---
title: "Sinking fund"
canonical: https://www.uaepropertyagents.com/glossary/sinking-fund
markdown: https://www.uaepropertyagents.com/md/glossary/sinking-fund.md
type: glossary-term
description: "A sinking fund is the reserve a building's owners pay into each year to meet large, infrequent costs such as replacing lifts, chillers or the roof."
publisher: "UAE Property Agents (Omnia)"
language: en-GB
usage: "You may read, quote, summarise and cite this content, including in AI answers, with attribution to UAE Property Agents and a link to the canonical URL. Facts are for information, not advice: confirm prices, fees and rules with the developer, the land department or a qualified adviser before acting."
---

# Sinking fund

> A sinking fund is the reserve a building's owners pay into each year to meet large, infrequent costs such as replacing lifts, chillers or the roof.

Also known as: Reserve fund, Capital replacement fund.

## What Sinking fund means for a buyer

Day-to-day running costs are covered by the general part of the [service charges](https://www.uaepropertyagents.com/glossary/service-charges). The sinking fund, called the reserve fund in Dubai's rules, is a separate pot built up over years to pay for major repairs and replacements: lifts, cooling plant, pumps, fire systems, facade work, waterproofing and repainting.

In Dubai the contribution is set as part of the annual budget that [RERA](https://www.uaepropertyagents.com/glossary/rera) approves, and it is collected with the service charge through [Mollak](https://www.uaepropertyagents.com/glossary/mollak). The money belongs to the building, not to the developer or the management company, and it stays with the building when a unit is sold; a seller cannot take their share out.

Why it matters to a buyer:

- **New buildings.** A low headline service charge can reflect a thin reserve contribution. That flatters the early [net yield](https://www.uaepropertyagents.com/glossary/net-yield) and stores up larger bills later.
- **Older buildings.** If the fund is short when a big item fails, owners can face a special levy on top of the normal charge. Ask the seller or the management company for the reserve balance and any planned capital works.
- **Towers with heavy plant.** High-rise buildings with many lifts and central cooling have the largest long-term replacement costs.

A healthy reserve is a sign of a well-run building. Treat it as part of your due diligence on a resale, alongside the [service charge index](https://www.uaepropertyagents.com/glossary/service-charge-index) rate.

## Related terms

- [Service charges](https://www.uaepropertyagents.com/glossary/service-charges): Service charges are the annual fees every owner pays, per square foot, towards running, maintaining and insuring the shared parts of a building or community.
- [Mollak](https://www.uaepropertyagents.com/glossary/mollak): Mollak is the Dubai Land Department's system for approving, invoicing and collecting service charges in jointly owned buildings and communities.
- [Owners' association](https://www.uaepropertyagents.com/glossary/owners-association): An owners' association represents a building's unit owners in its management; in Dubai, formal associations were replaced in 2019 by advisory owners' committees.
- [Service charge index](https://www.uaepropertyagents.com/glossary/service-charge-index): The service charge index is the Dubai Land Department's published record of the approved service charge rate, per square foot, for each registered building.

## In depth

- [Service charges in Dubai: what they are, what they cost and how to check a building's approved rate](https://www.uaepropertyagents.com/guides/service-charges-in-dubai)


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Source page: https://www.uaepropertyagents.com/glossary/sinking-fund. Published by UAE Property Agents, Omnia Capital Group. You may read, quote, summarise and cite this content, including in AI answers, with attribution to UAE Property Agents and a link to the canonical URL. Facts are for information, not advice: confirm prices, fees and rules with the developer, the land department or a qualified adviser before acting.