Almost every building has a reserve fund. Few owners know exactly how much is in it, what it may be used for, or whether it will cover what the building needs over the next few years. It's one of the first things we look at when taking over a property.
What it is and why it's mandatory
The reserve fund is the building's collective savings, set aside to pay for conservation works. It isn't optional: Portuguese law requires each owner to contribute at least 10% of their annual fee (Decreto-Lei 268/94). The money belongs to the condominium, not to the manager, and must sit in an account held in the condominium's name.
In practice, if your annual fee is 600 euros, at least 60 of those go to the reserve fund — and should not be spent on day-to-day costs.
What it can pay for
The fund exists for conservation of the common parts: roof, façade, plumbing, electrical installation, lift, waterproofing. That is what prevents a surprise two-thousand-euro levy per unit when the roof starts leaking.
It should not cover running costs — cleaning, common-area electricity, insurance, management fees. Those come out of the annual budget. A building that dips into the fund to plug cash-flow gaps is simply postponing a bigger problem.
Is the 10% minimum enough?
In many buildings, no. The legal minimum was designed as a floor, not a target. If the property is over 30 years old and has a lift, a garage and a flat roof, 10% a year rarely keeps pace with the real cost of the work ahead.
A simple test: list the major works foreseeable over the next ten years — façade painting, pump replacement, lift modernisation, roof waterproofing — and divide the estimated cost by ten. Compare that with what the fund takes in each year. The gap is the risk the building is carrying.
The assembly can vote a contribution above the minimum. It is almost always cheaper than financing the same work through an emergency levy.
Questions to ask at the next assembly
- What is the current balance, and which account is it held in?
- How much came in and went out last year, and for which works?
- What interventions are planned for the next five years, and at what estimated cost?
- Does the current contribution cover that plan, or will a levy be needed?
If the manager cannot answer those four questions with documents on the table, the reserve fund is no longer the main problem.
How we handle it
At Chave 100 Demora the reserve fund is held in a separate account and reported in every set of accounts, with a full history of movements. Because we have our own construction team, we can estimate the real cost of future works without relying on ad-hoc quotes — and bring the assembly a multi-year plan rather than a surprise.
This article is for general information and does not replace reading your building's constitutive title, internal regulation and the legislation in force.