Cologne Local Court, 8 October 2019, Ref. 215 C 45/19
The rights and obligations of condominium owners and property management are regulated in the German Condominium Act (WEG). The owners form a maintenance reserve for any future costs that may arise, to which they pay regular contributions and which is generally managed by the property management. It is used for the long-term maintenance of the property and not for free use to pay operating costs. It is part of the economic plan in accordance with Section 28 I 2 No. 3 WEG.
At the condominium owners' meeting, the owners jointly decide how the property management should be organised. They also determine how the community's funds are to be handled. To this end, a business plan is adopted that sets out the planned income and expenditure, from which the owners' payment obligations are derived. However, if the owners' meeting decides that contributions to the maintenance reserve should now also be used to pay operating costs, the reserve may be utilised in full contrary to its purpose.
In the judgement below, the Cologne Local Court ruled that free access to the allocations to the maintenance reserve cannot be made possible by resolution without further ado.
FactsIn the present case, the parties are in dispute about the validity of resolutions in the owners' meeting. They form a heritable building community, the plaintiff holds 12.496/1000ths for the flat she uses herself.
In the 2017 accounting year, the management withdrew around € 3,000 from the maintenance reserve for the payment of operating costs due to an overrun in the costs of the business plan. Contested resolution proceedings against the 2017 annual statement of accounts led to its partial cancellation.
Two resolutions were passed at the owners' meeting in April 2019. Firstly, the administration was granted authorisation to use the reserve (resolution I). Secondly, the presentation of the maintenance reserve was changed in the form of the "2017 actual reserve" as at 31 December 2017 (resolution II).
In the opinion of the plaintiff, resolution I violates the principles of proper administration, as the key data for access by the administration to the maintenance reserve are not complied with. It criticises the lack of an upper limit on the amount as well as the lack of a temporal and factual limit. It believes that this undermines the institution of reserve formation, as "free money" cannot be saved and accounted for via the reserve formation item.
It sees the "iron reserve" at risk due to the lack of an obligation to return or refill.
It considers Resolution II to be invalid if the amount of the ACTUAL reserve is replaced without further explanation in order to remedy the incorrect statement of accounts for 2017. In its opinion, this provides no informational value for the financial situation, as a difference remains based on this presentation. As no logical connection between the amounts is apparent from the presentation, the transparency required by the BGH regarding the reserve assets is also lacking.
The plaintiff therefore requests that the court declare both resolutions invalid.
The defendants, on the other hand, consider both resolutions to be valid.
Earmarking the allocation amount to the maintenance reserve in accordance with the business plan only when the annual statement of accounts is prepared (resolution I) is at the discretion of the owners. The key data for limited access to the maintenance reserve had been complied with, as the amount was limited by the allocation amount to the maintenance reserve shown in the business plan. The earmarking was also established by the annual accounting results, so that the free earmarking only ran until the annual accounts were prepared. It considers an intervention in the iron reserve to be unacceptable, as the reserves are not affected.
With regard to resolution II, the defendants state that any transparency deficiencies in outflows from the actual reserve for operating costs have been remedied, as these are now reported openly.
They therefore request that the action be dismissed.
Cologne Local CourtThe Cologne Local Court considers the action to be well-founded with regard to Decision I and unfounded with regard to Decision II.
It ruled that Resolution I contradicts the principles of proper administration, as it undermines the earmarking of the maintenance reserve with regard to ongoing allocations as provided for by law. The administration should not be given unrestricted carte blanche to use the contribution to the maintenance reserve, as this would be tantamount to a complete cancellation of the earmarking. The cancellation of the earmarking may be necessary, but may only be temporary and limited in amount. The court comes to the conclusion that Resolution I largely cancels this earmarking, however, as the administration has full access to the contributions. The realisation of the binding effect is solely in the hands of the administration, which in turn could lead to no more allocations to the maintenance reserve being committed. However, transferring this decision to the administration to this extent is no longer in line with the principles of proper administration. The court therefore declared Resolution I invalid.
Resolution II, on the other hand, complies with the principles of proper administration; in particular, it is sufficiently transparent. The new presentation of the actual reserve shows the amount withdrawn for operating costs, which results in the final amount. It also fulfils the transparency requirements of the BGH, as it shows the financial situation of the community and enables a plausibility check of the annual statement. In particular, the presentation shows the funds available to the community from the reserve. The court rejected the plaintiff's objection that there was no logical connection between the amounts, stating that this connection could be established by inspecting the receipts. The court thus declares Decision II valid.
Source: Cologne Local Court
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