Condominium cash fund, when it is mandatory

Condominium cash fund: when it is mandatory

There are various types of condominium cash funds but the only one obligatory by law it is the one foreseen to deal with expenses Of extraordinary maintenancethe so-called special fund regulated by thearticle 1135 civil code.

Il condominium cash fund is an administrative tool used to ensure efficient and timely financial management of expenses common areas of a condominium.

Condominium in which there is a cash fund for extraordinary expenses – photo Getty Images

Represents a reserve of money made up of contributions from condominiums, used to cover planned or unexpected expenses related to maintenance, services or emergencies affecting the common parts of the building.

What is the condominium cash fund

The condominium cash fund is one reserve of money useful to deal with emergency situations; is established by decision of thecondominium meeting and is administered bycondominium administrator.

It is not mandatory by law in all contexts, but it is strongly recommended to ensure more stable economic management and to prevent situations in which the necessary liquidity to face urgent or extraordinary expenses is lacking.

The fund is fed by the fees paid by condominiums, which can be calculated based on thousandths owned or in proportion to the use of certain services (such as the lift, central heating or other common areas).

The condominium owners, therefore, pay a pre-established sum which flows into this fund, so as to constitute an economic reserve ready to be used in case of need.

Types of condominium cash fund: ordinary cash fund

They exist different types of the condominium cash fund, depending on the purposes for which it is established: Il ordinary cash fund it is the most common and is used to cover the ordinary expenses and predictable aspects of the condominium.

Include i costs maintenance and daily management of the common parts of the building, such as:

• Cleaning the stairs and common areas;
• Elevator maintenance;
• Expenses of central heating;
• Bills for electricity and communal water.

The ordinary cash fund is approved by the condominium assembly during the approval of the budget.

The condominium owners periodically pay their share and the administrator uses it to make the necessary payments.

Purpose of the ordinary cash fund

The main purposes of the condominium cash fund are the following:

1. Ordinary expenses: Cover recurring and expected expenses, such as those for cleaning the stairs, lighting the common areas, the concierge service or the maintenance of condominium gardens;
2. Insolvency prevention: Guarantee continuity in payments even in the presence of defaulting condominiums, avoiding the blocking of essential services or the impossibility of respecting contractual obligations with suppliers.

Extraordinary or special cash fund

Il extraordinary cash fund is a type of fund intended to cover unexpected expenses or extraordinary which do not fall within ordinary management.

This could be, for example,:

• Urgent repairs due to faults or malfunctions;
• Interventions by brought up to standard of the building;
• Expenses related to natural disasters or accidents.

The extraordinary fund is usually approved ad hoc, on the occasion of an extraordinary condominium meeting, and the condominiums are asked to pay a additional fee compared to ordinary expenses.

Examples of use are:

• The renovation of the roof;
• Il remake from the facade;
• The installation of video surveillance systems.

In these cases, condominium owners are asked to contribute with specific payments, proportional to the expected costs of the project.

Cash fund for arrears

A cash fund for arrears it is established to prevent the negative effects of the non-participation of some condominium owners in common expenses.

The condominium arrears it is a widespread problem that can put the financial management of the condominium into difficulty, especially if the expenses to be incurred are urgent.

Condominium cash fund for arrears – photo Getty Images

With this fund, the other condominiums they anticipate the unpaid dues from defaulters, preventing the condominium from finding itself in a situation of insolvency towards suppliers or service companies.

The amount paid by the condominium owners can be recovered once the defaulter settles his debt.

Decision to set up a cash fund

As we have seen in Italy, the condominium cash fund it is not mandatory by law, except in specific cases.

However, its constitution can be decided by thecondominium meetingwhich defines the amount, methods of use and management criteria.

Special Fund – photo Getty Images

It is important to underline that, once approved by the assembly, the decision to set up a cash fund is binding per all condominiumsincluding those who voted against.

And particular case of obligation concerns extraordinary maintenance or innovation interventions. In these contexts, article 1135 of the Civil Code provides that the assembly must set aside in advance the funds necessary for the execution of the works.

Management and reporting of the cash fund

The condominium administrator is responsible for management of the cash fund.
It is his task:

1. Hold a record accurate payments and expenses;
2. Ensure transparency in financial management;
3. Submit an annual report detailing the use of the fund.

Il report must be approved by the condominium assembly, which has the right to verify the correctness of the management.

The condominium cash fund is an essential tool for a effective management from the common expenses and to guarantee the financial serenity of the condominium.

Its establishment and use, however, require transparent and shared management, with active involvement of condominium owners in decisions.

The various types of funds, adaptable to different needs, offer flexibility that allows you to respond to both ordinary needs and extraordinary situations, making the condominium a more organized and sustainable environment.