Sinking Fund

A sinking fund is a sum of money that is saved up over period of time to compensate for defunct items or the cost of major repair works.

When a buyer purchases a property, the life cycle of various items is calculated on conjunction with the replacement cost. The purpose of the sinking fund is to invest in enough savings to pay for the costs of maintaining these items in the future.

Overall, the sinking fund protects leaseholders from having to pay for these expensive repairs or replacements, which saves them money in the long term. The lack of such a fund can deter some home buyers from purchasing a property.