Every block of flats will need a new roof, a lift replacement or new windows one day. The only open questions are who pays and when. A reserve fund is the usual way to prepare: a little money put aside each year, so the bill does not arrive all at once.
Big repairs should not come as a surprise
Roofs, lifts, windows, boilers and fire safety equipment all wear out. We cannot say the exact day, but we know roughly when, so a large bill should never be a shock. Every year the work is put off, it gets more expensive and the bill gets bigger.
What a reserve fund is
A reserve fund, sometimes called a sinking fund, is money collected through the service charge a little at a time and kept aside for large, predictable costs such as a new roof, a lift replacement or external decoration. It is not there for everyday running costs.
The idea is fairness. Without one, the people who happen to own a flat in the year the work is done pay for decades of wear. With one, the cost is spread across everyone who lives in the building over the years. The RICS code for managing agents in England treats holding reserve funds as good practice wherever the lease allows.
Your lease decides
Some leases require the landlord to build a fund. Some allow money to be kept for future costs without using the words reserve fund. Some say nothing. If the lease obliges the landlord to create a fund, that is a duty, not a choice. If it is silent, the landlord can explain the future costs to leaseholders and, with enough support, ask the tribunal to vary the leases.
A plan decides how much
There is no magic percentage. The RICS code expects every building to have a costed long-term maintenance plan that reflects its age and condition, with reserve payments worked out from that plan. Leaseholders can ask to see the plan, and a buyer can ask for it when a flat is sold.
The money is held on trust, in a separate client money account, apart from the managing agent’s own funds. Reserves should not be used to prop up everyday running costs, routine repairs or other people’s unpaid charges, apart from rare exceptional cases.
What other countries do
England has no general legal requirement to build a reserve. Some other places do: the Netherlands, Ontario in Canada and New South Wales in Australia all require owners’ bodies to plan ahead and put money aside for major repairs. Our article on leasehold reform and building repairs gives the details.
What should happen next
The government’s 2025 consultation floated making reserve funds compulsory for new leases and requiring asset management plans. That is a proposal, not law. In July 2026 the government said it would respond to the reserve fund and major works proposals separately, without giving a date. We would like the next stage of leasehold reform to put reserve funds and long-term maintenance planning at the centre.
Reserve funds and Section 20
Having money in the fund does not remove the duty to consult. If work will cost any one leaseholder more than £250, the landlord must still follow the Section 20 process, even when the money is already saved. Our guide to Section 20 notices explains the steps.
How we help
Our service charge accounting includes budgeting and reserve fund planning for the buildings we manage. If you would like to see where your building stands, get in touch.
General information, not legal advice. Sources: RICS, Service Charge Residential Management Code, 4th edition (2026); UK Government, Strengthening leaseholder protections over fees, charges and services: consultation (2025) and government response (updated 15 July 2026); Rijksoverheid (Dutch government), VvE: money for major maintenance; Condominium Authority of Ontario, What is a reserve fund; NSW Government, Strata levies, finances and insurance.