Reserve Fund Studies Simplified
What is a Reserve Fund Study?
Reserve funding is the capital specifically allocated to cover expenses for major repairs and maintenance of buildings. Having financial reserves helps avoid the interruption of cash flow for building and property owners, as well as any inconveniences and service interruptions for the users and occupants of the building or property.
In the real estate scenario of Dubai, UAE, the reserve funds study is prepared to assist community managers in determining the appropriate amount for the annual contribution to the contingency fund which estimates the repair or replacement cost for, and the expected life of, each of the items covered within the common areas, such as:
- Exterior of the building (cladding, epoxy paint, render)
- Windows and frames
- HVAC systems
- Plant and machinery
- Common electrical systems
Land Sterling has professional and highly qualified building surveyors in Dubai who deliver accurate, comprehensive, and meticulous reserve funding studies to property owners and owners associations for a variety of reasons, including:
- Development of a stable and feasible funding plan that meets the needs of both investors and future owners
- Identification of multi-year contributions necessary to cover future repair/replacement costs
- Provision of information on the service life and forecasted replacement costs of assets
- RERA’s annual service charges approval for freehold buildings
Our study will include the following:
- Cash flow balance sheet
- Expenditure and contributions
- Projected sinking fund costs up to a period of 20 Years
- Proposed contribution
Who needs this study in Dubai?
The Real Estate Regulatory Authority of Dubai (RERA) has made the study mandatory in securing the approval for service charge budgets. Individuals and entities that need to have the study conducted include the following:
- Developers / Property Management companies
- Building owners
- Owners’ associations
Questions: When should an owner’s association or community management request to have the fund study? Is it too early to request such a study for newly constructed building recently handed over to the owners by the developer?