Apportion building insurance to tenants: Rip-off or legal?

Every year the same game: The landlord has sent the utility bill and you wonder what you are paying for it. Garbage collection and stairwell cleaning are still understandable – but building insurance? Do you really have to pay them if you are only a tenant? Or is your landlord trying to cheat you? And if so, what can you do about it?

Building insurance – what is that?

Building insurance? Doesn’t concern me; I don’t own a building that I could insure, you think? But still, you’ll most likely pay money for homeowner’s insurance – even if you live in rented accommodation. However, tenants cannot take out such a policy, the homeowner does.

But first things first: What kind of insurance is it anyway that almost everyone is supposed to pay for? A building insurance covers the costs if a house is damaged by:

  • …storm,
  • Hail,
  • Tap water,
  • a fire,
  • a lightning strike or
  • an explosion or implosion.

Depending on the type of policy taken out, residential buildings insurance also covers damage caused by flooding.

Building insurance is not mandatory in Germany. However, because such damage can be very expensive, most homeowners have taken out such insurance. In addition, the policy ultimately costs owners nothing if they do not live in their property themselves. Because the building insurance is apportionable. This means that the homeowner can pass on the costs of this insurance to his tenants. This is usually done via the utility or operating costs statement.

Why do I have to pay for my landlord’s insurance?

In short: Because tenants benefit from the building insurance. The fact that landlords pass on their expenses for garbage collection, the caretaker or water to them is understandable for most tenants. After all, there is a concrete consideration for this, from which they themselves benefit. But pay for insurance taken out by the landlord? Yes – because ultimately the tenants also benefit from it, at least in the case of residential building insurance.

Admittedly, it is the landlord who receives money from the insurance company in the event of damage – for example if a storm has covered the roof. But this payment ensures that the homeowner can have the damage repaired quickly. And ultimately, you as a tenant also benefit from this. If you have to vacate your apartment temporarily, residential building insurances often also cover the costs for your hotel accommodation.

The expenses that landlords are allowed to pass on to their tenants as operating costs are regulated by law – namely in the Operating Costs Ordinance (BetrKV). The law clearly states in § 2 that “the costs of insuring the building against fire, storm, water and other natural hazards” are part of the operating costs and can therefore be charged to tenants.

Which rules must my landlord follow?

The question of whether you as a tenant has to pay the building insurance can be answered quite clearly with “yes”. At least if the landlord has followed the rules. Because there are some of them.

One of the most important: Landlords are only allowed to pass on costs to tenants if they are mentioned in the rental agreement. However, it is not necessary to list every single item, such as building insurance, garbage collection, garden maintenance, etc.separately. A reference to the legal operating costs regulation is sufficient. This is often solved by clauses such as “In addition to the rent, the tenant bears the operating costs in the sense of the Operating Costs Ordinance”. If operating costs are not mentioned in the rental agreement, you do not have to pay any.

The landlord cannot transfer unnecessary insurances

But don’t worry: your landlord cannot pass on to you all the expenses incurred for the house. As far as insurances are concerned, he may only charge property and liability insurances for operating costs “which serve to protect the building, its occupants and visitors”, as the Federal Court of Justice (BGH) formulated it in a ruling.

If, for example, the owner of the flat has insurance against you not paying your rent, this policy will only benefit him, not you. Therefore, he may not pass the costs on to you – unless the loss of rent insurance is part of the apportionable building insurance, the BGH ruled in 2018 (Az. VIII ZR 38/17). The same applies to landlord legal expenses insurance. This also benefits the landlord alone and may therefore not be apportioned.

You also do not have to pay for unnecessary insurance. For example, a so-called terrorism insurance is not necessary for most residential buildings, as the risk of a terrorist attack is normally negligible.

Service charges must be transparent

As a tenant, you have a right to know what you are paying operating costs for. Therefore, the landlord is obliged to provide certain information in the statement. If he apportions insurance costs, he does not have to list each individual policy, but at least summarise them under the item “Insurance”. This way you know what your money is used for and can demand that the landlord presents you with the relevant insurance policies.

It must also be clear which distribution key will be applied to the tenants. There are various ways of charging for operating costs, including according to consumption (e.g. water), the number of people in the household or as a percentage of the total living space of the house. If there is no provision for this in the rental agreement, the costs are divided according to the living space. This is determined by § 556a of the German Civil Code (BGB).

Landlords have to select favourable offers

In addition, the landlord is subject to a so-called efficiency rule. This means that he is obliged to avoid excessive costs for the tenants. So he cannot simply choose the first best offer. Instead, he is obliged to compare different policies and choose one with a reasonable price-performance ratio. If he chooses an overpriced policy, he cannot pass on the full cost to his tenants.

What to do if the landlord charges too much for insurance?

Despite all the regulations, disputes between tenants and landlords over the service charge statement occur time and again. This is usually the case when the service charges have risen sharply and an additional payment is due. Is this also the case with you? Then first compare the current statement with the previous ones to find out which items have become more expensive.

If it is the “Insurance” item that drives up costs, first ask your landlord to inspect the insurance documents, which are summarised under this item. The landlord is obliged to allow you to inspect these documents if you request it. However, he does not have to send you a copy.

If the costs for the building insurance has increased significantly since the previous settlement, the landlord should be able to give a plausible reason for this. For example, that the premiums were increased due to several settled claims in the previous year.

As a tenant, can I deduct the building insurance from tax?

Tenants can deduct certain items from the service charge settlement via their tax return. However, building insurance is not one of them. Only those services that serve to keep the property in good condition are deductible. For example, costs for the caretaker or chimney sweep.

Of course, it is not easy for a layman to assess which costs are appropriate for building insurance and when the insurance premium is overdrawn. A tenants’ association can help you here and can also assist you in correspondence with your landlord. In addition, there are also legal service companies that specialise in checking utility bills.

Formalities and deadlines for appealing against service charge settlements

Important to know: If you want to dispute your service charge statement, you have exactly twelve months to do so. The period runs from the day on which you receive the settlement and ends twelve months later to the day. This is stipulated in § 556 of the German Civil Code. This period does not change if the statement of account contains a clause stating that any objection must be lodged within 30 days. Nevertheless, it may be advisable to lodge an objection as soon as possible. In this way, the matter can possibly be settled in your favour before you have to transfer the additional payment. Normally, the 30 days are also the payment deadline for additional payments.

Your objection to the settlement must be formulated in concrete terms. Simply stating that the additional costs seem too high will not help you. Specify exactly which items you object to and why. The objection should always be made in writing. It is best to send the letter by registered post, so that you can clearly prove that you have observed the time limit for lodging an objection, should a dispute arise.

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