In one sentence
Lender-held accounts funded at closing and monthly for taxes, insurance, replacements, tenant improvements, and negotiated repair items.
The longer version
Tax and insurance escrows protect the collateral's basics. Replacement reserves fund the PCA's long-term table. TI and leasing commission reserves cover re-tenanting. Repair holdbacks release against completed work.
Each reserve carries its own funding, release conditions, and paperwork. Release requests are a steady stream of servicing work with document requirements that look like small draw packages.
In Prodeal
Reserve releases run as document requests with statuses and an approval record, so the file shows what was funded, released, and on whose sign-off.
Common questions
- What reserves does a commercial lender require?
- Commonly tax and insurance escrows, a replacement or capital expenditure reserve, a tenant improvement and leasing commission reserve, and deal-specific reserves for repairs, interest or rollover.
- How are reserves sized?
- Tax and insurance from the actual bills, capital reserves from the property condition assessment, and leasing reserves from lease rollover in the rent roll.
- When are reserve funds released?
- On submission of evidence that the funded expense was incurred, such as invoices and lien waivers, under the release conditions in the loan agreement.
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