In the UAE, the reserve fund requirement is a critical aspect of financial planning, particularly for property owners and homeowners’ associations (HOAs). Established under Law No. 6 of 2019, the reserve fund mandates that developers and HOAs set aside a portion of service charges collected from property owners to cover future maintenance and repair costs of common areas in residential or commercial buildings.
The reserve fund ensures that there are sufficient funds available for major repairs, replacements, or emergencies, such as elevator maintenance, façade repairs, or plumbing system overhauls. This proactive approach prevents sudden financial burdens on property owners and maintains the long-term value and functionality of the building.
Typically, developers are required to contribute 5% of the total service charges collected annually to the reserve fund. For HOAs, the contribution is determined based on a detailed study of the building’s maintenance needs, ensuring the fund aligns with the property’s lifecycle costs.
The reserve fund requirement underscores the UAE’s commitment to sustainable urban development and protecting the interests of property owners. It promotes transparency, accountability, and financial stability, ensuring that buildings remain well-maintained and habitable for years to come.
For property owners, understanding the reserve fund is essential. It not only safeguards their investment but also ensures a high standard of living in well-maintained communities. By adhering to this requirement, the UAE continues to set a benchmark for real estate management globally.