The receipts, please! | panorama

Some real estate groups commission subsidiary companies with the maintenance of their apartments. Whether the bills for this are overpriced can hardly be checked so far. A Munich tenant is now moving to the Federal Court of Justice - and could bring the controversial practice to a halt.

No one actually goes to the Federal Court of Justice for a trivial amount. Franz Obst does. His utility bill from Vonovia for EUR 288.67 from 2014 still gives him reason to defend himself today. “Vonovia writes itself bills for work that sometimes wasn’t even done properly. And the tenant should pay,” Obst fumes.

On May 15, the district court in Munich agreed with the pensioner on certain points. According to the verdict, Vonovia must break down the ancillary cost bill for the pioneer more precisely. Now Obst wants to appeal to the highest authority to obtain a judgment that is binding for the whole of Germany. His goal: “Transparent access to receipts for all tenants. That means documents that you can really check, instead of just meaningless final amounts.” As the judges justified in the judgement, Obst is granted the opportunity to go before the highest court because the question of the scope of tenants’ right to inspect documents has not yet been clarified.

Franz Obst is still not clear to this day what exactly he had to pay the 288.67 euros for. The problem of non-transparent and possibly artificially inflated utility bills does not only occur with him - it could be a mass phenomenon. Whenever the landlord entrusts a subsidiary with completing the tasks, tenants should prick up their ears. Because if the bill is passed on to tenants anyway and a possible surplus ends up in the coffers of the parent company, there is not only a lack of incentive to control costs. On the contrary: It is an opportunity to earn money - via the caretaker trick. The dictum of the "second rent" with a view to the additional costs gets a taste here.

Franz Obst would like to be able to identify and reclaim any overpriced operating costs. So far, however, he has only received a list of services that, from his point of view, is meaningless. He complains that he cannot check whether the cost accounting is economical. Many items in his statement are pure sequences of numbers. “Nobody can say what service was actually provided for this. How am I supposed to compare the price of a service with that of another provider offering the same service?” says Obst.

Other items such as "2nd floor light switch serviced 54 times" are listed at a flat rate. Here, too, Obst expects a comprehensible list of material and personnel costs, as is usual with a normal craftsman's invoice. “Whether the calculation is economical and fair, who knows? But if a landlord doesn't keep up with this for six years, you can guess where the wind is blowing from," says Obst. As a board member, he represents 365 members of the tenants' association of the residential complex located in the Kieferngarten in the north of Munich.

In addition, Vonovia's service specifications raise bizarre questions even where services are clearly titled. In Obst's settlement, for example, the maintenance of water meters is billed, even though they don't even exist. The tenants also pay for the cleaning of playgrounds, although they have been visibly deteriorating for years, as Obst claims. After all, he is happy about the “great verdict” of the district court. "The tenant must be able to understand the price calculation formula," it says. A list of caretaker services with a price is not enough, according to the judges.

The apparently harmless judge's verdict makes the giants of the housing industry sit up and take notice. Because it threatens their practice of supplementing their profits with the questionable insourcing method. With the Franz Obst case, the business practices of Deutsche Wohnen, LEG Immobilien, Grand City Properties and TAG Immobilien are also being put to the test. All of these real estate companies have also founded their own subsidiary companies in order to earn money from the additional costs of their own apartments. So far, none of the real estate companies has been obliged to disclose their price calculations. This corresponds to legal requirements, the large companies mentioned explain on request.

The real estate association IVD, which mainly represents small private landlords, brokers and real estate managers, fears that the business practices of the big companies will damage the image of the entire industry. IVD consultant Annette Engel-Lindner supports the tenants. “There is a need for stronger tenant protection here. At a minimum, landlords and their subsidiaries would have to disclose the allocation key, according to which the ancillary costs are calculated. A list of services as such is of no use,” says the lawyer.

Anyone who writes themselves bills that a third party has to pay in the end already has a great theoretical incentive to charge excessive prices. After the Munich judges have legally recognized this conflict of interest, a system may falter. "If the Federal Court of Justice confirms the judgment of the regional court, tenants nationwide could really check their utility bills for profitability for the first time and would thus have the opportunity to tackle overprices," says lawyer Volker Rastätter, who represented Franz Obst in court and runs the business of the Munich tenants' association .

Since Vonovia commissioned its own subsidiaries to look after the apartments, Franz Obst's ancillary cost bill has tripled. The largest listed housing company in Germany even admitted in court that it could make money from the high additional costs through insourcing – in contrast to ordinary landlords who hire external parties. The group has perfected the insourcing business and now sells everything to its tenants, from caretakers to lawn care workers. When it comes to ancillary costs, tenants are never allowed to decide what, how much, from whom and at what price they want to buy. According to its own statements, Vonovia achieves a profit of EUR 129 million by insourcing operating and heating costs, which accounts for around ten percent of operating profit.

The insourcing method has been trending among the big players in the industry since the early 2010s, observes Ralph Henger, senior economist for housing policy and real estate economics at the Cologne Institute for Economic Research. “In the last decade, large real estate companies have emerged with a wave of mergers, which have also gone public. They have recognized the high return potential that can be realized through the additional costs as a second rent," says Henger.

Vonovia background

The company, which has its headquarters in Bochum, owns around 415,000 apartments at around 400 locations in Germany, Austria and Sweden. Another 74,000 apartments are managed by Vonovia. Vonovia was formed in 2015 from the merger of the companies Deutsche Annington and GAGFAH. On Vonovia's website it says: "Today, the company sees itself as a service provider for everything to do with the home and is also active internationally." The company has been listed on the stock exchange since 2013, and the portfolio value is currently around EUR 56 billion.

Even if detailed studies are still missing, Henger comes to a clear snapshot: "The truth is that the ancillary costs have increased due to the business model and the tenants have to bear the costs accordingly," says the scientist. The industry was more fragmented 20 years ago. "Back then, the administration of the apartments was often outsourced to external service providers," says Henger. "In retrospect, in some cases you have to say clearly: to the benefit of the tenants."

The GWG Remscheid, which is organized as a cooperative, shows how things are still fair and transparent today. Ralf Markert, executive member of the GWG board, explains the difference between outsourcing and in-house maintenance as follows: “Anyone who commissions external service providers has an interest in keeping costs low. And if only because, as a landlord, I can increase the rent when the operating costs are low,” says Markert.

But companies like the GWG with its 1100 apartments often do not have enough capital to expand their housing stock. For years they have been treading water, while the big ones are making extra profits with the insourcing method and are buying up more and more apartments. "We can't keep up with that," says Markert. The market leader Vonovia is no exception, but simply the best competitor.

There is reason to mistrust the insourcing method not only because a large number of tenants are on the barricades because of possibly incorrect or overpriced utility bills. Current or former employees of the housing company are also unpacking, for example on the online platform "Konunu", actually intended as a portal for employer ratings. With a mediocre rating, Vonovia's profile initially appears unsuspicious. The first twenty pages are filled with remarkably good to overly excellent employee ratings. Then it suddenly gets dark. It no longer says, "The best employer I've ever had," but rather: "You walk over dead bodies here." And: "No one knows why the tenants are still so friendly." A number of anonymous employees are also noticeable -Comments: “Vonovia owes its rise to radical cheating on ancillary costs. As long as employees cover it, it's a good climate" (sic!), it says, for example.

Upon request, Vonovia rejects the allegation of a method. Regrettably, there were a few incorrect ancillary cost bills, which is unavoidable given the size of the company. Many apartments have been bought in recent years without having received a precise list of the stock from the former owners. According to the Vonovia press office, this resulted in some incorrect items in the accounts.

A former Vonovia employee - let's call him Florian Decker - continues to burden the company in the conversation. He does not want to be named because he continues to work in the industry. Vonovia saved so much on staff and wages that employees were completely overburdened. “Economic and fair just don’t go together. The management is completely unworldly, they only care about keeping the shareholders happy," says Decker. After completing his training, he only lasted a year in customer service at Vonovia. He now works for a much smaller, family-run real estate company.

The maintenance of the apartments is also suffering from the lack of staff, criticizes Decker. Decker believes that fewer staff, poorer quality than before – that is the rule for all large housing companies that make money from insourcing. At Vonovia, he was solely responsible as the contact person for the tenants of 7,000 apartments. At his current employer, a whole team looks after the same number of apartments. "I was glad when I knew where the road was," he says. That's exactly how it looks in other business areas, with the caretakers, craftsmen and cleaning staff of Vonovia. "They are completely overwhelmed. They hired cheap labor that didn't know the business," says Decker. Employees often simply have to estimate the bills because they don't have the time. “Many think that Vonovia is intentionally writing wrong invoices. But there is no fraudulent intention behind it. The real problem is the austerity policy dictated by management,” says Decker.

Even the central association of the housing industry GdW, of which Vonovia is a member, keeps its distance. "Insourcing is by no means a common business practice among landlords," a spokesman told the newspaper over the phone. Shortly thereafter, however, he rowed back by email. He could not comment on the subject because it affects a company organized by the association.

The tenant Renate W., who also does not wish to be given her full name, lives in a Vonovia estate on Dornbusch in Frankfurt. Mainly senior citizens live there, but there are sandpits and children's playgrounds, which Vonovia regularly maintains, at least on paper, through its Wohnumfeld GmbH. "Vonovia employees are sent there all day long to write down as many services as possible that can be billed, whether that makes sense or not," says Renate W.

She advocates the formation of a tenants' union - also to check the operating costs. This check is only possible for an active neighborhood at all, since the calculation extends to entire blocks of flats and streets. In the Dornbusch settlement, the tenants are already taking turns to check whether and which maintenance, cleaning and repairs are actually being carried out. Renate W. now photographs every movement of Vonovia in her neighborhood. "I won't be fooled anymore," she says. The group considers the complaints in the settlement to be unfounded, as the press office said at the request of this newspaper.

As great as the tenants' joy at the Munich verdict is, there is also a lot of disappointment mixed in with it. The judgment still has several weaknesses, says Daniel Schultz, board member of the tenants' union founded in 2019. "As it has been up to now, the business practice of the real estate companies would continue relatively undisturbed," he says. It is incomprehensible why the judgment finds the documentary information insufficient only with regard to the caretaker costs. Vonovia service providers also provide other services such as garden maintenance and repair work, and here the documents are also not transparent.

In addition, Schultz fears that the verdict because of the protection of Franz Obst, who lives in social housing, will only mark a precedent for this group of tenants. "Of course, it must also be possible for other tenants to have their invoices audited for profitability," says Schultz. He hopes that the Federal Court of Justice will make a clear judgment for all tenants.

By Jan Schroeder