Renewal fund — spread maintenance costs over several years
What is a renewal fund? - The definition
A Renewal fund Is a community-built money pot that is financed by a Condominium Owners Association is used to finance future maintenance and renovation work on a property. According to Article 712h et seq. of the Swiss Civil Code (ZGB), owners' associations are required to regularly maintain the common parts of the building. Contributions to the Renewal Fund are paid in accordance with Value ratio determined by the respective owner and paid in regularly. In this way, major renovations or repairs to the property can be planned in the long term and implemented without financial surprises. Renewal fund Is a community-built money pot that is financed by a Condominium Owners Association is used to finance future maintenance and renovation work on a property. According to Article 712h et seq. of the Swiss Civil Code (ZGB), owners' associations are required to regularly maintain the common parts of the building. Contributions to the Renewal Fund are paid in accordance with Value ratio determined by the respective owner and paid in regularly. In this way, major renovations or repairs to the property can be planned in the long term and implemented without financial surprises.
What do you need a renewal fund for?
For buyers of condominiums, the focus is usually on their own home, but the much larger part of the building maintenance is accounted for by the common areas. These include cost-intensive components such as:
- Façade, windows and doors
- roof, storm water drains and roof terraces
- Heating system and ventilation systems
- Garden and outdoor areas as well as parking spaces
- Energy-efficient modernizations such as the installation of photovoltaic systems
Managing these Community costs requires a renewal fund. In the Owners meeting It is decided how much the payments into the renewal fund will be made and at what frequency they will be made. The amount is often based on the amount of buildings insurance, although annual amounts of 0.2% to 0.5% of the insured sum are usual in Switzerland.
Pitfalls of the Renewal Fund
Although a renewal fund distributes maintenance costs over several years, in practice it can also lead to financial bottlenecks if the funds are insufficient. Possible difficulties include:
- Insufficient deposits: If regular contributions are too low, the saved assets are not sufficient for major restructuring. The owners' association could then be forced to make large back payments in the short term.
- Deferred maintenance work: Delayed or “stripped-down” renovation measures can result in building deficiencies recurring more quickly and requiring new work. In order to avoid such financial bottlenecks, it is advisable to regularly check the condition of the property and adjust the amount of the renovation fund as needed.
You should pay attention to this with a renewal fund
Buyers of condominiums should find out about the status of the renewal fund before making a purchase. A well-filled fund indicates that the Community is prepared for future maintenance costs.
The following points should be checked:
- analysis of the condition of the property: Have an expert carry out an audit of the condition of the building and the planned maintenance measures to ensure that the renovation fund is adequately financed.
- Deposits from owners: Make sure that all owners contribute their share to the fund regularly. Failure to make payments could otherwise represent an additional financial burden for the Community.
- Review of past and planned measures: Ask the administration for a list of measures carried out over the last 10 years and planned for the next 10 years to understand the actual need for and coverage of maintenance work.
tip: Before buying a condominium, it should be checked whether the previous owner has made all payments due. Otherwise, outstanding payments must be taken over by the new owner.
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