal errors are made, claims may not apply.
• Landlord's right to rectification: Corrections are possible within 30 days of discovery.
• Tenant's right of objection: Possible within the deadline in writing, stating the errors.
• Payment subject to reservation: Prevents rent arrears in the event of disputed amounts.
• In the event of deliberately incorrect billing, compensation can be claimed.