Apartment Reserve Fund: How Much to Save and How to Protect It

The lift needs a major overhaul, the quote is several lakh taka, and the association has almost nothing in the bank. So the committee asks every owner for a large one-off payment, and half of them refuse. An apartment reserve fund exists to stop exactly this situation — by saving a little every month for costs you already know are coming.

What an apartment reserve fund is for

Your monthly service charge covers running costs: guards, cleaners, the common electricity bill, generator fuel, small repairs. A reserve fund (sometimes called a sinking fund) is different. It is money set aside for large, predictable expenses that come every few years, such as:

• Lift overhaul or replacement of major parts
• Generator overhaul or replacement
• Water pump replacement
• Roof waterproofing
• Exterior and stairwell painting
• Replacing CCTV, intercom or fire equipment

None of these are surprises. You just don't know the exact month. Saving for them steadily is fairer than charging whoever happens to own a flat in the year the bill arrives.

Step 1: List the big items and their life

Sit down with the committee and anyone who understands building maintenance. For each major item, write down a rough replacement or overhaul cost (get current quotes, don't guess) and roughly how many years until it is due.

Here is an example layout — the numbers are purely illustrative:

Step 2: Turn it into a monthly contribution

Say an association of 25 flats needs to save ৳3,00,000 a year. That is ৳25,000 a month, or ৳1,000 per flat per month if split equally.

If your building charges by flat size, divide by total square footage instead. With 30,000 sq ft in total, ৳25,000 a month works out to roughly ৳0.83 per sq ft — about ৳1,000 for a 1,200 sq ft flat and ৳1,500 for an 1,800 sq ft flat.

Add a small margin for price increases. Costs rarely go down.

Tip: Show the reserve fund as a separate line on every bill. Owners are far more willing to pay "Reserve fund ৳1,000" than an unexplained jump in the service charge.

Step 3: Keep the money separate

The single most important rule: do not mix reserve money with day-to-day cash. Once it sits in the same account, it gets used for this month's generator fuel and slowly disappears.

Practical safeguards:

1. Open a separate bank account in the association's name for the reserve fund.
2. Require two signatories from the committee for any withdrawal.
3. Consider keeping part of it in a fixed deposit with your bank, if your constitution allows.
4. Allow spending only for the purposes listed in your by-laws, with a committee or general meeting resolution.
5. Report the reserve balance to all owners at least every quarter.

Your constitution may already say how reserve money can be used and who approves it. If it doesn't, add a clause at the next general meeting, and seek legal advice if you are unsure.

Step 4: Handle the awkward cases

New buildings. If the developer collected an advance reserve amount from buyers, make sure it is transferred to the association with a full account when the building is handed over.

Selling owners. Reserve contributions generally stay with the building when a flat is sold; they are not refunded to the seller. Write this down so nobody is surprised.

Emergencies. If you must borrow from the reserve for an urgent non-reserve expense, record it as a loan and agree a repayment plan in writing.

Owners in arrears. Track reserve dues the same way as service charge dues. Letting them slide defeats the purpose.

Step 5: Review every year

Once a year, update the list: has anything been replaced, have quotes gone up, did something fail earlier than expected? Adjust the monthly contribution at the annual general meeting and explain the reason in plain numbers.

If your organisation is a cooperative society rather than an apartment association, Somity Keeper is built for savings, loans and instalment collection — and Somity Keeper Lite is the lightweight option for small groups.

How Society Keeper helps

Society Keeper lets you set up the reserve fund as its own charge type alongside the service charge, so it is billed automatically each month and shows separately on bills and receipts. With double-entry accounting, you can keep the reserve in its own bank account in the chart of accounts, and the cash and bank book and balance sheet show the balance at any time. Payments from the reserve need a voucher and maker-checker approval, which adds a second pair of eyes. More guides are on our blog.