Germany: Federal Court of Justice clarifies rules on service charge efficiency

The German Federal Court of Justice (BGH) has issued a ruling regarding the principle of economic efficiency in service charges. In a case involving a landlord seeking back payments for 2017 and 2018, the court clarified that a lack of comparative quotes for service packages does not automatically constitute a violation of the economic efficiency requirement under Section 556, Paragraph 3 of the German Civil Code (BGB).

The BGH ruled that determining a violation depends on whether services were commissioned at objectively excessive prices. A high invoice alone does not prove a breach of duty, nor does the mere absence of comparative offers. The case has been remanded to the Mannheim Regional Court for further proceedings.

In related guidance for tenants, experts note that landlords must provide service charge statements within twelve months of the end of the billing period. Failure to meet this deadline generally prevents landlords from claiming additional payments, unless the delay was not their fault. Tenants are advised to verify the billing period, total costs, distribution keys, and individual shares before making payments.