Almost every property manager knows the reserve fund is mandatory and must reach 10% of the budget. The question that comes up at every year-end is a different one: how to account for the reserve fund correctly, where to reflect it in the community’s books and what to do with it from one year to the next. And here you have to start with a distinction that prevents a lot of mistakes: the law says how much there must be and what it is for, but it does not dictate the accounting entry. Let’s clearly separate what the law requires from what is professional practice, so your books are impeccable and defensible at any meeting.
What the law requires (and what it does not)
Article 9.1.f of the Horizontal Property Act (LPH) sets out four things that are not open to debate: the reserve fund must exist in every community, its ownership belongs to the community as a whole, its balance may never fall below 10% of the last ordinary budget, and each owner contributes to it according to their share (coefficient). Its purpose is also fixed: conservation, repair and refurbishment works, accessibility and energy-efficiency works, and the option to use it to take out a damage insurance policy or a permanent maintenance contract for the building.
The First Additional Provision of the LPH adds a decisive practical detail: the fund may not drop below the legal minimum at any point in the financial year, and any amounts withdrawn for works must be replenished at the start of the following year. The rise from 5% to 10% came with Royal Decree-Law 7/2019, in force since March 2019, so any calculation still using 5% is out of date.
That, however, is where the law’s requirements end. Communities of owners are not commercial entities and are not subject to the General Accounting Plan: there is no mandatory account or official entry for the fund. Everything that follows is professional practice, not a legal mandate, and it should be presented as such. If you want the detail of what the fund is and how it is calculated, you’ll find it in our guide to the reserve fund; here we focus on how to keep it in the books.
How the fund is funded in the budget
In practice, the fund’s provision is included as a specific line in the annual ordinary budget and its amount is shared among the owners by coefficient, within the ordinary fee. It is not usually charged as a separate levy, except when the fund is first set up or when it has to be replenished after works.
An example makes it clear. If the ordinary budget approved at the meeting is 50,000 euros, the minimum provision for the fund will be 10%, that is, 5,000 euros. An owner with a coefficient of 3.5% would contribute 5,000 × 3.5% = 175 euros a year, included in their usual fee. The figures are illustrative, but the mechanics are always the same: work out 10% of the budget and share it by coefficient.
Where it appears in the community’s books
This is the point where professionals do not fully agree, precisely because there is no single rule. Some firms and software record the fund as an equity account of the community; others place it under liabilities on the balance sheet. Both approaches coexist in the sector and share the same idea of the fund: an accumulated balance that belongs to the community and is kept separate, in the books, from day-to-day running costs.
What matters is not the technical name of the account, but that the fund is clearly identified and traceable in the annual accounts approved at the meeting, so any owner can check that the 10% minimum is being met. The specific account numbers you’ll see in some programs are conventions of each piece of software, not official accounts.
Does it need a separate bank account?
The law does not require the fund to be held in a separate bank account. It is a best-practice recommendation, not an obligation. Many communities keep the money in the same general treasury account and control the fund through accounting, by line item. Physically separating the balance helps avoid confusing it with the running-costs pot and resists the temptation to dip into it to pay for electricity or cleaning, but it is a management decision, not a legal requirement.
What happens to the fund from one year to the next
The fund is not spent or shared out at year-end: it accumulates. The unused balance carries over to the following year, and each year you only need to provision what is necessary to keep the minimum on the new budget. As the minimum is 10% of the last ordinary budget, it is worth recalculating it every year at the meeting: if the budget goes up, the provision will have to be adjusted upwards.
And if the fund is used during the year for works, the law requires it to be replenished. The amount withdrawn counts as part of the fund during that year, and at the start of the next one the contributions needed to cover what was taken out are made. Leaving the fund below the legal minimum the following year is one of the most common mistakes, and it is easily avoided with proper tracking.
Common mistakes when accounting for the reserve fund
- Using it for running costs. The fund’s purpose is fixed by law. Paying for electricity or cleaning with it is a management error and defeats its purpose.
- Calculating the 10% on the wrong base. The percentage applies to the last approved ordinary budget, not to actual expenses or to a special-levy budget.
- Not replenishing it after works. If it is used, it must be replenished at the start of the following year so it does not fall below the minimum.
- Returning «their share» to an owner who sells. The fund belongs to the community and is not individually refundable. A seller does not take their contribution with them.
- Still applying 5%. That is the minimum repealed in 2019. The one in force is 10%.
Frequently asked questions about accounting for the reserve fund
Does the reserve fund go under assets, liabilities or equity?
There is no single regulatory answer, because communities do not follow the General Accounting Plan. Two practices coexist in the sector: recording it as an equity account or placing it under liabilities on the balance sheet. What is essential is that it is identified and traceable in the accounts, not the exact label.
Does the fund have to be in a separate bank account?
The law does not require it. It is a best-practice recommendation to avoid mixing it with the running-costs treasury, but many communities keep it in the same account and control it by accounting line item.
Can I use the reserve fund for running costs?
No. Its purpose is fixed in Article 9.1.f: conservation, repair and refurbishment works, accessibility and energy efficiency, and taking out a damage insurance policy or a permanent maintenance contract. Ordinary expenses are paid with the ordinary fee, not with the fund.
If I use the fund for works, when do I have to replenish it?
At the start of the following budget year. The First Additional Provision requires the contributions needed to cover the amounts withdrawn, so that the fund reaches the legal minimum again.
A reserve fund that always adds up
Accounting for the reserve fund correctly is not complicated, but it takes consistency: recalculating the minimum each year on the new budget, keeping it identified in the accounts, and never dropping below 10%, not even after works. Doing it by hand, with loose spreadsheets, is where the errors creep in that later surface at the meeting.
FixrOS community accounting calculates the fund’s provision on the approved budget, shares it by coefficient across the fees and keeps the fund’s balance identified and up to date year after year, alerting you if it falls below the legal minimum. If you want to see it with your own accounts, book a demo and we’ll show you how it works.