Maintenance Fee And Sinking Fund – Which For Which?

Living or owning stratified properties means that on top of the mortgage you fork out each month, you need to be prepared to fork out your monthly maintenance fee and sinking fund. According to the Strata Management Act 2013 (SMA 2013) which came into effect in June 2015, a strata owner or occupier needs to pay a monthly maintenance fee or service charge to the Joint Management Body (JMB) or Management Corporation (MC) which will be used to manage and maintain the common property of the strata development.

Under the same Act, strata owners are also required to contribute to the sinking fund which is normally at the rate of 10% of the total amount of the maintenance charges.

Pursuant to Subsections 25(4) and 61(3) of the SMA 2013, the JMB and MC may fix the rate of the sinking fund to more than 10% of the charges provided that such a rate is passed during a general meeting.

The maintenance fee you pay for depends on the type of facilities you have in the development, the number of units in a building and so forth. It also depends on qualitative factors such as how well the management company manages your property and the kind of service operators being used to service the development.

When to use maintenance fees?

Under Act 757 of the Strata Management Act 2013, the maintenance account shall be solely used for the purpose of meeting the actual or expected general or regular expenditure necessary in respect of the following:

  • Maintaining the common property in good condition on a day-to-day basis.
  • Minor painting works on the premises of the common property.
  • Paying for the expenses incurred in providing cleaning services for common property, security services and amenities for the occupiers of the building.
  • Paying all charges reasonably incurred for the administration of the accounts required to be maintained by the JMB under this Act as may be determined by the Commissioner of Buildings.
  • Paying any premiums for the insurance effected under this Act or any other insurance approved by a special resolution in a general meeting.
  • Paying the remuneration or fees for the managing agent appointed under the strata management before existence of the Management Corporation.
  • Carrying out inspection of all electrical wiring systems of the common property and replacing or repairing any faulty wiring systems.
  • Carrying out inspection, maintenance and repair of the main water tanks.
  • Paying any fee incurred for the auditing of the accounts required to be maintained by the JMB under this Act.
  • Paying rent and rates, if any.
  • Paying any expenses, costs or expenditure in relation to the procurement of services, including the engagement of consultants, legal fees or costs and other fees and costs, properly incurred or accepted by the JMB in the performance of its functions and exercise of its power under this Act.
  • Complying with any notice or order given or made by the local authority in respect of periodical inspection of any building in the development area in the manner as specified in the Street, Drainage and Building Act 1974.
  • Meeting other expenses of a general or regular nature relating to the maintenance and management of the building or land intended for subdivision into parcels and the common property.

What about sinking funds?

Meanwhile, sinking funds are prepared against future expenditure such as large-scale repairs or major works on a building. They are often referred to as the rainy day funds and shall be used solely for the purpose of meeting the actual or expected capital expenditure in respect of the following matters:

  • The painting or repainting of any part of the common property.
  • The acquisition of any moveable property for use in relation to the common property.
  • The renewal or replacement of any fixture or fitting comprised in any common property.
  • The upgrading and refurbishment of the common property.
  • Any other capital expenditure as the JMB deems necessary.

[Image source: Business photo created by katemangostar]

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