Reserve fund of the owners’ association: what to check in the annual budget

Why it is worth checking the reserve fund before voting on the accounts

In an owners’ association, the reserve fund is not an incidental concept or a line item that should go unnoticed. It forms part of each owner’s ordinary financial obligations and is used to cover conservation, repair and refurbishment works, as well as certain accessibility and energy-efficiency measures. The Horizontal Property Act includes it among the owner’s obligations and sets a minimum provision of 10 % of the community’s last ordinary budget. In the first additional provision, the rules for establishing the fund in communities and its gradual adaptation where appropriate are also provided for. You can read it in the Ley 49/1960, de propiedad horizontal.

Checking this item is especially useful if you are going to attend a meeting, have just bought a home or notice that the accounts do not clearly explain where the special levy comes from. This is not about carrying out a complex accounting assessment, but about checking three things: that the fund exists, that the provision is in line with the budget and that the spending agreements match what the law allows.

What you should check in the budget and the minutes

Before voting on the accounts, it is worth looking at the annual budget carefully. It is not enough to see an overall figure: what matters is understanding whether the reserve fund is included, whether amounts have been deducted for specific works and whether it has been agreed to replenish them afterwards.

Useful steps:

1. **Locate the reserve fund item** in the ordinary budget.

2. **Check the minimum provision**: the law requires it to be no less than 10 % of the community’s last ordinary budget.

3. **Review whether amounts from the fund have been used** for conservation, repair, refurbishment or accessibility works.

4. **Verify whether the minutes explain the purpose of the expenditure** and the agreement approving it.

5. **Check whether the allocation among owners is based on the participation quota**, unless there is a valid special rule.

In practice, the minutes should allow you to identify what was approved, by what majority and for what purpose. If the document does not clarify the expenditure, ask before voting. You will avoid later disputes about whether a special levy was ordinary, extraordinary or simply a replenishment of the fund.

What it can be spent on and what should not be confused with a special levy

Article 9 of the law provides that owners contribute to general expenses and to the reserve fund. In addition, the provision on the fund and Article 17 distinguish between different types of agreements and expenses. This matters because not every community outlay is subject to the same rules.

Bear these ideas in mind:

- **The reserve fund** is set aside for conservation, repair, refurbishment and accessibility works and measures.

- **Mandatory works** may arise from the duty to conserve the property or from universal accessibility measures.

- **Non-essential improvements** may require different majorities and, in some cases, do not bind dissenting owners if certain legal thresholds are exceeded.

- **The community may agree to finance works**, but it must clearly state how the cost will be passed on.

It is not advisable to mix different concepts in the same item without explanation. If the community charges an expense to the reserve fund that is actually a voluntary improvement, or calls a special levy for a specific work an “ordinary fee”, you are entitled to ask for clarification before accepting payment.

Common mistakes worth avoiding

There are several mistakes that appear frequently in community documents and can lead to unnecessary disputes:

- **Accepting a budget without reading the detail of the items**.

- **Assuming the reserve fund can be used for any expense**.

- **Confusing a special levy approved by the meeting with an ordinary fee**.

- **Forgetting that majorities depend on the type of agreement**.

- **Failing to check whether the owner voting is up to date with payments**, as this may limit their voting right.

It is also worth remembering that, even if a community adopts an agreement, that does not automatically mean it is correct in every respect. If you consider that an agreement is contrary to the law or the statutes, seriously harms your interests or causes you damage that you are not obliged to bear, the Horizontal Property Act provides for judicial challenge in the relevant circumstances and time limits.

What to do if you detect an irregularity

If, when reviewing the annual budget or the minutes, you notice a questionable item, the best approach is to act methodically:

1. **Request a copy of the budget, the minutes and, if available, the debt statement or the breakdown of expenses**.

2. **Ask for the exact purpose of the reserve fund to be clarified**.

3. **Check whether the agreement complies with the required majority and whether it has been properly notified**.

4. **Keep all documentation** so you can compare future financial years.

5. **If you do not get a clear response, raise the matter at the next meeting or seek an individual review**.

If you want to assess the situation of your property or prepare for a sale with greater documentary certainty, you can use UBICASA’s indicative online estimate in our home valuation in Madrid, with a price range and PDF report plus optional visit. If you would prefer to discuss it with an adviser, you can get in touch from our contact page. Our office is at Calle Montesa 29, Madrid, open Monday to Friday from 10:00 to 15:00 and from 16:00 to 19:00.

In community matters, a careful reading of the accounts avoids surprises and helps you make informed decisions. The guidance above is general; if the budget, the minutes or the allocation of expenses have particularities, it is advisable to analyse them individually.

If you would like to go further, read our related guide: Owners’ association and tourist accommodation: what you should check before authorising it or objecting.