The condominium budget: a practical guide for the administrator

The condominium budget is the document with which the administrator estimates, before the financial year begins, the expenses the building will have to bear during the year and allocates them among the owners. It is not a mere forecasting exercise: the amount of the instalments, the cash planning and the very ability to collect contributions all depend on the condominium budget. Its approval is required by article 1135 of the Italian Civil Code and it is one of the most important acts of management.

What article 1135 of the Civil Code says about the condominium budget

Article 1135 of the Civil Code states that the owners' meeting approves the budget of expenses to be incurred during the year and the related allocation among the owners. The budget is therefore a matter for the meeting: the administrator drafts and proposes it, but only the resolution of the meeting makes it effective. Approval refers to the year the budget covers, which is why the administrator cannot demand in advance the quotas relating to subsequent years.

The difference between budget and financial statement

The budget and the financial statement are two distinct, complementary documents. The budget looks ahead: it estimates the outgoings of the year that is beginning and sets the instalments. The financial statement, governed by article 1130 bis, looks back: it accounts for the expenses actually incurred in the closed year. In an ordinary meeting the two documents often travel together, because the statement of the year just ended helps build a realistic budget for the one that starts.

The items in the expense budget

A well-built budget distinguishes recurring ordinary expenses from exceptional items and funds. The main ordinary items are:

• Recurring services: cleaning, electricity for common areas, water, central heating.
• Ordinary maintenance: lift, green areas, small scheduled repairs.
• Building insurance and ancillary policies.
• The administrator's fee, to be stated analytically.
• Cash fund and provisions to cover unexpected events and arrears.

For significant extraordinary maintenance works, article 1135 requires setting up a special fund equal to the amount of the works, which can be arranged in stages when gradual payment based on progress is allowed.

How to prepare the budget

Preparation starts from the analysis of the previous year and the existing contracts. The administrator updates known costs (supply contracts, fees, insurance policies), estimates the variable ones on the basis of past figures and adds a prudent reserve for contingencies. The total is then allocated among owners according to the thousandth (millesimal) tables or the specific criteria for individual expenses set out in articles 1123 and following of the Civil Code.

Allocation by millesimal tables

Most general expenses are allocated on the basis of ownership thousandths. Some items follow different criteria: stair and lift expenses are split half by thousandths and half by floor height, while expenses for an asset or service that serves only some owners fall only on them. A clear budget states, for each item, the allocation criterion applied.

How the budget is approved

The budget is approved at the meeting with the majorities of article 1136 of the Civil Code. On second call the resolution is valid with the favourable vote of the majority of those present representing at least one third of the value of the building. With approval the owners are bound to pay the instalments within the set deadlines, and the administrator is entitled to take action to recover unpaid contributions.

The budget as the basis for collection

It is the approval of the budget that makes the instalments due. On the basis of the approved budget and the allocation schedule the administrator can obtain an immediately enforceable payment order against an owner in arrears, under article 63 of the implementing provisions of the Civil Code. For this reason an inaccurate or late-approved budget weakens the condominium's ability to collect. Pending the new budget, case law recognises the administrator's ability to collect provisionally on the basis of the last approved budget.

The most common mistakes

The mistakes that most often make a budget contestable or ineffective are the chronic underestimation of recurring expenses, the absence of a reserve for arrears and contingencies, the failure to state the administrator's fee analytically and the use of wrong allocation criteria. A budget that is too optimistic forces year-end adjustments and undermines the owners' trust.

The budget with management software

With condominium management software the budget is built from the data already in the accounts: active contracts, the history of expenses and the millesimal tables. The allocation among owners is automatic, the instalments are generated and communicated to residents, and the comparison with the previous year's statement is immediate. This reduces calculation errors and makes the document readable at the meeting.

AmministraPro generates the condominium budget from the firm's accounting, with automatic millesimal allocations, instalment management and comparison with the actual statement. You can see how it works on the features page or compare the plans in the pricing section.