NovAsia

Sinking Funds, Reserve Funds and Special Assessments in Cambodian Condominiums

NovAsia · updated July 19, 2026

Prepared by the NovAsia Editorial Team

A new condominium rarely looks like a building that will one day require expensive repairs.

The lifts are polished.

The pool is new.

The generator has run only during tests.

The facade has not yet passed through many wet seasons.

Owners may assume that the monthly service charge covers everything.

Several years later, the scale of expenditure changes.

The building may need:

The normal operating fee is not enough.

Management announces a special assessment of USD 2,000, USD 5,000 or USD 10,000 per apartment.

A special assessment does not always prove mismanagement. Buildings age and common systems require capital work.

The problem is a building that spent every dollar on security, electricity and cleaning while making no long-term plan.

When major work becomes unavoidable, owners must raise the full amount immediately. Some cannot pay. Work is delayed. Damage becomes worse. Resale buyers demand a discount.

A reserve fund does not make ownership cost free.

It spreads future capital expenditure over time and across the owners who benefited from the building during that period.

This article provides general information, not legal, engineering, accounting or investment advice. Reserve rights, contribution rules, assessment approval and seller-buyer allocation should be checked under the documents of the specific building.

Three financial layers should be kept separate

Operating service charge

Pays for day-to-day operations:

Reserve or sinking fund

Accumulates for future major and cyclical work:

Special assessment

An additional charge where:

If all money sits in one account and one budget line, owners cannot tell whether they are funding current cleaning or the next lift replacement.

Cambodian law creates the burden, not one universal reserve formula

Sub-Decree No. 126 requires internal regulations to address co-owner contributions to maintenance and repair of common areas and public services.

The sample regulations provide that:

The Foreign Ownership Law provides that foreign co-owners carry the same obligations and burdens as Cambodian co-owners.

The available framework does not impose one universal rule for:

The actual protection therefore depends on:

The absence of a statutory percentage does not remove the obligation to fund a valid major repair.

The words “sinking fund” and “reserve fund” are used inconsistently

In one project, sinking fund means a one-off handover payment calculated per square metre.

In another, it means an annual capital contribution.

In a third, reserve fund is the total long-term balance while sinking fund is a separate account for one asset, such as lifts.

Read the definition in the project documents.

Check:

The label does not create protection.

A fund with an impressive name but no separate bank balance or restricted purpose may function as ordinary operating cash.

A large initial contribution can still be inadequate

Assume the developer collects USD 10 per square metre at handover.

A tower with 30,000 square metres of private area receives USD 300,000.

That sounds substantial.

The amount is meaningful only after asking:

USD 300,000 may be enough for a simple building and inadequate for a complex with multiple lifts, a large pool, an extensive facade and central plant.

Absolute cash is meaningless without an asset and life-cycle plan.

Reserve planning starts with an asset register

A building cannot forecast capital work if it does not know what it owns.

The register may include:

For each asset, management should know:

Without this information, the annual reserve contribution is a guess.

Planned maintenance is different from emergency repair

Preventive maintenance reduces failure risk.

It does not eliminate eventual capital replacement.

Regular lift maintenance:

Emergency repair occurs after a breakdown.

It is usually more expensive and disruptive.

A stronger building uses a Planned Preventative Maintenance plan covering:

The 2026 RICS residential service-charge code treats a costed long-term PPM plan and life-cycle assessment as sound professional practice.

That code is not Cambodian law.

It is a useful benchmark for determining whether the reserve is based on evidence rather than an arbitrary number.

Reserves spread cost between generations of owners

Assume the building expects a major lift project in ten years costing USD 500,000.

Without a reserve, the owner who purchases in year nine receives a large assessment almost immediately.

The owner who used the lift for eight years and sold before the assessment contributed little to the replacement.

A reserve allows the cost to accumulate over the period of use.

This improves fairness and predictability.

The calculation should consider:

Dividing today’s estimate by ten is not enough if construction and imported-equipment costs rise significantly.

Reserve money is not normally personal owner profit

When selling, an owner may ask whether their share of the reserve will be refunded.

A reserve is usually attached to the building purpose rather than the individual owner.

The next buyer receives the benefit of the accumulated fund together with the apartment.

If every seller withdrew previous contributions, the reserve would disappear before major work.

The exact treatment depends on the internal regulations and agreement.

Possible structures include:

A seller should not promise a cash refund without a contractual basis.

Separate bank accounts improve control

Sound practice separates reserve money from daily operating funds.

Reasons include:

The board should know:

Where the reserve remains inside a developer account, management-handover risk is higher.

Separate accounts do not guarantee sound governance.

They make misuse easier to detect.

Using the reserve for operating deficits creates hidden future debt

Assume the building does not collect enough monthly service charge.

Management pays:

from the reserve.

The services continue and the tariff remains artificially low.

The capital liability does not disappear.

Several years later:

A temporary bridge can be reasonable where collection is delayed for a short period.

It should have:

Permanent use of reserve money for routine expenses means that:

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A special assessment can be necessary even with a good reserve

A reserve cannot reasonably cover every event.

Possible shocks include:

An excessively large reserve also has a cost.

Owners lock up money that could be used elsewhere.

The objective is reasonable coverage rather than unlimited cash.

A special assessment should be evaluated through:

Approval should follow a governance process

A large additional charge should not arise only from an email from the manager.

A stronger process includes:

  1. Technical report.
  2. Scope.
  3. Cost estimate.
  4. Urgency analysis.
  5. Insurance and warranty review.
  6. Reserve balance.
  7. Allocation method.
  8. Owner meeting.
  9. Vote under the applicable rules.
  10. Payment dates.
  11. Progress reporting.

Sub-Decree No. 126 links important repair, maintenance and public-service decisions to owner voting in the basic framework.

The exact classification and threshold should be checked under the internal regulations.

Emergency authority may be needed for critical safety work.

Later reporting and ratification remain important.

Repair, replacement and improvement are different

Repair restores an existing function.

Replacement renews an asset that has reached the end of life.

Improvement creates a higher standard or new facility.

Examples:

WorkLikely category
Replace failed pumpRepair or replacement
Restore leaking roofRepair
Install a new premium gymImprovement
Replace obsolete lift systemCapital replacement
Add solar panelsImprovement with possible savings

The category matters because:

A charge labelled pool works is too vague.

Developer defects should not automatically be funded by owners

A major problem appearing after handover may be:

Before using the reserve, management should ask:

Owners may need to fund emergency protection while pursuing the responsible party.

The cause should remain documented.

A reserve should not become a convenient way to erase unresolved developer obligations.

Insurance and reserve planning work together

Insurance can cover some:

It does not normally cover:

A strong reserve plan considers:

Insurance reduces some volatility.

It does not replace long-term capital planning.

Non-payment by some owners increases the burden on others

A reserve plan can look adequate on paper while collection remains weak.

If 25% of owners do not contribute, the actual fund may fall far below forecast.

The building then faces:

Management should report:

The nominal fund target is less important than the cash actually held.

Developer-owned units must be treated transparently

A new building may have substantial unsold stock.

The developer can support the reserve through:

The exact obligation depends on:

Any exemption should be visible.

If private owners are funding future replacement for systems serving the full building while developer-owned units contribute nothing, the economics are distorted.

Inflation can make an old reserve plan obsolete

Imported lifts, pumps, glass and control systems can become much more expensive.

A reserve study prepared five years earlier may underestimate:

The plan should be reviewed periodically.

A building can appear well funded in nominal dollars while remaining materially underfunded against updated replacement cost.

The fund should not be judged by cash alone

A reserve of USD 500,000 can appear strong.

The building may also have:

A proper opening position compares assets and liabilities.

Reserve assetsExpected liabilities
Bank cashApproved major work
InvestmentsContracted invoices
ReceivablesKnown defects
Insurance recoveryDeductible and exclusions

Cash without liabilities is an incomplete picture.

Special assessments affect resale

A known assessment should be disclosed in a resale transaction.

Questions include:

A seller should not say there are no arrears while omitting an approved future charge.

A buyer should review:

A strong reserve can support resale because the buyer sees lower immediate capital risk.

A depleted reserve is effectively a hidden future liability.

Worked example

Assume a building expects three major projects over ten years:

Estimated total: USD 900,000 before inflation.

Existing reserve: USD 200,000.

If the building wants to fund the gap over ten years, it must consider:

A simple USD 70,000 annual contribution may be too low after cost escalation.

The figures are illustrative.

The purpose is to show why a one-off handover fund should be tested against a timed capital plan.

Reserve red flags

Concern increases where:

When a high assessment can still be reasonable

A high charge may be justified where:

A controlled major repair is usually better than system failure and collapse in resale confidence.

Conclusion

Operating service charge and reserve money perform different functions.

Cambodian rules require owners, including foreign owners, to contribute to common-property maintenance and repair according to the applicable allocation system.

They do not impose one universal reserve percentage for every condominium.

The quality of the reserve therefore depends on governance.

A stronger fund is based on:

It is not used permanently for salaries and cleaning.

A special assessment becomes necessary where the reserve is insufficient, an unexpected risk occurs or owners approve major work.

The main risk is not the existence of an additional charge.

It is a building with no plan, where an expensive failure is first disclosed together with the payment deadline.

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Sources

  1. Royal Government of Cambodia — Sub-Decree No. 126 on the Management and Use of Co-Owned Buildings, 12 August 2009.
  2. Kingdom of Cambodia — Law on Providing Foreigners with Ownership Rights in Private Units of Co-Owned Buildings, 24 May 2010.
  3. EuroCham Cambodia — Charge Collection in Co-Owned Buildings.
  4. RICS — Service Charge Residential Management Code, 4th edition, effective 7 April 2026, used as comparative professional guidance rather than Cambodian law.
  5. RICS — Property Agency and Management Principles, effective 1 January 2025.

Frequently asked

Must every Cambodian condominium have a sinking fund?

Cambodian rules require co-owners to contribute to maintenance and repair of common property, but they do not impose one universal reserve-fund formula for every building. The actual fund depends on the internal regulations, SPA and owner decisions.

How is a reserve fund different from an ordinary service charge?

The operating service charge pays for daily building operations. A reserve fund accumulates for future major and cyclical works such as lifts, facade repairs, pumps, waterproofing and other capital expenditure.

What is a special assessment?

It is an additional one-off or temporary charge above the normal tariff when approved work cannot be funded from the operating budget and existing reserve.

Should the developer contribute for unsold apartments?

Where the developer remains the owner of private units, its share of common costs should be addressed under the internal regulations, title status and project agreements. Any exemption or subsidy should be disclosed separately.

Can reserve money be used for salaries and cleaning?

The answer depends on the building documents, but sound practice separates money for future major works from daily operating expenditure. Permanent use of the reserve to fund an operating deficit destroys its purpose.

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