1. Purpose
The purpose of this Reserves Policy is to ensure the long-term financial health, sustainability, and responsible stewardship of Rent into Equity Initiative, by Lemon Leopard Charitable Community Benefit Society (LLCCBS) It outlines the establishment, funding, and management of financial reserves for major capital repairs, emergency contingencies, and risk mitigation.
2. Scope of the Policy
This policy applies to all 10 units and governs the financial reserves related to building infrastructure, common facilities, external areas, and risk coverage.
3. Types of Reserves
a. Capital Reserve Fund
Used for major repairs and replacements of building systems and components, including but not limited to:
- Windows, roof, gutters, chimney stack, repointing, and paint
- Pest control and garden infrastructure
- Shared kitchen and laundry systems (if future replacements arise)
b. Insurances Excess Reserve
Held to cover deductibles in the event of major insurance claims.
4. Reserve Funding Strategy
The co-op maintains a forward-looking 10-year capital plan. Based on the most recent plan (2025), the total annual contribution target is £6,000 per year (£500/month), rising by 3 percent per year. This aligns with anticipated future costs of major works and ensures readiness without financial strain.
The Capital Reserve will be built through regular contributions from member fees, included in the annual budget. Contributions may be adjusted based on inflation, actual costs, or updated assessments. The Capital Reserve Fund at 10 years will stand at £84,516.
5. Target Reserve Levels
- LLCCBS aims to maintain a minimum reserve balance equal to 100% of forecasted 10-year capital needs, distributed over time.
- The reserve fund will be considered adequately funded if annual contributions match or exceed the projected needs based on the capital reserve plan.
- A target buffer of 10–15% above projected costs is encouraged to account for inflation, unforeseen issues, or early deterioration.
6. Use and Approval of Reserve Funds
- All withdrawals from reserve funds must be approved by the Board of Trustees at a scheduled quarterly board meeting.
- Expenditures must relate to eligible capital or emergency expenses as listed in the 10-year capital plan or arising from new needs (e.g., pest control, weather damage).
- Emergency expenditure outside regular board cycles may be approved by a quorum of trustees and reported at the next board meeting.
7. Review and Updates
- Reserve contribution levels and capital forecasts will be formally reviewed every 3 years, or more frequently if major issues arise.
- A full capital reserve plan update, including on-site assessments, will be undertaken every 5 years or following any significant renovation or structural event.
- The Board will present an updated reserve status annually at the AGM for member transparency.
8. Investment and Management of Funds
- Reserve funds will be held in a secure, interest-bearing account with low risk (e.g., building society savings account, fixed-term deposits).
- Funds must be managed in compliance with the Society’s financial and charitable obligations.
9. Transparency and Reporting
- Reserve fund balances and projections will be shared with members in the Annual Financial Report.
- Members will have access to the capital reserve plan upon request