Last updated: 2026-10-19
The accounting records of a property management company must show more than the company's own financial results. They must also show how much money has been received for each managed building, the management costs of each building, and the amounts of outstanding debts and reserves.
A property manager often manages several buildings. Each building has its own owners, expenses, repair needs and reserves. The foundation for this approach is a chart of accounts with building-level analytical accounting: every item of income, expense, receivable, payable and reserve is assigned to a specific building, making it possible to calculate the cost of each building at any time.
This is not merely good practice. Article 6 of the Residential Building Management Law provides for preparing a draft budget and organising financial accounting, while Article 8 requires reports on actual income and expenditure and information about the amount of accumulated funds.
Create appropriate accounts with additional codes in the chart of accounts. For example, the general ledger account for service expenses is 7170. The number of digits in the code assigned to each building depends on the number of buildings managed. If no more than 10 buildings are expected, the service-expense account for the “first” building could be 7170_1. I can create all other accounts in the same way. To view all income, expenses and unpaid invoices relating to the “first” building, i can filter for ledger accounts containing “_1”.
As with transactions for each individual building, the company's own transactions should be posted to separate ledger accounts.
If the bank fee for maintaining an additional account is relatively low or there is no fee, one solution is to open a separate bank account for each building, as well as an additional account for the company's own transactions and transactions with service providers.
If the buildings have only a small number of flats, one bank account can be used, but accounting becomes more complex. I need to create “virtual” ledger accounts for each building in the chart of accounts. For example, the main account is 2620. Payments from residents of the first building are posted to 2620_1. This account is also used when posting payments for services relating to the first building. If one invoice relates to several buildings, the accountant must allocate its amount among the buildings.
Because each building has its own ledger accounts, all transactions for the relevant building can be filtered and a financial report prepared using only those transactions.
When records are handed over, the transactions and account balances relating to the building can be selected separately. When taking over the records, it is useful to review the accounting method used by the previous manager and obtain the ledger balances and a transaction listing for the building for a specified period (see section 5. Accounting for receivables and payables for more details).
This is often the most labour-intensive part of the process. The hardest task is not issuing an invoice, but ensuring that the amounts charged to residents match suppliers' invoices, meter readings and payments received.
Where possible, the utility provider can issue a separate invoice for each building. If one invoice covers several buildings for a particular service, the costs can be allocated using defined criteria.
For example, a property manager may manage three buildings and receive one invoice covering waste collection for all of them. The cost can be allocated according to the number of people declared as residing in each apartment. If one heating invoice covers several buildings, the total area of all the buildings is calculated, along with the area of each heated premises. The heating cost for a particular premises is calculated by dividing the invoice amount by the total area and multiplying the result by the area of that premises.
A clear procedure is needed. For example, if a resident has not submitted a reading, the average consumption for that property over the previous 3–6 months may be used. Residents should receive reminders to submit readings, and the submission process should be as simple and quick as possible. If a reading appears unreliable, it can be checked visually or technically, for example by asking the resident for a photograph of the meter.
The difference can be allocated using defined criteria. The applicable legislation needs to be checked before the criteria are selected. The criteria must comply with paragraph 19 of Cabinet Regulation No. 1013 of 9 December 2008 (“Procedures for an apartment owner in a multi-apartment residential building to settle payments for services related to the use of the apartment property”).
Possible criteria include:
If the apartment owners have agreed at a general meeting on how to pay for the services received (the consumption difference), the agreed procedure must be followed (Article 16 of the Apartment Property Law).
Invoices for consumed services should be issued after the suppliers' invoices have been received. If an invoice is significantly delayed, two options are available:
In all cases, the procedure must comply with the applicable legislation.
Corrections can be included in the following month's invoice by increasing or reducing the amount payable and adding an explanation of the recalculation.
Each month, accounting records should be reconciled against three items: suppliers' invoices, amounts allocated to apartments and payments received. Differences (estimates based on average consumption, recalculations and adjustments for previous periods) should be recorded separately so they can be explained.
A property manager may provide services in its own name or act as an intermediary arranging payments to the actual utility providers. VAT treatment differs between these two cases.
The State Revenue Service (VID) explains that if the property manager issues invoices to customers in its own name, it is generally considered to be the supplier of the service. If the contract states that the manager acts as an intermediary, VAT is generally charged on the intermediary's fee. Invoice preparation and input VAT accounting also differ.
| Model A — in its own name | Model B — as an intermediary | |
|---|---|---|
| VAT is calculated on | the full value of goods and services | only the intermediary's (collection) fee |
| Input VAT on suppliers' invoices | deductible (if the manager is VAT-registered) | not deductible |
| Invoice to residents | issued by the manager in its own name | supplier invoice details must be stated; the manager is identified as the payment recipient |
The full value of the services supplied is reported in the VAT return. In the manager's accounts, suppliers' invoices are expenses and amounts invoiced to residents are income.
The contracts with residents and suppliers must clearly state that the manager acts as an intermediary. The VID recommends reviewing such contracts and, where necessary, amending them by means of an additional agreement.
Utility payments received into the bank account and payments made from the bank account to utility providers are not the manager's income or expenses; only the intermediary fee is income. These amounts are recorded as settlements, not as income or expenses. Invoices must refer to the suppliers' invoices and state that the manager is the recipient of payments for the relevant utility services.
The property management and supplier contracts should clearly establish whether the manager acts as an intermediary, and the invoices should be consistent with that arrangement (see the models above).
If invoices are issued in the manager's own name, there is no obligation to state the details of the actual service providers on the invoice, because the manager is treated as the service provider. The manager may reduce the VAT payable by the amount of VAT shown on the actual suppliers' invoices.
If invoices are issued by the manager as an intermediary:
If the invoicing procedure is followed, a consumer who is VAT-registered and uses the services for taxable transactions may deduct input VAT. In the relevant annex to the VAT return, the actual supplier and that supplier's invoice number and date are stated as the transaction partner details.
The answer depends on what is stipulated in the contracts between the property manager and residents and in whose name the manager enters into repair contracts.
1) Contributions are included in the monthly property management fee, or the manager will provide repair services in its own name. In that case, the contributions form part of the management fee and are subject to 21% VAT, regardless of whether the repairs are carried out by the manager or by other businesses in their own names (see page 4 of the VID guidance on VAT treatment of residential building management services). Note that if the manager provides construction services and any apartment owner is VAT-registered, the manager must apply the reverse-charge procedure under Article 142 of the VAT Law to the transaction with that owner; the invoice amount is not increased by VAT.
2) Contributions are not included in the monthly management fee and the manager does not itself provide repair services. In that case, the manager does not charge VAT on contributions to the reserve fund. An appropriate agreement between the manager and the apartment owners' association is required. The manager accumulates contributions to the repair fund and enters into contracts with repair service providers on behalf of the apartment owners. When invoices are received from repair service providers, the amounts are allocated to the apartment owners, reducing the remaining balance of the reserve fund.
This depends on turnover and on how the company supplies its services.
Property management services are subject to VAT because, under the general rule, they are taxable transactions and no exception, reduced rate or exemption is provided for property management services.
| Payment | Services supplied in the manager's own name | Utility services supplied through an intermediary |
|---|---|---|
| Property management fee | 21% | 21% VAT (the manager's own service) |
| Repair contributions included in the management fee | 21% | 21% |
| Repair contributions paid into a separate fund | 21% as an advance | VAT-free if contracts are entered into on behalf of the owners' association |
| Utility payments | VAT on the full value | VAT only on the intermediary fee |
| Payment-collection/intermediary fee | 21% | 21% |
The approach depends on the property management and supplier contracts and on how invoices are actually issued. These factors determine the accounting procedure, invoice format and VAT reporting requirements. The appropriate solution must be assessed in light of the legislation in force and the contracts entered into by the property manager.
Contributions by owners to a building's reserve fund are not working capital that the property management company may use freely. Under Section 15.2 of the Apartment Property Law, contributions to the reserve fund are the property of the apartment owners' association. Article 14 of the Residential Building Management Law also restricts the manager's right to use reserves accumulated by owners.
In either case, the manager's accounting records must include a separate ledger account for the repair reserves of each building.
The balance is visible in the bank account. The balance of the corresponding ledger account in the accounting register must also match the bank account balance.
Reserves and payments are separated by building because a separate bank account is used for each building's reserves (and separate ledger accounts are used as well — see section 1). Purposes can be tracked using additional analytical codes. For example, account 7170_1 is used for building X01, account 7170_101 for purpose Y01 in building X01, account 7170_102 for purpose Y02, and so on.
Additional codes can also be used for supplier and contractor accounts, in the same way as for expense accounts. For example, the analytical account for supplier Z01 for purpose Y01 in building X01 is 5310001_101. One approach is to record advances paid to supplier Z01 in this account. The resulting debit balance shows the amount of advances paid. Once the work is completed and the invoice received, the invoice amount is recorded on the credit side, reducing the advance balance.
The budget must be realistic both in composition (a list of works and materials) and in pricing (market prices), and must be broken down into line items such as materials, labour, equipment rental, transport and contingency costs.
A table or “register” can be used for each project (purpose) to record the approved budget, contractual amounts and invoiced amounts for each line item. It can also show the remaining available amount for each item.
As with expense and supplier accounts, additional ledger accounts can be used for loans. For example, the liability of building X01 to lender Z01 for purpose Y01 can be posted to account 5140001_101. The same approach also applies to grants and other funding. The number of digits in an account code depends on the number of managed buildings, suppliers, lenders and other business partners.
Under point 3 of part 3 of Article 12 of the Residential Building Management Law, unspent funds must be transferred to the owner of the residential building.
Reserves are accounted for separately for each building: contributions received, amounts used and the remaining balance. For major repairs, separate project accounting can be maintained for advances, unpaid contractor invoices and financing. This makes it possible to show owners clearly where the money is and how it has been used.
Construction project management and the preparation of project applications are not accounting services. The role of accounting is to ensure that all transactions related to a project are correctly recorded.
Invoices may have been issued to owners in full, but available cash may be insufficient if some owners do not pay. The property manager is required to monitor owners' payments and promptly inform other owners if an owner's action or inaction affects their interests (Article 14 of the Residential Building Management Law). The manager must also provide the building owner with a written report at least once a year, including information about the use of financial resources (Article 15).
This information is usually available in the accounting system, where issued invoices are linked to payments received.
Receivables can be analysed in a spreadsheet with the following columns: A — Debtor, B — Payment due date, C — Debt (EUR), D — Days overdue. Column D can contain a formula calculating the number of days between the due date in column B and the date on which the spreadsheet is prepared. The debts can then be grouped by age:
If this situation is covered by legislation (Articles 1843 and 1844 of the Civil Law) or by the contract, the relevant legal provisions or contractual terms apply.
If there is no such provision and the payer has specified which invoices are being paid, the payment is allocated to those invoices (Supreme Court Department of Civil Cases judgment in case No. SKC-5/2025).
If there is no information about which invoices are being paid, the payment can be allocated according to the following priorities:
If the apartment owners have not decided at a general meeting how payments should be allocated, the debtor has not specified what is being paid, and the management fee debt and utility debt are equal in the sense that both are overdue, equally burdensome and of the same age, the payment may be allocated proportionally.
Example: the invoice totals €100 — €20 for property management and €80 for utilities supplied by third parties. The debtor pays €70. The payment is allocated as follows: €14 to the management fee (70 × 20/100) and €56 to utilities (70 × 80/100).
If a resident specifies in the payment that it is for utility services, under part 4.2 of Article 14 of the Residential Building Management Law, the manager must transfer the amount received to the service provider.
A handover-takeover protocol is required (Article 12 of the Residential Building Management Law). The following information and documents should also be requested:
Each receivable should be analysed individually and classified into groups:
Separate accounting is maintained for each building, debts are grouped by age, and payments are reconciled with invoices. These records can be used to prepare statements of an owner's payments, data for debt notices and an annual report on total arrears. Supplier-level payable records show whom the company must pay and how much.
The manager needs more than the company's (limited liability company or association) annual accounts. Owners of each building must be able to see clearly how the money for their building is used. Separate “building accounting” (analytical records) can be maintained to prepare a report at any time in accordance with Annex 3 to Cabinet Regulation No. 408 (rules for calculating residential building management and maintenance fees).
With a well-structured chart of accounts, analytics broken down by building, and a regular (monthly/quarterly) review cycle, it is possible to:
The starting point is a chart of accounts with building-level analytical codes (see section 1). Income, expenses, receivables and payables, and reserve balances for each building must be recorded separately. An analytical identifier (additional characters for each building or property) is added to each income, expense, receivable, payable and reserve account.
Actual expenses are compared with the budget each month, or at least quarterly. The review covers not only the total variance but also its causes, such as higher service consumption, price increases, unplanned repairs or expenses recorded in a different period from the one originally expected.
Changes in costs can be identified by comparing expenses for one period with those for the previous period and with the budget. The comparison can be made by expense type and by building. This helps identify significant changes, such as higher heating costs, increased repair expenses or recurring unplanned work.
The following are compared:
If costs are expected to exceed income, the additional contributions required can be calculated and options presented for the owners to consider, such as increasing contributions, postponing work or seeking a loan or EU funding.
The forecast reserve balance is calculated by adding planned contributions to the opening balance and deducting expected expenses. The calculation should also account for contracts already signed, advances paid and invoices not yet paid. This helps estimate how much money will remain after the planned work and whether funds will be sufficient for other unexpected expenses. It is also advisable to prepare a 13-week (or 3–6 month) cash-flow forecast to identify liquidity risks in advance.
The accounting data can be used to prepare a concise, clear report containing:
Reporting and tax obligations depend on the property manager's legal form. Requirements may differ for a commercial company, cooperative society and association.
Reporting requirements differ according to the legal form.
The main legislation is the Law on Annual Statements and Consolidated Annual Statements. Annual accounts generally consist of a balance sheet, profit or loss statement, notes and a management report.
The main legislation is Cabinet Regulation No. 439, regulations regarding annual reports and the maintenance of accounting records using a single-entry system for associations, foundations, and trade unions.
If an association uses double-entry bookkeeping, it must submit a balance sheet, income and expenditure statement, donations and gifts statement, explanatory notes and a management report, similarly to commercial companies (paragraph 14 of the Regulation). However, the items included in the balance sheet and income and expenditure statement differ. If the association uses single-entry bookkeeping, it must submit an income and expenditure statement, donations and gifts statement and management report.
Owners' contributions to reserve funds and utility payments collected for onward transfer are generally treated as intermediary transactions or advances received (payables). They are not included in the profit or loss statement as income or expenses. The management fee and the manager's own remuneration are exceptions. If the manager supplies utility services in its own name, those transactions are recorded as the manager's own income and expenses.