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Condominium reserve fund, what is it?

9 NOVEMBER 2023
Onderwerpen
Fundos de Investimento Fundos Imobiliários Gestão Condominios Despesas
Find out what it is, how it should be invested, who manages it and how to calculate the amount you contribute to this fund.
Condominium reserve fund, what is it?
Source: Freepik
Author: Redaction

condominium's reserve fund, as the name suggests, is a fund to cover the building's maintenance costs that is mandatory by law, according to Article 4 of Decree-Law 268/94 of 25 October. However, if you pay condominium fees, this amount should already be included, so there's no need to pay extra for the reserve fund.

The condominium reserve fund must be paid into by all the owners, in order to cover any maintenance work on the building or in the event of the need to carry out more expensive work. 

Who manages the fund?

The owners' meeting and the condominium manager are responsible for managing the reserve fund. In turn, it must be deposited in a bank with the name of the condominium, in accordance with the law.

In order to move this fund, the condominium owners' meeting must approve its use and the amount to be spent. Once approved, only the condominium manager can carry out this transaction.

What kind of interventions are covered by the fund?

The reserve fund can be used to cover any building maintenance costs, such as painting, lift maintenance and any work that is not covered by insurance, such as fixing a door.

The following are not included in this fund:
    - Works on autonomous fractions;
    - Payment of water, electricity or cleaning bills.

The money is only intended for work that benefits the whole building and its owners, and is a community fund.

How do I calculate the amount to be paid?

The calculation of the fund is based on the annual budget for condominium expenses. According to the law, the obligatory minimum limit is 10 per cent of the annual budget divided by the permilage of the autonomous fraction, but it can be higher if the meeting agrees.

In order to be fair, condominium management companies advocate dividing the total maintenance costs equally over the years. Thus, if a condominium owner sells his flat, he will pay an amount proportional to the years he has used it.

Example calculation:

Annual budget: 5000€
Common Reserve Fund: 10% x 5000 = 500€
Condominium owner's Common Reserve Fund: 500 x permillage

If any owner refuses to contribute to the condominium's reserve fund, it is essential to explain that this is a compulsory fund that reverts to all the inhabitants of the building. If there is still a refusal on the part of the condominium owner, legal action can always be taken, with the intermediation of a lawyer, by presenting a notarised photocopy of the minutes of the meeting at which the contributions were decided.

Onderwerpen
Fundos de Investimento Fundos Imobiliários Gestão Condominios Despesas
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