A provisions fund is a separate fund that is paid into regularly by yourself and other residents and shared among the residents of a building. The money is used for large, costly works like lift replacements, window replacements, or major roof repairs. Having this as a separate fund helps spread the cost of these expensive repairs over the length of your tenancy, rather than having to pay all in one go.
Here are some examples that tell the difference between what is paid for with a provisions fund and what is paid for in service charges.
Paid for in service charges |
Paid for using provisions fund |
| Fixing a lift door | Replacing the entire lift |
| Fixing roof tiles | Replacing a whole roof |
| Replacing a door hinge | Installing a new electronic entry system |
Why does my statement have two lines for provisions? (provisions and provisions-homeowner)
Some customers don’t pay separately towards aspects of the upkeep to a property. Some of the costs of upkeep is included in their rent. We therefore split this up as provisions that all residents pay towards and those that only homeowners pay towards.
How do you work out how much I have to pay towards provisions funds?
When the property is built the builder will provide us with a cost list of all component parts of the building (such as windows, roof, lifts, pumps, fire safety systems etc.) and approximate life expectancies for these. From this information we can work out how much is needed from each property to pay for the works when required. This information should then be placed into our system so that reminders are provided when works are expected. Other factors such as independent condition surveys, works to similar properties and inflation are also taken into account.
What if no works are required?
No works are started until a qualified surveyor has inspected the property and assessed the condition. If it is deemed no works are required a reassessment will be scheduled for the following year. Alternatively, if a component such as a pump fails and is beyond repair this will be replaced when required.
Will I be consulted about any works that are required?
Yes, we are obliged to consult with you for any single item of works that will cost more than £250 per property. This will be in the form of letters that meet legal requirements. If you have any comments, wish to nominate a contractor or have a query with the costs or works you should contact us as soon as you receive your consultation letter. Further information about consultation legislation can be found at The Leasehold Advisory Service. (This is a free Government-funded service that provides independent advice to homeowners)
What happens if there is not enough money in the provisions fund to pay for the works?
We try to avoid this scenario where possible, however unexpected works do occur. You will receive formal confirmation of the final amount of works and any likely shortfall. We will pay for the contractors bill, make the contributions due for tenants, deduct from the provisions fund and any amount still left will be payable by homeowners. Payment options are available depending on the amount owing.
Who looks after my provisions fund contributions?
All contributions are held by us in a central bank account and accounted for separately. Interest is earned on the monies that are held and is added to the provisions balance every year.
I live in a mixed block of flat; do I pay for the tenant's work through my provisions fund?
No, you only pay for your contribution due. If you live in a block containing 10 flats, five of which are owned and five tenanted each homeowner will pay a contribution based on the apportionment set out in your lease i.e. if unit based apportionment you will contribute 1/10th of the cost of the works. We would pay 1/10th for each of the tenants as a contribution. This is paid for through the tenants rent.
Can I take my provisions fund contributions with me when I move?
No, the contributions that you make will remain in the account and be used when works are required. You may wish to make an informal arrangement with your buyer to take this into account. A buyer’s solicitor will always write to us and enquire about the provisions balance. From our experience, having a provisions fund will improve the sale ability of a property as the major works burden on the buyer is reduced.
What do I do if I think the provisions fund contributions are too high?
If you want clarification of what you are paying you can get this from our Service Charge Team. This includes items covered, life expectancy or the balance in the account. If you are still not satisfied you will need to provide reasons why you think the charge is too high that are supported by evidence. Hyde may commission an independent survey report to review the charges that is supported by your evidence. The result of the report will be binding on both sides, this could mean that the provision contributions decrease or increase depending on the report findings.
What if I don't pay into a provisions fund?
All new build properties have provisions set up as a matter of course. Older properties, particularly those transferred as part of stock transfers from local authorities do not normally have a provisions fund. This means that no monies have been put aside by homeowners for works that will be required and full payment will be invoiced once works have been completed. Full consultation on the works will be carried out and payment options will be available after the final bill is known.
Can I start a provisions fund at our property?
Yes, if everybody in the building agrees, we will work with you to agree suitable contributions and remaining life expectancies on parts of the building that will require work in the future.
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Have another query about your service charges? Find out more information on our FAQs about service charges.