The Fundamentals of Community Ownership

Legal Framework and Legislation

Upon acquiring a flat or a terraced house, owners automatically become part of the property's community ownership. This applies regardless of whether the flat is intended for personal use or let out. The declaration of division defines the individual areas for flats and any existing commercial spaces, as well as the communal property. As it must be notarised, it is also mentioned in the land register.

Each unit within the community ownership has rights and obligations defined in the community regulations. The legal foundations for community ownership in Germany are anchored in the Residential Property Act (WEG). These regulations create a clear legal framework for the management and operation of community ownership and help to avoid conflicts between owners. The law governs all essential aspects of residential property communities, including:

• Declaration of division: It defines the individual units within the building, such as separate or partial ownership, and the division of the overall property.

• Community regulations: They determine the use of communal property and the rules for the community ownership.

• Decision-making: This stipulates how decisions are to be made and what majorities are required.

• Property manager: The law and community regulations determine the tasks and duties.

Processes and Decisions in Community Ownership

For residential property communities, decision-making processes for maintenance, renovation, or enhancement of communal property are an essential part of coexistence. Therefore, every important decision regarding communal property is put to a vote at an owners' meeting. During these meetings, all members of the community ownership have the opportunity to express their opinion and subsequently vote. These owners' meetings typically occur once a year, or more frequently if needed.

Different majorities may be required depending on the importance and scope of investment. For instance, residential property communities make everyday decisions by simple majority. For structural changes or amendments to the community regulations, the community ownership requires at least a qualified majority with three-quarters of all votes during the ballot, if not a unanimous decision.

The law provides for a quick and cost-effective alternative with the circular resolution procedure. Here, the written proposal is delivered electronically to the entire community ownership. For the circular resolution, members of the residential property community approve or reject the proposal without convening an extra owners' meeting.

The type of voting and the required majority are stipulated in the community regulations and the Residential Property Act, ensuring a transparent and fair decision-making process within the community ownership.

Property Manager – Tasks and Functions for Community Ownership

The property management of a community ownership assumes central tasks in the administration and organisation of communal property. The community ownership can elect managers or commission an external management company. The main tasks include:

• Administration and maintenance: Organising maintenance measures, managing finances, and overseeing service providers.

• Documentation and implementation: Recording the decisions of residential property communities during owners' meetings and their implementation.

• Accounting: Maintaining the financial accounting of the community ownership.

• Representation: Representing the residential property community to third parties such as tradespeople or authorities.

The property managers of a community ownership are thus a crucial link between individual owners and ensure proper management of the communal property.

The Advisory Board: Support and Control

The advisory board is an additional elected body within the community ownership. Its tasks include supporting the property managers and mediating between owners and management when necessary. Although the advisory board has no formal decision-making authority within the community ownership, it plays an important role in promoting effective property management and peaceful coexistence. The tasks of the advisory board may include:

• Monitoring and control: Reviewing the work of the property management and ensuring it is carried out in the interest of the community ownership.

• Consultation: Supporting property managers in planning and implementing structural, renovating, or design measures.

• Mediation: Resolving conflicts and facilitating communication between owners and property manager.

Advantages and Disadvantages of Community Ownership

Community ownership offers numerous advantages that make living in a multi-family house attractive. By dividing responsibility among multiple parties, necessary tasks can be organised more efficiently and cost-effectively. These include, for example, building maintenance or the upkeep of communal facilities. Moreover, community ownership allows for stronger participation in important decisions, such as structural changes or the use of communal areas. This collective decision-making promotes a sense of community and can lead to better coexistence.

However, there are also some disadvantages to consider. Decision-making processes in community ownership can be time-consuming and sometimes conflictual, especially when different interests collide. There is a risk that disagreement may block important resolutions within the community ownership or that individual owners may feel outvoted by the majority. Likewise, administrative costs and additional expenses for communal projects can lead to financial burdens. Furthermore, participation in owners' meetings and dealing with legal and organisational issues require a certain level of engagement and knowledge.

Community Ownership: Managing Properties Together

A well-organised community ownership functions smoothly when clear regulations and efficient management are in place. Property managers play a central role for the community ownership, while the advisory board can have a supportive effect on cooperation. A meaningful and clearly formulated set of community regulations, as well as regular communication between parties, are crucial for identifying and solving problems within the residential property community early on. A solid legal foundation and a fair decision-making process are the basis for good cooperation in community ownership. Overall, positive communication and respectful interaction within the community ownership are decisive in harnessing the advantages and minimising potential disadvantages.

Would you like to learn more about buying a flat and its community ownership? The experienced Engel & Völkers estate agents are happy to provide you with further valuable information.