Co-ownership budget: drawing it up, voting on it, following it

The notice of the ordinary general meeting has arrived, with a table of figures attached: the co-ownership budget for the coming financial year. It looks technical, but it decides what you will pay each quarter. Too low, and it forces painful top-up calls when the annual statement comes. Too high, and it ties up the co-owners' money for no reason. Well built, it makes the charges predictable and defuses most of the tension at the general meeting (GM).

So it is in your interest to read it before the meeting, not during it. The rules are the same in Flanders, Brussels and Wallonia, because they come from the Civil Code. What changes from one building to another are the items, the contracts and the condition of the building.

What exactly does the general meeting vote on?

Two budgets, not one. The property manager (syndic) must present a budget for the ordinary expenses of maintaining, running and administering the common parts and common equipment, and a second one for foreseeable extraordinary costs: it is one of their duties (Art. 3.89, § 5, 16°). If the notice contains only one table mixing the two, ask for them to be separated.

These budgets are put to the vote of the general meeting every year, in practice at the ordinary general meeting. Its notice must be sent at least fifteen days before the meeting, except in an emergency (Art. 3.87, § 3). We say it clearly to syndics: attach the budgets to the notice. A co-owner who discovers the figures at the meeting can neither check them nor prepare their questions.

The vote is by an absolute majority of the votes of the co-owners present or represented, since the law provides no qualified majority for the budget. How votes are counted, and what happens with abstentions, is explained on the page on voting rules and majorities.

Which items should the ordinary budget include?

Always start from the expenses actually paid, not from the previous budget. The general ledger or the latest annual service charge statement gives you these amounts. Then adjust each item according to the current contracts and known changes.

On fees, our page on reducing syndic fees lists the extras to keep an eye on. For heating and water, how they will then be split between the units depends on the meters installed: see splitting water and heating costs.

A word on energy. If the building has a variable-price contract, a budget calculated on a year of low prices can turn out to be insufficient. Our advice: present two scenarios to the general meeting and keep the more prudent one. Slightly high advance payments are adjusted in the annual statement; underestimated heating is paid in one go, at the worst possible moment.

How do you cost the budget for extraordinary expenses?

This second budget covers what does not come back every year: replacing a boiler, bringing a lift up to standard, redoing a roof, painting the stairwell. It is built from three sources.

The first is the condition of the building: maintenance reports, technicians' remarks, the age of the equipment. The second is the decisions already taken by the general meeting and the legal or regional obligations still to come. The third is the available reserve fundGlossaryTotal of the periodic contributions intended for non-recurring expenditure, such as replacing the heating system or the lift. It becomes mandatory no later than five years after provisional acceptance, with an annual contribution of at least 5% of the previous financial year's ordinary service charges, unless the general meeting decides otherwise by a four-fifths majority. See the glossary.

The Civil Code sets a floor for feeding this fund: the annual contribution may not be less than 5% of the total ordinary common charges of the previous financial year, unless the general meeting has decided by a four-fifths majority of the votes not to set it up (Art. 3.86, § 3). This minimum is rarely enough to finance a major project. If significant works can be expected in a few years, it is more comfortable to increase the contribution now than to call a large sum in one go. The rules of this fund are developed on the page on working capital and the reserve fund.

Including works in the budget does not amount to a decision to carry them out. Starting the works, choosing the contractor and the financing are voted separately, by the majority the law provides for that type of works. The page on building works goes through these steps.

From the approved budget to your quarterly advance payment: an example

Once the budget has been voted, the syndic divides it between the units. The basic key is each unit's shareGlossaryTerm used by the Civil Code for the fraction of the common parts attached to each unit, also called quotités. It is set in the deed of division according to the respective value of the private parts and determines each co-owner's number of votes at the general meeting. See the glossary, but the by-laws may provide a usefulness criterion for some charges, such as the lift.

Take a fictitious building of twelve apartments whose ordinary budget is set at 36,000 euros, with no charge under a special criterion. The ordinary common charges of the previous financial year came to 34,000 euros.

If the lift is split according to a usefulness criterion, that item is taken out of the general calculation and split only between the units concerned. The end-of-year statement then compares these advance payments with the actual expenditure.

How can you tell whether a budget is realistic?

Ask the syndic four questions before voting. Is each item compared with the actual expenditure of the previous financial year? Have the indexed contracts been updated? What is the balance of the funds on the date of the meeting? And which works are expected within three to five years?

A serious budget often fits on one page, with three columns: actual for the past financial year, budget for the past financial year, proposed budget. If the actual column is missing in your building, ask for it before voting: without it, nobody can judge whether the proposed amounts are credible. If the syndic keeps accounts under the standard chart of accounts, they can produce this table directly from the expense accounts.

During the year, track the gap between actual and budget halfway through the financial year. The co-ownership council, if there is one, is well placed to do this. If an item spirals, for example after a fixed-price energy contract ends, a top-up call for funds decided in good time is better than a deficit in the end-of-year statement. To place this budget within the building's finances as a whole, go back to the page on co-ownership service charges.