FOR RESIDENT MANAGEMENT COMPANIES
Reserve funds and Section 20 major works
Helping Resident Directors plan ahead, protect long-term value and manage major projects with confidence.
What is a reserve fund?
A reserve fund is a dedicated fund built up over time through service charge contributions made by homeowners.
The purpose is simple.
To help developments prepare financially for larger repairs, replacements and planned investment works that cannot reasonably be covered through routine annual budgets.
Reserve funds are held separately and are specific to the development they support. Contributions build gradually over time, helping create a financial buffer for future expenditure.
Examples of projects reserve funds may help support include roof repairs, external redecorations, lift replacement programmes, communal infrastructure upgrades and other major maintenance projects that protect the building and support long-term value.
Forward planning plays an important role in effective residential management.
Buildings naturally age.
Components require replacement.
Standards evolve.
Reserve funds help developments prepare for these longer-term responsibilities while reducing the likelihoo
Why reserve funds matter
Well-managed reserve funds help strengthen financial resilience and provide Resident Directors with greater confidence that developments remain prepared for future investment requirements.
Without long term planning, larger projects can create significant financial pressure for homeowners when unexpected costs arise.
Building reserve funds gradually over time often helps developments plan more effectively while supporting stronger financial stability.
Reserve funds also help support proactive maintenance strategies.
Planned investment often protects long term building performance more effectively than waiting for issues to become urgent.
Strong long-term planning can help protect resident experience, support asset value and reduce operational disruption over time.
What happens when major works are needed?
Major works projects vary significantly between developments.
Some projects involve planned investment programmes identified years in advance.
Others arise following inspections, compliance requirements or unexpected repair needs.
Where major works become necessary, reserve funds may contribute towards covering costs.
If available funds do not fully meet project requirements, additional homeowner contributions may sometimes become necessary.
Clear communication becomes particularly important during these situations.
Resident Directors and homeowners need visibility around why works are required, expected costs, delivery timescales and how decisions are being made.
Structured processes help ensure transparency remains central throughout delivery.
Looking for property management support?
Our handy guide explains exactly what good property management looks like and is full of useful information to help you in your role as a Resident Director.
Understanding the Section 20 consultation process
For leasehold properties, major works that result in any leaseholder contributing more than £250 towards qualifying works generally require formal consultation under Section 20 of the Landlord and Tenant Act 1985.
The Section 20 process exists to help ensure leaseholders remain informed and consulted regarding significant expenditure affecting their development.
The framework supports transparency by providing homeowners with information relating to proposed works, anticipated costs and contractor arrangements before projects progress.
Although Section 20 requirements apply specifically to leasehold arrangements, structured consultation processes are often considered good practice more broadly.
How the Section 20 process works
1.
Major works consultation follows a structured approach designed to ensure residents remain informed throughout the process.
2.
The process commonly begins with a Notice of Intention, providing information about proposed works and inviting observations or contractor nominations.
3.
The next stage generally involves sharing estimates received from contractors. This provides visibility around anticipated project costs and creates an opportunity for homeowners to review proposals and provide feedback.
4.
Where appropriate, additional communication may explain contractor selection adecisions and provide information regarding anticipated delivery timescales.
5.
As works progress, contractors coordinate operational arrangements and access requirements to help minimise disruption where possible.
6.
Once works complete, final review processes help ensure any outstanding issues are identified and addressed before project completion.
Clear communication throughout every stage helps strengthen confidence and supports better outcomes for residents and Resident Directors alike.
Frequently asked questions
A reserve fund is a dedicated fund built through service charge contributions that helps support larger repairs, planned investment works and long-term maintenance requirements.
Reserve funds are generally intended to support future expenditure relating to the development and are used according to the terms governing the property and relevant management arrangements.
Where reserve balances cannot fully meet project requirements, additional homeowner contributions may sometimes become necessary.
Section 20 refers to the formal consultation process under the Landlord and Tenant Act 1985 relating to qualifying major works for leasehold properties.
The process generally applies where qualifying works result in any leaseholder contributing more than £250 towards project costs.
Yes. The consultation framework exists to provide visibility and allow homeowners opportunities to review information and provide observations.
Reserve funds support financial resilience and help developments prepare more effectively for future maintenance and investment requirements.
Long term planning, effective reserve funding strategies and structured maintenance planning all help developments prepare for future investment needs.
Supporting Resident Directors through major works projects
Managing larger investment projects requires financial planning, communication and structured operational delivery.
Whether supporting reserve planning, contractor oversight or major works delivery, strong management frameworks help developments remain prepared, informed and positioned for long term success.
Get expert guidance from the UK’s leading property manager
Complete the form to download our handy property management guide, packed with expert advice to support you and your development. Don’t forget to request your complimentary development health check.
Related content
Property management support for Resident Management Companies
Switching managing agents
What is the role of an RMC Director?
