Operating costs are recurring expenses incurred by the owner of a building in connection with renting out the property. Operating costs must be distinguished from administrative costs and from expenses for maintenance and repairs.
Under the German Operating Costs Ordinance, Section 2 of the BetrKV, landlords may allocate recurring charges proportionately among the tenants of an apartment building. These include the following items: water supply, drainage, maintenance of the heating system, street and building cleaning, waste disposal and pest control.
Operating costs also include lighting for parts of the building used jointly by residents, such as hallways, basements and outdoor areas, as well as chimney sweeping, certain property and liability insurance premiums, and the costs of a caretaker or caretaker service. Where the building has a lift or a garden, the costs associated with their ongoing maintenance may also be passed on to tenants.
Among tenants, the term “service charges” is more commonly used. In terms of content, it is equivalent to the term “operating costs”.
Important information in the service charge statement
For a landlord’s service charge statement to be valid, it must meet certain formal requirements. Otherwise, the landlord may lose the right to claim an additional payment if the actual operating costs exceed the advance payments made by the tenants.
As a general rule, a service charge statement should meet the following requirements:
When stating the total costs, it is sufficient to specify the total amount incurred for each category of service charge that the landlord allocates among the tenants within the selected accounting unit.
Another requirement is an explanation of how the total costs for each category of service charge are distributed among the respective tenants. This allocation formula must be stated so that tenants can understand the calculation steps used to apportion the operating costs. For example, where service charges are allocated according to the size of the property, the wording “allocated according to floor area” is sufficient.
The allocation formula that landlords are permitted to use depends on the agreement made with the tenant. If the tenancy agreement does not contain a specific arrangement regarding the distribution of service charges, Section 556a of the German Civil Code, BGB, generally requires all consumption-independent service charges to be allocated according to the floor area of the respective properties.
The service charge statement must also show which advance payments have already been made during the accounting period. Landlords are therefore advised to state both the amount of advance payments that were due, known as scheduled advance payments, and the amount actually paid, known as actual advance payments.
The total actual advance payments must be deducted from the total service charges. If the scheduled advance payment was too low to cover the tenant’s share of the costs, the tenant must make an additional payment. If the advance payments exceed the tenant’s share of the costs, the landlord must reimburse the corresponding credit balance to the tenant.
It is important for landlords to comply with the deadline for issuing the operating cost statement. It must always be provided within twelve months after the end of the accounting period. For the year 2017, for example, the deadline would have been 31 December 2018.
If the landlord misses this deadline, they must provide evidence that the delay was not caused by them, but, for example, by invoices that were received late.
