Property manager and building: accounting, VAT and fund calls

Quick answer. The accounting of a building manager follows decree no. 2005-240 of 14 March 2005: accrual accounting, a chart of accounts specific to co-ownership and five annexes. Fund calls are sums belonging to the co-ownership, never the manager's turnover. The professional manager's fees, by contrast, are subject to VAT at the standard 20% rate.

Managing a building in co-ownership means keeping two sets of accounts that must not be confused: that of the co-owners' association, governed by a specific decree, and that of the professional manager who runs it. Many errors stem from this confusion, especially on VAT. This article clarifies the accounting framework, the fund calls, the works fund and the VAT treatment.

The accounting of the co-owners' association is governed by decree no. 2005-240 of 14 March 2005 and its order of the same day, amended in 2020. It requires accrual accounting: charges and income are attached to the financial year they relate to, regardless of the payment date. This breaks with the simple cash accounting that some small buildings used to practise.

The co-ownership chart of accounts is specific. Each entry must identify its supporting document: invoice date and number, payment date and reference, the period and purpose of the fund call. The financial year covers in principle twelve months, and the accounts are presented to the annual general meeting for approval.

Our reading. The decree's rigour is not a formality. Well-kept accrual accounting makes it possible to know, at any time, what each co-owner really owes, and to separate current charges from exceptional operations. It is the condition of a calm general meeting and a credible budget. We support this work as part of our service to keep and review the co-ownership accounts.

The decree requires five accounting annexes, presented each year with the accounts. They give a standardised reading of the co-ownership's position, from the budget achieved to ongoing works.

These annexes are not merely a presentation exercise. They separate day-to-day running (lift, cleaning, insurance) from works and exceptional operations, which directly drives the amount called from each co-owner.

The provisional budget covers the building's current charges (article 14-1 of the law of 10 July 1965). It is voted at the general meeting, then called as provisions, in principle on the first day of each quarter, unless the meeting decides otherwise. The co-owner thus pays four provisions a year, adjusted at year-end against actual spending.

Works and operations outside the current budget (facade renovation, roof repair) are governed by article 14-2. They are subject to specific calls, following the schedule voted by the meeting, and appear in annex 4. The key point: these fund calls are not income of the manager. They are sums of the association, collected in a separate bank account opened in the co-ownership's name, under article 18 of the law.

The underestimated risk. Confusing fund calls with the manager's turnover is a serious error. The funds called pass through the co-ownership; they are neither income nor a VAT base for the manager. This distinction, sometimes forgotten in small structures, is the key to a correct tax treatment, which we secure under our work on the VAT and tax position of the manager.

Since the ALUR law, completed by the ELAN law and the Climate law, most co-ownerships must build up a works fund. The obligation applies after a ten-year period from the reception of the building's construction works. This fund, provided by article 14-2-1 of the 1965 law, finances the multi-year works plan, voted works, emergency works and those needed to safeguard the building.

The annual contribution has a floor. Where no multi-year works plan has been adopted, it cannot be lower than 5% of the provisional budget. Where a multi-year plan has been adopted, it cannot be lower than 2.5% of the amount of the works planned and 5% of the provisional budget. The meeting may suspend contributions where the fund exceeds 50% of the amount of the planned works.

A point often ignored: the works fund is attached to the lot, not to the person. A co-owner who sells does not recover their share: it remains acquired by the association and benefits the buyer. Accounting for this fund separately, away from current charges, avoids any confusion on resale.

VAT is the most misunderstood point. The co-owners' association carries out no economic activity: it manages a building for its members and is therefore, in principle, not subject to VAT. The charges it bears (supplier invoices, maintenance contracts) are called inclusive of all taxes, with no VAT recovery, except in special situations.

The professional manager, by contrast, is a service provider. Its current management fees, like its priced special services, are subject to VAT at the standard 20% rate. The manager's contract, whose format is regulated, indeed separates the annual management fee from services billed in addition. It is on these fees, not on the fund calls, that VAT applies.

The case of the volunteer or cooperative manager is different. Where a co-owner performs the manager's role personally, without professional activity, they do not invoice fees subject to VAT: at most they may be reimbursed for their costs. The 2005-240 decree also requires VAT rates and amounts to be shown in the accounts where some co-owners, operating commercial premises, have declared being VAT-liable. For operational tracking, a tool such as Pennylane helps separate fees, disbursements and fund calls. On the line between charges and future commitments, see also our article on provisions for risks and charges.

A co-ownership we support voted a facade renovation spread over two financial years. Three reflexes structured the treatment: isolating the article 14-2 works fund calls in annex 4, separating these sums from the current charges of the budget, and checking the works-fund contribution, set at the floor of 5% of the provisional budget for want of an adopted multi-year plan. The manager's fees for supervising the site, a special service, were billed with 20% VAT, apart from the annual fee. The result: a clear reading for each co-owner and accounts approved without dispute at the meeting.