It is common sense and good practice to save on an annual basis for known large expenditure and the unexpected. That is why we think it is sensible for a development to have its own Reserve Fund. In most cases there is a provison in the lease too.
Reserves are collected to help meet some of the cost of non annual expenditure such as external and internal decorations, renewal or major repair to parts of the building and also plant and machinery such as lifts and pumps.
The money is held in the same way as other service charge funds in a trust account with any interest being for the benefit of the reserve fund. It can only be used to finance projects on your development and is set aside to provide a contribution to the actual costs incurred.