Reserve and sinking funds

A reserve fund starts with the lease, not a percentage.

Check the power to collect, the long-term works plan and the money already held. A neat annual figure is not evidence that the fund is right for the building.

Long-term work needs a plan, not a round-number guess.

Start here

Connect the fund to the building plan.

Does the lease allow it?

Identify the clause permitting advance contributions, the purposes for which the money may be used and the method for calculating each leaseholder's share.

What work is being funded?

Use surveys, condition information, lifecycle assumptions and an indicative programme. State what is known and what is still an estimate.

What is already held?

Reconcile the opening balance, contributions, interest, expenditure and closing balance. Keep the fund purpose and any sub-funds visible.

Work through it

Turn a balance into a defensible funding story.

01
Lease authority
Quote the clause that permits collection and use. Not every lease allows a reserve or sinking fund.
02
Asset plan
List the relevant building elements, expected intervention, timing, current cost basis and uncertainty. Update the assumptions as evidence improves.
03
Fund record
Show what has been collected, how the money is identified, what has been spent and how the balance relates to the plan.
04
Works process
A reserve balance does not remove a separate Section 20 consultation duty where the statutory requirements are met.

Take the next step in LEASE-iQ

Can this cost be recovered through my lease?

Use this for a charge, budget increase, reserve-fund contribution or disputed service.

Ready to copy

Questions to paste into LEASE-iQ

I have uploaded the signed lease for the relevant flat. Please analyse whether the following cost can be recovered from this leaseholder: [describe the cost, service, work, period and amount].

Please:
1. Identify the landlord, tenant and any management company or other relevant party in this lease.
2. Find every clause and schedule that may authorise, limit or exclude this cost. Quote the short relevant wording and give the clause and page.
3. Explain the cost category, payment date, apportionment method and any budget, account, certification or reserve-fund requirements in the lease.
4. Separate what the lease says from what current law may add, qualify or override.
5. State what the lease cannot prove, including whether the cost was incurred, the work was done, the amount was reasonable or the demand paperwork was correct.
6. Give the strongest reasonable reading against recovery as well as the reading in favour.
7. Finish with one of: supported, partly supported, ambiguous or not found. List the documents and facts I should check next before anyone decides whether the charge is payable.

Keep checking: The lease can show the charging route. It cannot prove the amount, standard of work or demand paperwork on its own.

Open the sources

Link the fund to the lease and the works plan.

This guide explains the current questions for residential service-charge reserve funds in England. It does not set a contribution level or decide whether a particular demand or expenditure is reasonable.

LegislationLandlord and Tenant Act 1987, section 42

Service-charge contributions held on statutory trust

LegislationLandlord and Tenant Act 1985, section 19

Reasonably incurred costs and reasonable advance contributions

Independent guidanceLeasehold Advisory Service

Current independent guide to reserve and sinking funds

Independent guidanceLeasehold Advisory Service

Current independent Section 20 guide for qualifying works

Sources and current-law status checked 18 August 2026. Legislation links are controlling sources. The lease determines whether the fund may be collected and how it may be used.

Connect the fund to the building plan.

Does the lease allow it?

What work is being funded?

What is already held?

Turn a balance into a defensible funding story.

Lease authority

Asset plan

Fund record

Works process

Can this cost be recovered through my lease?

Link the fund to the lease and the works plan.

Related guides and tools.