Regional Court of Cologne, 27 October 2016, Ref.: 29 S 91/16
The management must present an organised and clear statement of income and expenditure that is comprehensible to a condominium owner even without the assistance of experts. This statement of income and expenditure and, in particular, the distribution of cost items therein must comply with the principles of proper management.
This term "proper management" is not defined by law. What is to be understood by this can only be partially inferred from the German Condominium Act (WEG). According to Section 14 (1) WEG, what serves the orderly coexistence of the community and, according to Section 15 (3) WEG, corresponds to the interests of the community according to equitable judgement is proper.
In the Cologne Regional Court case discussed here, the question was whether the management of the condominium owners' association was allowed to charge expenses for heating costs incurred prior to the billing period in the overall and individual annual accounts and whether this was in line with the principle of proper management.
Facts of the Case:
Plaintiffs were condominium owners and sued the WEG
The parties in this legal dispute form the condominium owners' association T-Straße 89 - 93, R-Straße 47 - 51 in Cologne. The plaintiffs were owners in the unit and had their own oil heating. The declaration of division dated 22 March 1993 provided, among other things, in Section 13 (2) in conjunction with (1) that operating costs and heating costs were to be allocated in proportion to the square metre living space.
At the owners' meeting on 18 August 2015, the condominium owners adopted the 2014 annual overall and individual accounts under agenda item 3. The individual accounts of the plaintiffs showed the item "Final oil inventory house 93" under operating costs with an amount of EUR 5,127.93; these costs were allocated to the plaintiffs according to the living space, with the plaintiffs being charged EUR 1,921.30. In the overall accounts, these costs were included under other administrative costs. The individual statement prepared by company C showed heating costs for the claimants in the amount of EUR 1,188.93 and a remaining balance of EUR 5,127.93. The initial oil balance had not previously been allocated to the owners and recognised in the individual statements. In the past, accruals and deferrals were recognised in the annual accounts.
The aim of the lawsuit was to exclude costs from an earlier billing period from the current billing period
In the present action, the plaintiffs sought the annulment of the resolution on agenda item 3 on the overall and individual accounts to the extent that the costs for the final stock of oil in house 93 in the amount of EUR 5,127.93 were included there. The plaintiffs are of the opinion that the distribution of the cost item "final stock of oil for house 93" is contrary to proper administration because in 2014 only as much heating oil was consumed as was purchased and no further expenses were incurred by the homeowners' association. The plaintiffs were charged with costs that were not incurred in the billing period.
Court of first instance regarded the collection of costs as proper administration
The local court initially seised dismissed the action in a ruling dated 26 April 2016. It stated that the contested resolution was in line with proper administration. As the costs for the oil inventory had been included in the previous year's statement as an accrual item, they had not yet been allocated to the owners in accordance with Section 16 (2) WEG or according to consumption. According to the case law of the Federal Court of Justice, these costs of stockpiling were to be allocated in accordance with Section 16 (2) WEG or the agreed allocation formula in order to prevent conceivable liquidity gaps. In order to fulfil the requirements of this case law, it is necessary to dissolve this accrual item in the year of conversion and to include a "costs" item in its amount in the annual statement of accounts, whereby the allocation must be made in accordance with the requirements of the BGH. In the present case, this was done by recognising the disputed item in the full-year statement under "administrative costs" and allocating it in the individual statement in accordance with the key for other administrative costs.
The plaintiffs appealed against this judgement to the Cologne Regional Court.
Judgement of the Regional Court of Cologne
Court of Appeal ruled that the annual statement may not include the costs of a previous period
The Cologne Regional Court has now ruled that the contested resolution on agenda item 3 of the owners' meeting of 18 August 2015 with regard to the item final balance for oil in house 93 in the amount of EUR 5,127.93 would not correspond to proper administration. This is because expenses for heating costs incurred before the billing period are not to be included in the annual statement. Although the Federal Court of Justice did not expressly deal with this in its decision of 17 February 2012, it did state:
"The management must present an organised and clear statement of income and expenditure that is comprehensible to a condominium owner even without the assistance of experts. A statement fulfils these requirements if all income actually generated and expenses incurred in the relevant financial year are included. By comparing the actual cash flows with the total account balances, it is easy to check the arithmetical accuracy of the statement. This simple check would not be possible, or only with difficulty, if accruals and deferrals were carried out. There is no objective reason to deviate from this in the presentation of the heating and hot water costs in the overall statement, and in particular no such reason can be derived from the provisions of the Heating Costs Ordinance. This only requires a distribution of the heating and hot water costs actually incurred on the basis of measured consumption. The requirements of the Heating Costs Ordinance are therefore already satisfied if, although not in the overall settlement, a consumption-based settlement is made in the individual settlements, i.e. the costs of the fuel actually consumed in the settlement period are distributed there. The fact that, in exceptional cases, the individual statement is not derived directly from the overall statement is acceptable, provided that the deviation contained in the individual statement is clearly recognisable and accompanied by a comprehensible explanation. It is up to the administrator to decide at which specific point in the overall or individual statement this explanation is provided. The only decisive factor is that the presentation is understandable and comprehensible. The Heating Costs Ordinance does not contain any provisions regarding the allocation of the money spent on fuels that have been purchased but not yet consumed. These costs are therefore initially to be allocated in accordance with the general cost allocation formula specified in Section 16 (2) WEG or an otherwise agreed cost allocation formula" (see BGH NJW 2012, 1434 ff.)."
In the overall context, however, these statements would only allow the conclusion that payment flows, i.e. expenses for heating costs in the full stop prior to the billing period, should not be listed in the annual statement because it would only be a statement of income and expenses for the year in question. The fuel stockpiled should not be stated because it is not a cash flow in the year in question. This would also be contrary to the system because other items purchased by the homeowners' association would not be listed there either. The oil stock is recognisable for the condominium owners from the heating cost statement in comparison with the expenditure for the purchase of fuels shown in the overall statement and is therefore comprehensible (see AG Bremen, ZMR 2014, 316 ff.). There would also be no compelling need to charge the individual flat owners in accordance with the distribution key pursuant to Section 16 (2) WEG or the general distribution key of the fuel stockpiled provided for in the declaration of division, as there would be no need for a corresponding allocation of the monies spent on fuel not yet consumed but not spent in the corresponding settlement year, even if this was due to the fact that (in the present case) the settlement in relation to the heating costs was carried out for the first time in accordance with the requirements of the BGH. The purchase of fuels could be adjusted in the future to the expected consumption, taking into account the stockpiling, so that the remaining stockpiling would be reduced accordingly and the individual flat owners would be charged in accordance with the Heating Costs Ordinance. There is no need to distribute costs that were not incurred in the underlying billing year. A liquidity gap that would give rise to such a retrospective charge was not apparent.
As a result, both the individual settlement and the total settlement must be declared invalid
Accordingly, both the individual statement and the total statement, insofar as the corresponding amount is listed in the administrative costs, should be declared invalid.
Source: Cologne Regional Court
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