Sinking fund in converted block of flats

[Justpassingtime1]

In theory this seems a good way of saving up for maintenance which
is always ongoing.
However how do you get this to work fairly and with zero interest rates
surely the money will just go down in value?

I see your logic but you are dealing with people here ...

Suppose the sinking fund was purely for a roof. It is estimated that it will go in 20 years' time and cost £20,000. Therefore you need to put £1,000 per year, every year, into the sinking fund. So someone who is living in a flat now will contribute to the 2021 portion and you can chase them for it under the terms of the lease. If they move out, it will be difficult to get any money once they are gone. The existing leaseholders - at the time the roof goes - will have to make up the shortfall of the ex flat-owner. His gain is your loss.
In conclusion, what you say about inflation / interest is true but you need to get the money off people while you can! A lump sum earning little interest is better than no money at all.

When you sell your flat, you are effectively selling flat + sinking fund so a good pot will add to the value of your flat.

Always better to have a sinking fund. Partly because the lessees who complain about paying into the sinking fund (but probably will even if it's a yearly battle and they're always late) will also be the ones refusing to pay their share when the roof starts leaking and there isn't enough money in the pot to fix it. It's better to have the money to hand even if it's not earning interest.

A sinking fund is a necessity, not just in theory but in practice . Legally you have to have one to cover all the things which will need doing to keep the value of the property going forward.

All the owners have to contribute annually to the sinking fund, and whether the interest rates are good or bad you will still have the required money in the fund when you need it.

The best thing the owners can do is to engage a quantity surveyor who will give you an estimate of your future maintenance costs over the next 20 years. You then divide the costs by 20 and everyone has to contribute that much each year.