The reserve fund and the long-term maintenance plan (MJOP)

What is the reserve fund?

The reserve fund is the association’s savings for major maintenance. Every month, the owners pay a contribution. Part of it covers running costs, such as insurance, cleaning and energy for the shared areas. Another part goes into the reserve fund. The money in the fund belongs to the association, not to an individual owner. If you move out, you do not get it back.

What does the law say?

Every association must have a reserve fund. Since 1 January 2018, the law also sets a minimum amount the association must put into it each year. There are two ways to meet it:

• the association has an MJOP and reserves the amount that the plan says is needed; or
• the association has no MJOP and reserves at least 0.5% of the rebuild value of the building every year.

The rebuild value is what it would cost to rebuild the building. You can often find it in the building insurance policy. An example: with a rebuild value of € 3,000,000, 0.5% comes to € 15,000 a year for the whole association.

The law has no majority decision that allows an association to reserve less than this minimum: an association with homes must reserve at least one of the two amounts. What the general meeting (ALV) can do, with at least four fifths of the votes, is decide that the money does not have to be kept in a separate bank account of the association.

Source: Article 5:126 of the Dutch Civil Code (Burgerlijk Wetboek, BW), introduced by the Act improving the functioning of owners’ associations (Wet verbetering functioneren verenigingen van eigenaars). See wetten.overheid.nl (in Dutch).

What is an MJOP?

A long-term maintenance plan is an overview of all major maintenance for the coming years, usually ten to thirty. For each part of the building, it says what needs to be done, when, and roughly what it will cost. For example: the roof in five years, the paintwork every six to eight years and the lift in twelve years.

The plan tells you how much the association needs to save each year. That way, you avoid a large extra payment in a single year. An MJOP is often drawn up by a specialist firm, but a small association can also start with a simple list of its own.

Keep the plan up to date

An MJOP is not a document to file away. Prices go up, and an inspection sometimes shows that something will last longer, or will fail sooner. So have the plan reviewed regularly, for example every five years. Discuss the state of the reserve fund at the ALV every year as well.

What does it mean per apartment?

How much an owner contributes usually depends on their ownership share (breukdeel). An apartment with a share of 12/1000 then pays 1.2% of the yearly amount saved. Explain this to residents. When they see what the plan means for their own apartment, they understand the contribution better.

In the budget, show per apartment which part of the contribution goes to running costs and which part to the reserve fund. That makes it easier to explain why the contribution sometimes has to go up.

What if there is not enough money?

If a large expense comes up and the reserve fund is too small, there are usually three options: postpone the work, ask for an extra contribution or take out a loan. None of them is pleasant. That is why it pays to save in time and keep the plan up to date. A loan or an extra contribution usually requires a decision by the ALV.

Common mistakes

• The plan is years old and the prices are no longer right.
• The contribution has not been adjusted for years.
• The reserve fund money sits in the same account as the money for running costs, so nobody can see how much has really been saved.
• Residents do not know the fund exists or what it is for.