Am I allowed to pass on maintenance reserve funds to tenants?

The law: Additional costs vs. net rent

To understand why the maintenance reserve for a rental property is a sensitive issue, we need to look at the structure of the rent.

1. Additional costs (advance payment/flat rate)

Here you may only pass on costs that are related to the use of the item.

• Permitted: Heating oil, water, sewage, general electricity, building maintenance.
• Prohibited: Repairs, renovations, acquisitions, maintenance reserves for the rental property .

The law is clear: Maintaining the rental property in a usable condition is the landlord's primary obligation (Art. 256 of the Swiss Code of Obligations). This is what the net rent is for. If you were to charge the maintenance reserve for the rental property as ancillary costs, the tenant would be paying twice: once the rent for using the property and again separately for maintaining its usability.

2. The net rent

This is where it all comes in. The net rent must be calculated to cover all your costs that are not utilities. These include:

• Mortgage interest rates.
• Administrative costs.
• Steer.
• And indeed: The maintenance reserve for the rental property .

So if you ask, "Am I allowed to pass on the maintenance reserve for the rental property to the tenant ?", the answer is: No, not as a separate item in the ancillary costs. But yes, it absolutely must be included in the calculation of the net rent .

The trap of condominium ownership (STWEG)

Owners of condominiums are particularly prone to falling into this trap. They receive an annual statement from the property management company listing the contributions to the reserve fund.

Many people think: "These are costs that affect the house, so I'll pass the bill on to the tenant." That's wrong.

The contribution to the renewal fund is nothing more than the maintenance reserve for the rental property . It is a savings plan set aside by the owners for future investments (e.g., a new elevator, a new facade).

• The mistake: If you include this item in the tenant's utility bill, the tenant can refuse this payment or reclaim it later (up to 10 years retroactively!).
• The correction: You must pay the contributions for the maintenance reserve of the rental property out of your own pocket – financed by the income from the net rent.

Building up a solid maintenance reserve for a rental property is your responsibility as the owner, not the tenant's. The tenant pays for the current condition of the apartment, not for its future condition through renovations that might not even happen until they've moved out.

How to properly calculate the maintenance reserve for a rental property

If you are not allowed to show the maintenance reserve for the rental property separately, you must set the rental price correctly from the beginning.

A professional rent calculation looks like this:

• Cost of capital: What will the mortgage and equity cost you?
• Operating costs: administration, insurance.
• Maintenance reserve for rental property: Here's what you need to calculate.
• As a rule of thumb: Set aside approximately 1% of the building's insurance value (replacement value) annually as a maintenance reserve for the rental property .
• For older buildings, you should set the maintenance reserve for the rental property at around 1.5% to 2%.

You divide this sum by 12 and add it to the desired net rent.

Example: You need 300 CHF per month for the maintenance reserve of the rental property .

• Incorrect: Rent 2,000 CHF + additional costs 200 CHF + reserve 300 CHF = Total 2,500 CHF.
• Correct: Net rent 2,300 CHF (incl. the maintenance reserve for the rental property ) + additional costs 200 CHF = Total 2,500 CHF.

The end result for the tenant is the same, but only the second method is legal. The maintenance reserve for the rental property is therefore an invisible part of the base rent.

Tax aspects of the reserve

Another reason why the maintenance reserve for a rental property is the responsibility of the owner lies in tax law.

• If you pay into the renewal fund of a condominium association (i.e., create a maintenance reserve for the rental property ), you can deduct this payment as maintenance costs for tax purposes in most cantons.
• If you were to pass these costs on to the tenant, you would have an unjustified advantage: you would save on taxes on costs that you did not incur yourself.

Therefore, the financing of the maintenance reserve for a rental property is systemically closely linked to your role as a taxable owner.

What happens if the calculation is too low?

Many private landlords forget to include the maintenance reserve for the rental property in the net rent because they are afraid the apartment will otherwise be too expensive.

• The result: The rent just barely covers the mortgage and the running costs.
• The problem: If the heating system breaks down after 15 years, there's no money available. The maintenance reserve for the rental property is missing. You have to contribute additional funds or increase the loan.

Rent that doesn't include a maintenance reserve for the rental property is a losing proposition in the long run. You're depleting the value of your property. It's essential to understand: the maintenance reserve for the rental property isn't profit, but a cost item that needs to be earned now to be spent later .

Conclusion

The answer to the question "Am I allowed to pass on the maintenance reserve to the tenants?" is a clear no when it comes to utility billing. The maintenance reserve for a rental property serves to preserve the value of the building and is the sole responsibility of the owner. Attempting to transparently pass this cost item on to the tenant is illegal and will result in claims for reimbursement.

The right approach is to calculate the net rent. A sound return on investment calculation absolutely includes a line item for the property's maintenance reserve . Your investment is only sound if the base rent is high enough to cover not only the bank loan but also the savings account for future repairs. Consider the property's maintenance reserve as an invisible but crucial pillar of your rental pricing strategy.

If you are unsure how high the maintenance reserve for a rental property should be for the age and condition of your property, or whether your current net rent really covers these costs, Loft offers data-based market analyses to put your calculations on a solid foundation.

Glossary

• Maintenance reserve for rental property: A financial buffer set aside by the owner to pay for future repairs and renovations to the property. It is part of the net rent, not the additional costs.
• Renewal fund: In the case of condominium ownership, this is the fund for the maintenance reserve of the rented property . Payments into this fund are the responsibility of the owner and cannot be passed on to tenants.
• Net rent: The rent excluding additional costs. It must cover all owner costs (interest, administration, maintenance reserve for the rental property ) and the profit.
• Additional costs: Costs directly related to the use of the rented property (heating, water). They must not include flat-rate charges for the property's maintenance reserve .
• Value preservation: Measures that safeguard the property's structure. These measures are financed through the rental property maintenance reserve .