Reserve funds are unpopular in the way that pensions are unpopular. Paying now for something that will not happen for a decade feels like money leaving the building for no visible return.
The argument for them is not really about prudence. It is about arithmetic.
A roof lasts perhaps thirty years. Lifts need replacing. External decoration comes round every few years whether anyone budgeted for it or not. None of this is optional and none of it is a surprise.
So the question is never whether leaseholders will pay. It is whether they pay a little each year, or a great deal in one go.
The roof fails. The work is quoted at £120,000. In a block of twenty flats that is £6,000 each, demanded in one or two instalments, and it arrives as a Section 20 consultation most people did not see coming.
Several things then follow, all of them bad.
Some leaseholders cannot pay. Arrears build, the work is delayed, and the building deteriorates further while everyone argues. Recovery action against neighbours is expensive and corrosive.
Anyone trying to sell is stuck. A pending major works bill has to be disclosed, and buyers either walk away or discount by more than the bill.
And emergency work costs more. Scaffolding goes up at short notice, you take whoever is available, and the leak has already damaged the flats below.
The same roof, funded at perhaps £400 a flat per year over fifteen years, is unremarkable. It appears as a line in the budget, nobody is caught out, and the work happens when it should rather than when it must.
Sellers are not held up. Buyers' solicitors see a funded reserve and treat it as a sign of a well-run building, because it is.
Three things separate a real reserve fund from a number someone guessed.
It is backed by a plan. A condition survey setting out what needs replacing, roughly when, and at roughly what cost. Without that, the contribution is arbitrary and impossible to defend when challenged.
It is held properly. Reserve contributions are service charge money and sit on statutory trust. They should be in a designated client account, visible in the accounts, and never used to prop up day-to-day spending.
It is reviewed. Building costs move. A plan written in 2015 and never revisited is now wrong, and probably wrong in the expensive direction.
Check the lease. Not every lease permits a reserve fund, and a few restrict what it can be spent on. Where the lease is silent or restrictive, there are ways through it, but they need advice rather than assumption.
If your building has no reserve and no plan, that is worth fixing before something fails rather than after. Send us your accounts and we will tell you what we think you are exposed to.
General guidance, not legal or financial advice. Your lease governs what is actually permitted.
Send us your last service charge budget. We'll tell you honestly whether you're getting value — no obligation either way.