Your Block’s Sinking Fund: How Much Is Really Available?

You pay your service charges. You contribute towards future repairs. But do you know how much money your block actually has available—and what has already been committed?

For leaseholders and Right to Manage directors, this should be a straightforward question. The answer needs more than a bank balance.

Understanding your block’s finances means knowing what has been collected, what has been spent, what remains unpaid and which funds are reserved for specific purposes.

What is a sinking fund?

A sinking fund, often called a reserve fund, builds up money towards larger or less frequent expenditure, such as roof replacement, external decoration or replacement communal equipment.

It helps spread the cost over time, although it cannot guarantee that additional contributions will never be needed. The lease determines whether contributions can be collected and the purposes for which they can be used.

A contribution towards future repairs should be clearly distinguished from money collected for everyday running costs.

Cleaning, gardening, communal electricity, insurance and management fees should be identifiable within the accounts. Leaseholders should be able to understand how their payments are allocated.

The bank balance does not tell the whole story

Imagine a block has £10,000 in its bank account.

That sounds reassuring. However, suppose the account includes:

This is an illustrative example, not a client account.

The account contains £10,000, but only £2,500 is uncommitted under these assumptions. Whether that money can be used for a particular purpose still depends on the lease and the relevant fund arrangements.

Cash held, reserve funds and money available for new expenditure are different figures.

Money owed is not money in the bank

Another common source of confusion is the difference between contributions demanded and payments received.

If a block has requested £12,000 but collected £10,500, the missing £1,500 remains a debt to be recovered. It cannot be treated as available cash.

Similarly, a contractor’s invoice shows that a charge has been raised. It does not, by itself, prove that payment has left the account.

Clear reporting should distinguish:

• Contributions requested and payments received.

• Supplier invoices received and payments made.

• Unpaid bills and approved commitments.

• Funds reserved for future work.

Six questions to ask your block manager

Directors and leaseholders should ask for a clear explanation of:

1. What was the opening balance?
   Was this money handed over by a previous manager, or the first contributions received? Those first payments must not be counted twice.

2. How much has actually been collected?
   Separate receipts from outstanding contributions.

3. What has been spent?
   Show the supplier, work undertaken, invoice amount and payment date.

4. Which fund paid for each item?
   Distinguish ordinary services, reserve expenditure, insurance and separately funded works.

5. What remains unpaid or committed?
   Include outstanding contractor bills and approved work.

6. What is genuinely available now?
   Reconcile the accounts to the bank and explain any restrictions on the funds.

A healthy reserve needs a maintenance plan

A balance can look substantial until it is compared with the work the building will need.

The useful question is: “Will this fund meet the foreseeable needs of our building?”

A maintenance plan should identify likely work, estimated costs and expected timing. Contributions can then be considered against those needs and the lease provisions.

Without that planning, a low contribution today may leave leaseholders facing a much larger bill later.

Clear accounts support better decisions

At MyEstate, we believe directors and leaseholders should be able to follow their block’s finances without having to decode unexplained figures.

Our approach is to make the charges, contractor costs, payments and outstanding actions understandable—and to identify any gaps that still need checking.

If a figure has not been reconciled, it should be explained clearly rather than presented as confirmed.

If you are an RTM director or leaseholder looking for clearer block management, contact Richard at MyEstate Luton to discuss your building and its needs.

Richard Gedall MNAEA | AARLA