Somewhere on your factoring paperwork, two similar-sounding things appear: a float and, in some developments, a sinking fund. They are routinely confused, and the confusion matters, because they do different jobs, are treated differently when you sell, and tell you different things about how well your building is being run. This guide untangles them.
The short version
A float is working money. A modest sum each owner pays up front, held as a credit, so the development can pay for day-to-day costs and repairs without waiting for every owner's payment to arrive. It smooths cash flow. It is generally returned to you, net of anything you owe, when you sell.
A sinking fund is savings. Regular contributions built up over years toward large, predictable future costs: roof renewal, external redecoration, lift replacement. It converts future crises into scheduled events. It stays with the building when you sell, because the building is what it exists for.
A float keeps this quarter running. A sinking fund keeps the next decade affordable.
The float, properly understood
When a factor takes on a development, contractors need paying on real-world timescales: the roofer who fixes a leak this week does not want to wait until every one of forty owners has paid their share next quarter. The float solves this. Each owner deposits a sum at the start (a common approach is to size the total float around a quarter of the development's annual expenditure, though practice varies), and that pool lets the factor pay bills promptly while quarterly invoicing catches up.
Points worth knowing about a well-run float:
- It is your money, held as a credit. The correct description is "held as a credit on your development account", not a fee and not a deposit the factor absorbs. It should appear on your statements.
- It belongs in a development-specific account. Client money should be segregated: separate from the factor's own operating cash, and separate from other developments' money. The Property Factor Code of Conduct sets expectations on how factors hold and account for clients' funds. You are entitled to ask exactly how yours is held.
- It is returned when you leave. On sale (or if the factoring arrangement ends), the float should come back to you, less any outstanding charges, as a credit on your final statement.
- It may need reviewing. A float sized years ago may be too small for the development's current spending, which quietly pushes the building back toward cash flow problems. A periodic review is a sign of attentive management.
The float's quiet virtue is fairness at speed: work proceeds promptly, and prompt payers are not left waiting on slow ones for every small job. What the float cannot do is fund a major project. That is the sinking fund's job.
The sinking fund, properly understood
Every building has large costs on a rough schedule. Roof coverings, render, decoration cycles, door entry systems, and above all lifts all age predictably. A development that saves nothing toward these faces a recurring drama: a five- or six-figure project, divided among owners, payable within months, landing on whoever happens to own each flat that year.
A sinking fund replaces that drama with arithmetic. Owners contribute steadily (quarterly, typically, alongside the ordinary billing), the fund grows, and when the big project arrives, most or all of the money is already there. The connection to planned maintenance is direct: a long-term maintenance plan tells you what is coming and when; the sinking fund is how the plan gets paid for. Each is weak without the other.
Points worth knowing about a well-run sinking fund:
- It should sit in its own interest-bearing account. The Code of Conduct requires factors to hold reserve funds of this kind separately. It should never blur into general cash.
- It stays with the building. When you sell, your contributions do not come back to you the way a float does. What you get instead is real: a building with a funded future is worth more and sells more easily, and buyers' solicitors increasingly ask about exactly this.
- It needs a target, not just a balance. A fund is healthy relative to the building's coming liabilities, not in the abstract. Fifty thousand pounds is ample for some developments and alarming for a high-rise with an ageing lift. The question is whether the balance tracks the maintenance plan.
- Spending from it should be decided properly. Withdrawals belong with owner decisions under your deeds or the Tenement Management Scheme, with clear reporting afterwards.
Whether your development has a sinking fund at all is usually set by the title deeds or by an owners' decision. If yours has none and the building has visible large costs ahead, starting one is a conversation worth opening; owners can typically establish contributions by the same majority decision-making that governs other scheme matters.
Buying or selling? Read this bit
Buying a flat: ask three questions through your solicitor. Is there a float, and how much will you pay on entry? Is there a sinking fund, and what is the balance? And are any major works planned or underway? A healthy sinking fund is a genuine plus. A large planned project with no fund means the bill is coming to you. See our first time buyer's guide for the fuller checklist.
Selling a flat: notify the factor early. Your float should be repaid net of your final account. Your sinking fund contributions stay with the building, and your solicitor will confirm the position on any live or recently completed works, since liability for shares of instructed work follows rules that depend on timing and the deeds.
Five questions that reveal how your building's money is managed
- Where exactly is our float held, and is it segregated from other money?
- What is my float balance, and when was the float level last reviewed?
- Do we have a sinking fund, and is it in a separate interest-bearing account?
- What future costs is the fund targeting, and is the balance on track against the maintenance plan?
- What does my statement show, and can I reconcile it without phoning anyone?
A factor managing money well will answer all five quickly and in writing. These are not awkward questions; they are the basics of the transparency you are paying for.
Frequently asked questions
Is a float the same as a deposit?
No, and the difference is more than wording. A deposit suggests money the factor holds against your behaviour. A float is a credit balance on your development's account: your money, visible on statements, doing cash flow work for the building, and returnable when you leave.
Do I get sinking fund money back when I sell?
Ordinarily no; the fund belongs to the building's future, and your deeds or the fund's terms will confirm the position. The value comes back through the sale itself: funded buildings carry fewer nasty surprises, and informed buyers price that.
Can the factor spend the sinking fund without asking owners?
Spending should follow the decision-making rules in your deeds or the statutory default scheme, and significant withdrawals belong with owner decisions. If money has moved out of your fund and you cannot get a clear account of why, raise it in writing, and escalate through the complaints procedure if the answer does not come.
What happens to the float and sinking fund if we change factor?
Both should be accounted for and transferred or returned as part of the handover: the float typically nets against final invoices, and the sinking fund transfers to the new arrangement intact with a closing statement. It is owners' money throughout.
How big should a sinking fund be?
Big enough for the building it serves, which only a maintenance plan can tell you. The honest method is: list the major items coming in the next ten to fifteen years, estimate costs and dates, and set contributions so the fund meets each item as it arrives. Any figure not derived that way is a guess.
General information only. Individual title deeds and circumstances differ.
AboveBoard Homes is an Edinburgh property factor that keeps development money where owners can see it: dedicated accounts, floats held as visible credits, and funding plans tied to real maintenance forecasts. If you cannot get a straight answer about where your building's money lives, get in touch.
