Renewal funds, owners’ meetings and more: The challenges of condominium ownership

What memories does the term “Maschendrahtzaun” (chain-link fence) conjure up in you? Well, if you’re a German speaker, it’s probably a musical interpretation of the world’s first (and best-known) breakdown of a petty bourgeois neighbourhood dispute. In the song in question, however, “Maschendrahtzaun”, the German grand master of obtuseness and stupidity Stefan Raab not only poked fun at problems between two neighbours, but also caricatured the philosophical implications of property in its basic features.

Being a neighbour, of course, and concluding a shared ownership agreement, are very different, Even so, similar shared decisions or conflicts may well arise in the border areas or at the wire mesh fences of ownership. This is relevant, given that available land for private individuals is becoming increasingly scarce, which explains the soaring popularity of shared or condominium ownership. According to the BAG, for example, two out of three privately owned properties are already bought as condominiums. But despite its increasing popularity, the communal aspect of condominium ownership can spark conflict as well as encouraging friendship and harmony. And as so often applies, joint financial decisions are a minefield of conflict and discord. Worry not – read on for solutions and more.

What does condominium ownership entail?

Although condominium ownership is often equated to owning an apartment freehold, this blurs the issue somewhat. The truth is that the condominium building is legally linked to the land on which it was constructed, so the ownership of the land and building normally come as a package. What this means is, if you want to buy a condominium, you also have to buy a share in the overall land.

A more accurate way to consider the issue is to refer to condominium rather than freehold apartment ownership. When you own a condominium, you become, in effect, co-owner of an entire building, with special rights to exclusively use and manage a certain part of the building – namely your own flat. All other parts of the house are jointly owned and must therefore be managed and maintained collectively. The fact that the common property is divided along these financial lines means that as a condominium owner, you get proportionally more living space than when you invest in a single-family house, where you have to cover the heating and other costs yourself.

Rights of condominium owners

Joint ownership of a property naturally also includes rights that regulate cohabitation. These rights are anchored by your legal ownership of certain portions of the building - your own flat and ancillary rooms like attics and cellar compartments – which you are free to use and design as you like. In effect, you get a free pass to install a rainforest shower, combine all the rooms into one huge studio or anything else you like. And provided your local building code allows it, you can even construct your long-awaited oasis of well-being, including a lava lamp and dream catcher, within your attic compartment.

But it doesn’t stop there. Over and above the ownership rights mentioned, you now have co-determination rights over the jointly owned premises and shared infrastructure, which you can exercise at the owners’ meetings. Meetings like these are held to regulate the shared responsibilities of owners to everyone’s satisfaction. These shared areas include driveways, staircases, facades, heating systems and that old bugbear, the chain-link fence. And don’t say we didn’t warn you - with rights come responsibilities.

Duties of condominium owners

Sharing the financial responsibility of condominium ownership is an enticing concept but is far from the whole story. Simply put, democratic coexistence requires democratic processes, which are renowned for being costly and sluggish, leaving you losing the will to live.

Being part of this democratic living community means you are also subject to common house rules. Moreover, you have to abide by them too - even if they aren’t all in your personal interest. If the house rules prevent owners keeping a dog, this also applies to your own four walls. In other words, it’s not the doghouse but the dog or the house...

Moreover, majority decisions made at owners’ meeting are binding and that includes financial participation too. So if most owners decide on forward-looking investment and opt to pay for a heat pump solution rather than oil, or replace the rusty wire mesh fence with a white picket fence, you would also have to contribute and dig deep. And that applies whether you personally approve of it or not.

Renovation funds

Few things are more demanding than steering a joint financial project. This is why, according to experts, condominium communities should maintain a renewal fund. This is a community fund which all co-owners pay into on an ongoing basis, as a reserve and provision set aside. This renewal fund can be used to pay for pending repairs, e.g. an energy refit, without any single owner being subject to acute financial distress. This obviously means that individual contributions to the fund have to be sufficiently high. The Swiss Condominium Owners’ Association SSTV recommends an annual payment amounting to at least 0.4 % of the insured building value.

To keep things fair, owners pay into the renewal fund, with the amount decided proportionally; commensurate with the size of their share in the property. This share, in turn, is determined based on the so-called value quota. This parameter is defined by the person or entity founding or creating the condominium and entered in the land register as a predefined figure, which applies when you buy the condominium. The value quota and renewal fund are needed to ensure the fairest possible distribution of the financial burden.

Hint: Investments made in the renewal fund can be tax-deductible, provided that the money paid in is actually used to renew or maintain your property.