Reserve Funds – Best Practice for Commercial Landlords
An article from Shoosmiths points out that many leases provide for a landlord to create a reserve fund of service charge contributions to cover recurring costs such as maintenance, cleaning and redecoration.
These funds are distinct from a sinking fund which is designed for costly rainy day items such as replacing lifts or air-conditioning plant.
A reserve fund helps to balance the financial burden on the tenant, as it avoids fluctuations to their service charge contributions, and gives greater certainty to the landlord that funds will be available in advance to cover the day to day cost of providing services.
The recent case of Caribax Ltd v Hinde House Management Company Ltd reminded us that residential landlords are obliged to hold reserve funds on trust for their tenants and must give effect to the service charge terms of the lease.
But what is the position for a commercial landlord?
Read the full article here