Requirements for a Formally Correct Utility Settlement

One of the main points of discussion between the landlord and his tennant is the annual clearance of the real estate’s operational costs. The accounts are to be cleared within the new year (§556 III 2 BGB). Is it enough for first all apportionable costs to be separated or must this also be mentioned in the clearance? The BGH passed a judgment on February 14, 2007 (re VIII ZR 1/06) to answer this question.


Defendant is a tenant having agreed to pay in advances on the operational costs. On October 13, 2003 the plaintiff settled the utility costs among all renters. To the disadvantage of the defendant, € 129.33 was still open. The plaintiff sued the tenant for this amount. The settlement contains non-deductible utilities, which had not been subtracted from the total in advance. These advance deductions were partially explained and mentioned. The items “real estate tax” and “water / waste water” were not explained. The prior deduction of “janitor” was not fully mentioned.

The landlord has no claim against the defendant because it is barred by §556 III 2 BGB. This section determines that utility costs must be settled within one year. It is ruling case law that only formally correct settlements can be corrected after the one-year time limit. The plaintiff’s settlement does meet the formal requirements because the structure of the accounting was wrong. The tenant can demand that – without any exception – all costs be accounted to the item “total costs”. The landlord must be transparent and therefore show and subtract all not apportionable costs before computing the individual tenant’s share in the operating costs. This is a formal failure of the settlement that cannot be corrected after the fact and therefore leads to its invalidity. It cannot be corrected because the one-year settlement period had elapsed. Since a formally correct settlement within the one-year period had not been met, the grounds for a supplemental payment did not exist.

The court emphasized that all costs are to be shown even if they cannot be apportioned to the tenant. After subtracting non-apportionable costs, the remaining can then be allocated to the individual renter.


This article is associated with following already previously published articles

Too Late to Settle Utility Costs

Punctual Settlement of Utilities Bill

Published on the old CMS: 2008/1/2
Read on the old CMS till November 2008: 1,485 reads

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