Reserve Funds
What is a Reserve Fund?
A reserve fund collects money from residents as part of their service charge to cover future expenses.
All occupiers, regardless of when they moved into the property, contribute towards expected and unexpected expenses not usually covered by the day-to-day service charge. As a consequence this contribution builds up in a reserve fund over time.
Think of your service charges as day-to-day expenses and the reserve fund as savings to be used as needed.
What are Reserve Fund monies used for?
We usually use reserve fund monies to cover planned expenditures, such as cyclical maintenance (e.g., external or internal redecorations, or replacement of communal carpet).
However, sometimes unexpected things happen. In these instances, we use reserve fund monies for unplanned expenditures, such as roof or lift repairs, fire alarm or door entry systems, or anything the normal service charge cannot cover.
If the amount taken from the reserve fund exceeds £250 per resident, legislation requires us, as the property managers, to enter the Section 20 process with residents.
Most importantly, this legal process requires us to consult with residents. As a result residents have a clear view of expenditure and have input into choice of contractors.
Where do we hold Reserve Fund monies?
We hold the reserve fund monies ‘in trust’ in a dedicated scheme bank account.
Only residents living at the property benefit from the fund and any associated interest accrued.
What are the Benefits of a Reserve Fund?
A reserve fund protects residents from potentially costly bills and spreads the cost of non-annual expenditures over several years.
A healthy reserve fund can help maintain the value of your property and make sales negotiations faster.
With over 30 years of residential, commercial, and retirement property management experience, we have seen many residents benefit from a reserve fund.
