In short
Start from a 10-year planned maintenance plan listing each major element, when it will need replacing and roughly what it will cost. Add up what will be needed each year and set annual contributions so the fund never runs dry. Review it every year.
What a reserve fund is
A reserve fund (also called a sinking fund) is money collected through the service charge and set aside for large future costs, such as roof renewal, external redecoration, lift replacement or window replacement. It spreads the cost over the years leading up to the work, and over the leaseholders who live in the building during that time.
What the lease must allow
A reserve fund can only be collected if the lease allows it. Most modern leases do; some older leases do not, or only allow it for particular items. We check before recommending one.
How to size it
- List the major elementsRoof, rainwater goods, external walls and decorations, windows, lifts, door entry, communal heating, fire alarm, drainage and paving.
- Estimate remaining life and costFrom a condition survey and current prices, with an allowance for fees and VAT.
- Build a 10-year cash-flowPlot when each cost will fall due.
- Set the annual contributionSo that the fund balance stays positive in every year, with a sensible buffer.
- Review annuallyUpdate for actual condition, spend and prices.
A worked example
Take an illustrative 12-flat block expecting external redecoration in year 3 (about £30,000), roof renewal in year 7 (about £90,000) and door entry replacement in year 9 (about £12,000). That is around £132,000 over nine years. Starting from a £20,000 balance, contributions of £15,000 a year, or £1,250 per flat on equal shares, would cover all three without a special demand: the balance dips to about £5,000 after the roof in year 7 and recovers afterwards. Real figures depend on the building and the lease apportionments; the method is what matters.
How it must be held
Reserve funds are held on trust for the leaseholders and must be kept in a client or trust account, not mixed with the agent's own money. At EKIN, client money is held in a client account, and EKIN is a member of the UKALA Client Money Protection scheme (membership 24113), subject to the scheme's terms.
Last reviewed 2026-09-23 against the sources listed. This page is general information about England and is not legal advice; the lease for your building always comes first.