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What is a renovation fund?
A renovation fund is a provision to finance future maintenance and repair work or construction of common areas. It is financed by the unit owners. It also serves to guarantee the financial commitments of the community of unit owners.
How is the renovation fund established?
The renovation fund may be established in the articles of incorporation, in the administration and use regulations, or by decision at a meeting of the unit owners.
Is it mandatory to set up a renovation fund?
Floor owners are under no legal obligation to set up a renovation fund, but it is very useful and important to contribute to the fund to ensure future work can be carried out.
Who owns the renovation fund?
The renovation fund is the property of the community of condominium owners.
How is the renovation fund financed?
The owners of the individual units decide on the amount of the contributions to the renovation fund by simple majority. The amount can, for example, be set as a percentage of the building insurance value or the construction value. The co-owners may decide that the fund can be capped at a certain amount. The setting of payments may also be delegated, for example to the committee or the administrator, but the meeting of floor owners may correct the amount set. All co-owners must pay their share. If a co-owner does not pay their share, the community may enforce a legal mortgage and the right of retention.
Where is the renovation fund money kept?
The condominium owners decide where to invest the renovation fund. In principle, the money is deposited in a checking or savings account with a Swiss bank.
Who decides how the renovation fund is used?
The renovation fund can be used for necessary, useful, or luxury construction work, depending on the majority required by law or in the administration and use regulations.
Elimination of the renovation fund
Co-owners may decide to eliminate the renovation fund by a simple majority if no other majority is specified.
What happens to the share of the renovation fund when a condominium unit is sold?
When a condominium unit is sold, the seller cannot request reimbursement of their share of the fund. The share is linked to their unit and will automatically be transferred to the buyer of the unit. Furthermore, a sufficiently funded renovation fund can reassure the buyer that they will not have to bear any unexpected high costs in the future.
Who pays taxes on the renovation fund's assets and interest?
Each co-owner is required to declare their share of the renovation fund's value and the income it generates to the tax authorities at their primary residence.
Who recovers the withholding tax from the renovation fund?
The refund of withholding tax is requested by the condominium association. The association's right to a refund is limited to the share attributable to co-owners domiciled in Switzerland.Co-owners domiciled abroad can only request a full or partial refund of withholding tax on an individual basis if they are domiciled in a country with which Switzerland has concluded a double taxation agreement.
Tax-deductible contributions
Contributions to the renovation fund are tax-deductible in the canton of Geneva and in certain other cantons. What happens if the renovation fund does not have sufficient funds to cover major works?
If the renovation fund does not have sufficient funds to finance the renovation work, a call for funds will be necessary and each co-owner must pay their share of the shortfall. This is why it is important to plan, calculate and schedule the work well in advance and ensure that there will be enough money saved in the renovation fund if necessary.
© Written by Esther Lauber, Property Fiduciary with Federal Diploma of Higher Vocational Education and Training, your real estate manager in Geneva Switzerland, speaking French, English and German
Mostly translated from French to English with DeepL
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