Reserve and Sinking funds

At K&M, we believe it is good practice to save regularly and annually for known large expenditures – and the unexpected, too!

This is why we advise our property-owning clients to have their own Reserve Fund. In most cases, there is provision for this eventuality in the lease, though it is best to check your unique circumstances.

What is a reserve fund?

Reserve funds are similar to emergency funds. They are typically a form of savings account accessible for expenditures as required.

These funds help you to carry out any financial obligations that are required as a property owner. They can prove invaluable when expenditure is needed throughout the length of your property ownership.

Reserves help to meet some of the cost of non-annual expenditure such as external and internal decorations, renewal, or major repair to parts of the building, and also plant and machinery such as lifts and pumps.

The money is held in the same way as other service charge funds in a trust account. It can only be used to finance projects on your development and is set aside to provide a contribution to the actual costs incurred.

What is a sinking fund?

Sinking funds are also accounts that contain revenue for expenditures, though these are typically for unexpected expenses, large-scale future costs, or debts that need paying. Keeping a sinking fund will help to make any large claims less jarring.

Need to know more?

Speak to a K&M property development manager to discuss your funding requirements.