Maintenance costs – Definition and explanation from the real estate agent

What are maintenance costs? Maintenance costs are those costs incurred to maintain a functional and usable condition of a property. Such maintenance measures can be divided into four different categories: inspection, servicing, repair, and improvement.

For which areas of the property do maintenance costs apply?

Over time, the condition of any property deteriorates. This can happen on the one hand through regular aging processes and weathering. However, if a property is used, gradual wear and tear also occurs. Damage to the property can occur on the facade and roof as well as in the masonry and interior areas.

Which specific repair costs arise and when they are due depends in part on the type of use as well as the construction method and building fabric. However, a decisive role in this regard is played by which part of the property it is. Some areas need to be repaired more often than others. Roughly speaking, a division into the following three time categories is possible.

Every 5 to 15 years:

• Interior painting and wallpapering
• Exterior painting on exterior doors, facades, and windows
• Flat roof coverings
• Electric water heater
• Textile floor coverings

Every 15 to 30 years:

• Exterior glazing
• Zinc sheet roof connections
• Zinc gutters and downpipes
• Electronic control devices
• Boilers and heating units
• Indoor plastic flooring
• Exterior panel cladding
• Steel heating radiators

Every 30 to 50 years:

• Sealing of exterior components with joint sealants
• Exterior wall plaster and wall coverings
• Equipment of bathrooms and kitchens
• Roof coverings and roof connections
• Electrical installation network with boxes and switches
• Windows and exterior doors
• Interior tile and slab floor coverings
• heating pipe network
• Chimney pots above the roof
• Plumbing pipe network for bathrooms and kitchens

Parts of the interior wall and ceiling plaster

How high should the maintenance reserves be?

Anyone who owns a condominium has the obligation, as a member of a homeowners association, to contribute to the formation of rmaintenance reserves to participate. The basis for this regulation is the Condominium Act (HOA). However, there is no fixed requirement as to how high the maintenance reserve must be. This decision is made by the respective homeowners association.

An exception to this is social housing, for which maintenance reserves must be formed in fixed amounts in accordance with the 2nd Calculation Regulation of the Housing Construction Act. The amount depends on the age of the property in question. For residential buildings that are a maximum of 21 years old, the maintenance reserve amounts to EUR 7.10 per square meter per year. For buildings between 22 and 31 years old, it is EUR 9.00 per square meter per year. If the residential building is already older than 32 years, EUR 11.50 per square meter per year is ultimately prescribed.

Some condominium associations base their approach on the framework above. An alternative to this is the so-called Peters formula. In contrast to the table for social housing, this formula is not based on the age of the property. Instead, construction costs are used as the benchmark.

For this, you take the construction costs of the building per square meter, multiply them by a factor of 1.5, and divide by 80. The result is an approximate estimate of the maintenance costs per square meter of floor space that will be incurred for the building combined over the next 80 years. Afterwards, the homeowners' association should set aside about 70 percent of the calculated amount per year and square meter.

However, critics point out the relatively high costs that property owners face as a result of the Peters formula. While the probability that all costs will be covered by the formula is very high, implementation in practice usually fails due to the excessively high annual costs for the reserve fund.

Unlike homeowners' associations, individual homeowners are not obligated to build up a reserve fund for maintenance costs. Nevertheless, to prevent having to manage excessively high costs within a short period of time, homeowners should ensure they build an adequate reserve fund. The Association of Private Builders (VPB) recommends setting aside at least 1 EUR per square meter per month for maintenance. This recommendation is independent of the property's age.

How do maintenance costs and repair costs differ?

Maintenance measures are primarily understood to mean regular repairs and servicing as well as preventative measures. The main focus is on the regular intervals atished by age, weather, or wear and tear. Maintenance aims to preserve the functionality and usability of a property.

In comparison, repair serves to restore a previous state. The objective for repair measures is often a contractually defined state. A repair may become necessary if sustained damage has occurred to a specific part of the property.

However, in reality, a precise separation of the two terms often proves difficult. For example, minor damage that runs counter to a contractually agreed condition can still be repaired within the scope of maintenance.

The best distinguishing feature is the delineation between prevention, on the one hand, and the remediation of damage that has already occurred in order to restore the contractually agreed state, on the other:

If, for example, repairs have to be made to a roof to prevent worse damage, the resulting costs are maintenance costs. If, on the other hand, the damage has progressed to the point where a renewal of the entire roof is necessary, it is a matter of repair costs.

Another example: Regular maintenance work on a heating system protects against wear and tear and signs of aging. Therefore, maintenance work is considered upkeep. If, on the other hand, the heating system has failed completely and must be replaced to restore the property to its previous condition (working heating), it is considered a repair.

Cosmetic repairs and modernizations play a special role

In contrast to maintenance and repair, there are, on the one hand, so-called cosmetic repairs. These basically involve only superficial measures such as wallpapering and painting walls, doors, floors, radiators, etc. Furthermore, modernization measures that are not aimed at preserving or repairing the existing substance are not counted among maintenance measures. These include, for example, measures that improve living comfort or work aimed at saving energy and water.

Who covers the costs?

Maintenance costs are to be borne by the owner. If the apartment is rented out, the landlord must therefore pay for the incurred costs. Repair costs are also mostly to be paid by the landlord. An exception is if the tenant is demonstrably responsible for the damage themselves. Minor cosmetic repairs are usually regulated in the respective lease agreement. Formally, the costs incurred from this do not count as maintenance costs. Most agreements therefore provide that such work is to be borne by the tenant. Modernization costs can be passed on to the tenants by the landlord. However, disputes frequently arise here as to which measures count as modernization and which work actually serves maintenance or repair.

How can repair costs be deducted from taxes?

All maintenance costs are, in principle, tax-deductible. However, there are restrictions.

In the first three years after completion, the costs for repairs and renovations are added together. If these exceed 15 percent of the original acquisition costs of the building within the three-year period, they are not counted as maintenance costs, but rather as acquisition-related renovation costs. To benefit from tax advantages, owners should therefore stagger renovation work over time in the event of correspondingly high costs so as not to exceed the 15 percent limit.

Another exception is renovations that first make an uninhabitable building habitable again. These, too, do not constitute tax-deductible maintenance costs.

Tenants also have the option to claim certain maintenance costs for tax purposes. The prerequisite is that the utility bill lists household-related services such as caretaker services, house cleaning, or gardening work. However, the labor cost portion must be explicitly shown in the utility bill.