What Does the Lease Say?

Before establishing reserves and contingencies, property managers must ensure that the lease agreements governing the property allow for such financial provisions. Lease terms may specify the permissible use of reserve funds, the process for replenishing reserves, and any limitations on contingency expenditures. Property managers should review lease agreements carefully to understand their obligations and rights regarding reserves and contingencies.

If the lease allows for a reserve then life will be much easier (in theory) to adequately plan and ease the financial burden on leaseholders. If the lease doesn’t allow for a collection of a reserve then this shouldn’t put you off planning properly. You duty to the building remains but instead of collecting the money into a reserve, you should provide leaseholders with the relevant information as the onus will be on them to pay in the years works will be required. Communication with your customers is key!