Sinking fund for major repairs and maintenance
29 Sinking fund for major repairs and maintenance
If a retail shop lease provides for the establishment of a sinking fund to fund provision for major items of repair or maintenance, the lease is taken to include provision to the following effect:
an amount paid by the lessee towards the lessor's outgoings on account of those major items of repair or maintenance is to be paid into the sinking fund;
so much of the balance standing to the credit of the sinking fund as remains unexpended from time to time for a purpose for which the sinking fund was established is to be held by the lessor in an interest bearing account;
amounts paid by the lessee for credit of the sinking fund, and the net interest earned by the lessor on the sinking fund, must not be applied by the lessor for a purpose other than payment of outgoings for which the sinking fund was established;
the lessor is liable to contribute to the sinking fund any deficiency attributable to a failure by the lessor or a predecessor in title of the lessor to comply with paragraph (c).
Note—
The effect of paragraph (d) will be that a purchaser of the shop from the lessor will have to ensure that the sinking fund has been properly administered and maintained by the previous lessor because the incoming lessor will be liable for any shortfall.
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