Connect with us

Property

Management Fund Vs Sinking Fund: A Guide for Strata Property Owners

Your monthly condo maintenance fee is used for both management and sinking funds


Owning property in Singapore is more than servicing your property loan and paying your property tax. There are institutionalised monthly fees to be paid for maintenance and up-keep of estates and communal spaces for strata property owners. These are the Maintenance Contributions (more commonly known as maintenance fees) under Building Maintenance and Strata Management Act.

What Are Maintenance Contributions (Or Maintenance Fees)?

Maintenance contribution is a monthly fee each property owner must pay to the management corporation of a strata property, such as condominium or landed cluster. Typically, maintenance contributions for strata property owners can vary widely, ranging from $100 to $1,000 per month (depending on the estate). This amount also fluctuates from unit to unit based on several factors:

The main purpose of the fees collected is for the upkeeping of the estate. The model of maintenance contribution is very similar to HDB’s Service & Conservancy Charges (S&CC) with a couple of key differences. The first is that while the government does provide some subsidies to support town councils in the maintenance of the estates, strata property owners do not receive any government subsidies when it comes to maintaining their private compounds. Strata property owners also have the autonomy and responsibility to collectively make decisions on maintenance-related matters for their estate, such as to make repairs or enhancements to existing facilities. Lastly, instead of town councils, management corporations are engaged to ensure the effective and efficient allocation of funds.

The maintenance contribution can be split into two forms – management fund and sinking fund.

Read also: Singaporeans’ Guide To Understanding Town Councils And Their Service & Conservancy Charges

What Is Management Fund?

Management fund is used to pay for recurring expenses of the estate’s maintenance. These include: –

– Security
– Communal utility bills
– Upkeep of communal amenities
– Lift repairs
– Mechanical car park repairs (if any)
– Other infrastructure wear and tear
– Payment of insurance premiums
– Audit fees and other professional services
– Any outstanding short-term liabilities (12-month period)
– Estate manager/facility manager

The list above is not exhaustive. A general principle to identify which expenses would fall under management fund would be any regular expense that covers commonly used amenities, services and other costs that allows for a functioning estate.

What Is Sinking Fund? 

The main difference between sinking funds and management funds is that management funds are made for regular and common expenses while sinking funds are typically set aside for larger and longer-term expenses. These include: –
– Painting
– Replacement or abolishment of communal properties
– Purchasing new communal properties
– Other longer-term liabilities
– Other capital expenses

In general, sinking fund expenses tend to be a one-off larger cash outlay that may be needed once every few years, as opposed to the management fund where expenses are typically incurred on a monthly, quarterly or annual basis.

The sinking fund is not to be confused for an emergency fund or a form of insurance coverage as the sinking fund is not a protectionary budget but a necessary payment for the upkeep of an estate.

How Are These Funds Being Allocated? 

The management and strategising of the funds would be budgeted annually by the management corporation of the estate for resolution approval. During the meeting, owners would be able to voice out any of their concerns with regards to the allocation of maintenance contributions including the weightage to be allocated to the maintenance and sinking fund. The final budget would then require more than 50% of the property owners at the meeting to approve.

Mismanagement or poor allocation of funds could potentially affect a property’s worth as these expenses cover essential areas for the overall state of the estate. Therefore, strata property owners should keep close tabs on the management of maintenance contributions, or these monthly payments may be for naught.

DollarsAndSense.sg aims to provide interesting, bite-sized and relevant financial articles.

Learn together with like-minded Singaporeans at the Personal Finance Discussion SG Facebook Group by discussing a range of personal finance topics.

If you have not done so, subscribe to our free e-newsletter to receive exclusive content not available anywhere else.