Building Management · 16-07-2026

Sinking Fund vs Operating Fund: How Much Should Your Building Save?

How much should an apartment building save? A defensible answer for most Cypriot buildings: list the major components that will need replacing over the next fifteen years, price them, and divide by the months remaining; the result is your monthly reserve contribution, and it typically lands somewhere between 10% and 25% on top of the operating budget. A building saving nothing is not running cheaply. It is running a deferred special levy, and the owners just have not been told the amount yet. This guide explains the two funds, shows the calculation, and covers where to keep the money and how to defend it at the general meeting.

Two funds, two different jobs

The operating fund pays for the predictable rhythm of the building: cleaning, common electricity, lift servicing, gardening, insurance, management. Money flows in monthly and out monthly, and in a healthy building the balance hovers around one to two months of expenses as a buffer.

The sinking fund (or reserve fund) exists for the big, rare, certain items: the lift that will need replacing, the roof membrane that will fail, the facade that will need repainting. These are not risks; they are schedules. Every component in the building is somewhere along its lifespan, and the only question is whether the money will be there when it arrives at the end.

Mixing the two in one account is the classic mistake. The reserve quietly leaks into everyday spending, and the building discovers at the worst moment that the roof money went on five years of small comforts. Separate line in the accounts at minimum; separate bank account ideally.

The component method: a worked example

Take a fifteen-unit building, twenty years old, with a lift. The committee lists the major items, asks contractors for rough replacement costs, and estimates remaining life honestly:

Spread each cost over its remaining months and add them up: €250 plus €167 plus €188 plus €67 comes to roughly €670 per month across the building, or about €45 per unit. That number will feel large the first time a committee calculates it. The alternative is the same money collected as a €2,000-per-unit special levy the month the lift dies, from owners who had no warning, some of whom will simply not pay, which is how buildings end up with arrears problems and a lift out of service for a year.

The estimates do not need to be perfect. A reserve built on rough numbers reviewed every two years beats a precise number calculated never.

Where the money lives, and who can touch it

A reserve is only as trustworthy as its custody. Keep it in the building's own account, require two signatures or committee resolution for withdrawals, report the balance at every general meeting, and record every movement in and out. Owners contribute far more willingly to a fund they can see than to one they must take on faith. Transparency here is not politeness; it is the collection mechanism.

The law is coming to the same conclusion

The pending Cyprus bill on jointly-owned buildings provides for a mandatory sinking fund for every building, precisely because voluntary saving has failed at scale: too many buildings run empty, insure nothing and defer everything. We covered the bill in detail here; the practical point is that buildings which start now, at their own pace, will meet the law as a formality, while the rest will meet it as a shock.

Surviving the general meeting

Three objections come up every time, and each has a short answer. "I won't live here in ten years": a funded reserve is priced into what your apartment sells for, and buyers' lawyers increasingly ask for the fund balance. "We'll deal with it when it happens": that is the special levy plan, and it means the money arrives late, angrily, and incompletely. "The amount is too high": then vote a lower one and start. Half the right reserve is enormously better than none, and the number can grow as trust does.

What makes all of this manageable is treating the reserve as ordinary bookkeeping rather than a special project: contributions tracked per unit, balance visible, every withdrawal documented against a real invoice. That is the record-keeping Folio handles for buildings as a matter of course, so that when an owner or a buyer's lawyer asks what the fund holds and where it went, the answer is a report, not a reconstruction.