Reserve fund

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Starlane
    replied
    Thank you foss333, I have been digging through the lease and any documents...the freeholder is asking for a reserve contribution....I will check the RICS guide.

    Leave a comment:


  • fos333
    replied
    Originally posted by Starlane View Post
    I have been reading through my lease to try and find any wording such as "reserve" in the lease so please enlighten me...
    Hi,

    Your post #15 states the lease provision, where it uses the wording "sinking fund", please see the glossary in the RICS Code of Practice.

    https://www.rics.org/globalassets/ri...ition-rics.pdf

    I believe your issue is that what is being asked for as a contribution now to the reserve fund is an unreasonable amount, given that it has not been demanded in the past.

    Leave a comment:


  • Starlane
    replied
    I have been reading through my lease to try and find any wording such as "reserve" in the lease so please enlighten me...Can the freeholder ask for contributions to a reserve when it is not mentioned in the lease? Can the freeholder ask for a reserve contribution? I have written to the landlord asking for clarification and I am being ignored?

    Leave a comment:


  • Starlane
    replied
    Many thanks to you all for your wisdom and help!

    Leave a comment:


  • Macromia
    replied
    Originally posted by Starlane View Post
    ....To set aside ( which setting aside shall for the purpose of the Sixth Schedule be deemed an item of expenditure incurred by the Lessor) such sums of money as the Lessors reasonably require to incur in replacing maintaining renewing and decorating those items which the lessor hereby covenants to replace maintain renew or decorate ( such sums set aside to be a sinking fund)
    That seems to allow the freeholder to collect a 'sinking fund' that can be used for any maintenance work that the lease makes them responsible for (but not for things like managing agents fees, insurance or legal fees).

    Best practice would be for them to be open about the expected future expenditure that they are asking for sinking fund contributions for - but, as eagle2 has said, they are under no legal obligation to do so (unless your lease requires this).

    Leave a comment:


  • Starlane
    replied
    SO the lease provision states ....To set aside ( which setting aside shall for the purpose of the Sixth Schedule be deemed an item of expenditure incurred by the Lessor) such sums of money as the Lessors reasonably require to incur in replacing maintaining renewing and decorating those items which the lessor hereby covenants to replace maintain renew or decorate ( such sums set aside to be a sinking fund)

    Leave a comment:


  • eagle2
    replied
    It is important as well to check if the lease requires the reserve/sinking fund to be held in a separate bank client account. If there is only a general bank client account, it is often raided for other purposes.

    Leave a comment:


  • Macromia
    replied
    Originally posted by Starlane View Post
    Thank you Macromia its a grey area then in some leases?
    It will depend on the what the lease says about a reserve fund, and whether or not it restricts the way that the fund is allowed to be used.

    Leave a comment:


  • Starlane
    replied
    Thank you Macromia its a grey area then in some leases?

    Leave a comment:


  • Macromia
    replied
    What a reserve fund can be used for may be restricted by the terms in the lease.

    Best practice will usually be to make it clear to leaseholders what the funds are for, and then to only use them for that purpose, but leases will sometimes (perhaps often) be written in a way that allows the freeholder to use reserves pretty much whenever they like.

    Leave a comment:


  • Starlane
    replied
    So from my understanding the Reserve Fund is a fund created to ensure that sufficient money is available to pay for large items of expenditure in the scheme, rather than towards day-to-day, regular repairs, maintenance or management. Sometimes also called contingency or sinking funds or long term maintenance funds, the funds can only be used for the purpose for which they have been collected. Such funds are raised either by contributions from service charges where the leases allow this and sometimes by the operation of a formula in leases, which provides for a fixed amount to be paid on any sale of a relevant dwelling. These funds are subject to being held in trust in accordance with section 42 of the Landlord and Tenant Act 1987.

    Leave a comment:


  • Starlane
    replied
    Thanks Eagle 2 I get that however the landlord is not saying what the monies are for it simply states in the budget a sum of £1400 required in two weeks time!!!!!!!

    Leave a comment:


  • eagle2
    replied
    The intention of a reserve fund is to spread the costs of "use and occupation" as evenly as possible throughout the life of the lease to prevent penalising leaseholders who happen to be in occupation at a particular moment when major expenditure occurs. RICS code 7.5.

    The problem is that landlords do misuse the funds, they raid funds to finance service charge arrears and pay for expenditure which was not included within the budget. In many cases, there is no evidence of any thought process behind the sums demanded, it is more a case of think of a number which can be collected. It should be calculated properly and the leaseholders should be informed eg estimated cost of replacing a lift spread over 25 years, estimated redecoration cost spread over 5 years etc.

    You can apply to the FTT if you consider that the annual charge is unreasonable but it is rare for a Tribunal to find that the charge is unreasonable, even when the amount varies substantially from year to year. It usually states that it is reasonable for a landlord to provide for contingencies and allows any charge to be made which goes against the principle of the RICS code.

    Leave a comment:


  • Starlane
    replied
    Originally posted by Macromia View Post
    That will depend on how the reserve fund is intended to be used.
    If a reserve fund is intended to spread the cost of the more expensive maintenance jobs evenly between all leaseholders, it may be reasonable to collect payments over a longer period. Flat roofs, for example, cost a lot to replace and are likely to last about 20 years. It can therefore be reasonable to collect payments for work that isn't expected to be needed for a longer period (although personally I would prefer not to pay into any reserve fund because of the risks of the money being stolen, or used inappropriately).
    Yes Macromia that is my worry also, how are these funds protected....can the landlord just send a bill to me with a demand for an advance for monies without saying what the monies are for, no explanation whatsoever and I thoughts under section 19(2) L&T act that any advance monies demanded need to be reasonable and no consultation offered?

    Leave a comment:


  • ram
    replied
    As far as I know, if there is - lets say £ 10,000 in a reserve fund ( for specific items ) for 5 flats and if that reserve fund is not expected to be spent in the next 4 to 6 or more years,( even as short as 1 yrear ) then you don't get that money back when you sell [ you don't get your £ 2000 back ].
    But you may be asked to reduce the sale price to cover the forthcoming expense, then all you do is add £ 2000 to the sale price before hand ( flats and houses are vastly overprices anyway, so adding £ 2000 is a drop in the ocean.)

    In my dealings, leasholders, who are normally directors ( less than 6 flats ) always refuse to have a reserve fund if lease allows, because it's their money, and why should the freeholder have it when the work wont be done for year or more, so the bank balance is always zero at the end of the year.

    I always sugest that the leaseholders personally input funds into their account so the balance always has a minimum, carried over every year , of between £ 1000 to 2000 ( in total, not each ) for emergency repairs, stating that £ 1000 for unknown emergency work ( drains blocked - basement flat becomes Venice )
    that only allows for 2 men - 9 hours each ( one day of work ) to repair anything that could not be forseen.





    Leave a comment:

Latest Activity

Collapse

  • Who can become a director of a RMC?
    by David Mc
    Hi, Could anyone advise who can actually become a director of a RMC. We are a block of 30 flats, each flat has one share in the RMC. We employ a managing agent. The RMC holds the freehold to the property. The MA is the company secretary.


    There are currently 2 directors, although...
    23-07-2021, 09:58 AM
  • Reply to Who can become a director of a RMC?
    by fos333
    Hi,

    If no modification is shown to regulation 88 requiring a director to be a member, then anyone that meets the requirements of regulation 88 can be nominated and consent to act to be a director.

    Therefore 3b in the preliminary section should have no bearing, others may offer...
    25-07-2021, 11:40 AM
  • Reply to Leaseholder placing table and chairs on freehold land
    by scot22
    More knowledgeable people than me have already posted.
    My view is if it is not permitted in the lease then not allowed to have table and chairs. If only access permitted then only access accepted. You can't cherry pick which parts of the lease you wish to obey.
    25-07-2021, 11:35 AM
  • Leaseholder placing table and chairs on freehold land
    by Joubert
    I am a director of a freehold company which comprises six leasehold flats in a converted building.

    The leaseholder of the lower ground flat has taken to placing a small table and two chairs outside her front door for use when the weather is good. They items are not causing any obstruction....
    24-07-2021, 17:06 PM
  • Reply to Leaseholder placing table and chairs on freehold land
    by ram
    It is not normal to have table and chairs outside a front door.

    I would have thought at a minimum. you should be stating that they only have the right to pass and re-pass over the common ground in front of the house, they should not make table and chairs a permanent occurance, I.E. to take
    ...
    25-07-2021, 10:07 AM
  • Reply to Leaseholder placing table and chairs on freehold land
    by nukecad
    TBH it sounds like the 'fellow director' doesn't like the noise being made, and so instead of having a word with the neighbour is going over the top and looking for a sledgehammer to crack a very small nut by trying to get the 'force' of the freehold company on his side.

    It's a simple neighbour...
    25-07-2021, 09:39 AM
  • Reply to Leaseholder placing table and chairs on freehold land
    by Lawcruncher
    Not enough to amount to adverse possession and in any event you cannot be in adverse possession against your landlord: However, after a period any land occupied may be treated as part of the land leased. It has to be doubted though that there is sufficient possession for that. Make a diary note to review...
    25-07-2021, 09:00 AM
  • Reply to Who can become a director of a RMC?
    by David Mc
    Hi Foss

    Our A of A under the Directors heading has 6 items listed 11 to 16

    11a deals with clause 75 Table A not applying to the company.
    11b number of directors, minimum2
    12 deals with clause 84 Table A
    13 Clause 87 does not apply
    15 Clause 88 unsound...
    25-07-2021, 08:29 AM
  • Reply to Changing Lease Clause to Permit Letting
    by ram
    [/FONT][/SIZE]
    • 1) Your possition - and mine, is NOT permitting letting will enhance the properties.
    • 2) Bad tenants DO adversely affect property values - normally.
    • 3) Your lease is not defective, so no need to change. And Judges HAVE gone along with the freeholder keeping the "no letting"
    ...
    24-07-2021, 23:42 PM
  • Changing Lease Clause to Permit Letting
    by witsend55
    Not sure if this is the best section to post in, so please move if it is considered best place elsewhere.

    I have had ownership of a flat, one of just four in a converted house, for many years. There is a simple flat management structure; the four owners are directors and have one share...
    24-07-2021, 11:53 AM
Working...
X