Accounting
What is the explanatory note of the accounts
Article 1130 bis of the Italian Civil Code requires the property manager to attach an explanatory note to the annual accounts, together with a summary of ongoing contracts and pending disputes. It is not a decorative attachment: its purpose is to make the year of management understandable to owners who often have no accounting background, explaining why certain figures changed compared to the approved budget or the previous year. The note accompanies the accounting register and the financial summary, the three elements that together form the accounts under the law. This guide covers its purpose, typical content, and how a management platform such as AmministraPro can help produce it consistently with the actual accounting data.
The purpose of the explanatory note
Law 220 of 2012, which introduced Article 1130 bis, addressed a real gap: raw accounting documents, made of a register and a summary, are readable only by someone comfortable with double entry bookkeeping or column based statements. The explanatory note translates those figures into a narrative that owners can actually follow, covering the most significant items, meaningful deviations from the approved budget, and the reasons behind any cash advances or payment reminders.
It does not replace the register or the summary, it completes them: case law and common practice treat it as an integral part of the accounts, to the point that its absence can be grounds to challenge the approval resolution if an owner shows the omission prevented a proper understanding of the management.
What it typically contains
There is no single legal template, but established practice identifies recurring content the note should cover:
- A summary of the main income and expenses for the year, compared with the approved budget
- An explanation of significant deviations, for example higher maintenance costs due to an unplanned intervention
- The status of ongoing contracts, such as supplier agreements or professional engagements still active
- The status of pending disputes involving the building, whether as defendant or claimant
- Any outstanding balances owed by delinquent owners and the recovery actions taken
- The cash reserve available at year end and its composition
How it relates to the accounting register and the financial summary
Article 1130 bis describes the accounts as made up of three distinct but coordinated documents. The accounting register lists income and expenses chronologically, with their respective headings. The financial summary shows the building's assets and liabilities at year end. The explanatory note connects the two technical documents, explaining in plain language what the figures mean and why they changed.
In practice, a manager relying on a platform like AmministraPro can generate the register and the summary directly from cash movements and installments recorded throughout the year, and use that same data as the basis for the note, avoiding mismatches between the narrative and the actual figures, which is the most frequent source of disputes at owners' meetings.
Consequences of a missing or insufficient note
Accounts lacking the explanatory note, or containing a generic note that explains nothing specific, expose the approval resolution to the risk of challenge within thirty days under Article 1137 of the Civil Code. Courts assess case by case whether the omission actually prevented owners from understanding the management, but a carefully drafted note significantly reduces disputes and clarification requests that otherwise prolong meetings.
For the manager, the note is also a form of professional protection: it documents and justifies the management choices made during the year, reducing the risk of challenges to the mandate based on serious irregularities.
Frequently asked questions
Is the explanatory note legally required?
Yes, Article 1130 bis of the Civil Code expressly requires it as part of the condominium accounts, alongside the accounting register and the financial summary. It is not optional practice: the manager must attach it to every annual statement submitted to the owners' meeting, also indicating ongoing contracts and pending disputes involving the building.
What happens if the explanatory note is missing from the approved accounts?
Its absence can be grounds to challenge the approval resolution within thirty days of notice to absent or dissenting owners, if it is shown that the omission prevented a proper understanding of the management. Many managers, out of caution, prefer to draft it carefully even in years with no significant deviations.
What is the difference between the explanatory note and the financial summary?
The financial summary is a technical document showing the building's assets and liabilities at year end, in accounting statement form. The explanatory note is instead a narrative text that explains in plain language what those figures mean, why certain items changed compared to the budget, and the status of ongoing contracts and disputes.
Can condominium management software help draft the explanatory note?
Yes, a tool such as AmministraPro tracks cash movements, installments and expenses throughout the year, so that at year end the manager can build the note from the same data that generates the register and the summary, reducing the risk of inconsistencies between the narrative and the actual figures.
Should the note also mention delinquent owners?
It is established practice to include the status of receivables from owners behind on payments and the recovery actions taken, since this directly affects understanding of the building's cash position and any need for advances by the manager or other owners.
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