Maintenance fee and sinking fund: what the monthly charge buys

Two charges come with a strata home, and the law keeps them in two separate bank accounts.The maintenance charge runs the building this month. The sinking fund is the reserve for the big jobs years away. Both are set by the owners’ management body, apportioned by share units, and enforceable as a debt.

The maintenance charge

Paid into the maintenance account, it covers the day-to-day: security guards, cleaning, landscaping, lift servicing, electricity and water for the common areas, the management office, and the building’s insurance. If it stops, the lights in the corridor go out within the month. It is quoted per square foot of your parcel per month, commonly somewhere between RM0.20 and RM0.50, more in a building with a pool, gym and concierge, less in a walk-up flat.

The sinking fund

Paid into the sinking fund account, it may only be spent on capital works to the common property: repainting the block, replacing lifts, re-waterproofing the roof, upgrading the security system. The Strata Management Act fixes the contribution at ten per cent of the maintenance charge, and says it may be set higher, never lower, by a resolution at a general meeting. A building that has kept its sinking fund untouched for fifteen years repaints without a special levy; one that has not sends every owner a bill when the lift fails.

A worked month

A 900 sq ft parcel at RM0.35 psf: maintenance RM315, sinking fund RM32, together RM347 a month, RM4,158 a year. Against the national median high-rise sale on this site (RM358 psf on the parcel, so RM322,200 for the same 900 sq ft), that is about 1.3% of the price every year, for as long as you hold it. The rate is illustrative; the management office quotes the real one.

Share units, not square feet

The charge is really apportioned by share units: a number assigned to every parcel when the building was subdivided, based on its area, its type and its accessory parcels (a car bay, a store). A larger or better-provided parcel carries more share units and a larger slice of the budget. Quoting a psf rate is the shorthand; the budget divided by the total share units is the arithmetic. Two identical-area units can pay differently if one has an extra accessory parcel.

Who sets it, and how it changes

Before strata titles issue, the joint management body, the developer and the owners together, sets the charge. Once titles issue, the management corporation of the owners does. Either way the amount is confirmed at the annual general meeting and notified to every owner on a prescribed form, and it can only rise by resolution. The last AGM minutes and the audited accounts tell you whether the fund is healthy; ask for both before you buy.

When an owner does not pay

Charges unpaid fourteen days after a notice attract interest of up to ten per cent a year, day by day. The management body may recover the sum as a debt, list the defaulter, attach movable property in the parcel, and refuse the owner a vote at the general meeting until the arrears are cleared. A sale cannot complete without the body’s confirmation that the account is settled, so arrears follow the unit, not the seller.

What neither fund pays for

Anything inside your parcel: your own pipes, wiring, air-conditioning, doors, windows and renovation. The line is the boundary of the parcel on the strata plan.

The other half of the holding cost is the price itself. What the same kind of home sold for, scheme by scheme, is on the prices page; what the title you are buying means is in strata title vs individual title.