What is Maintenance fees and Sinking fund?

Under the Strata Management Act 2013 (SMA), the management body of a condominium needs to provide proper maintenance and management for the buildings and common property, as well as other related matters. To achieve this, each condominium unit owner will need to pay fees to these management bodies.

Section 25 (1) of the Strata Management Act 2013 states that: “Each purchaser shall pay the Charges, and contribution to the sinking fund, in respect of his parcel to the joint management body for the maintenance and management of the buildings or lands intended for subdivisions into parcels and the common property in a development area.”

Service charges are the monthly payments of ongoing maintenance fee for keeping the common facilities and common property. It includes swimming pools, services lifts, lighting, air conditioning, cleaning and landscaping services, security services and etc.

Meanwhile, sinking fund is maintained in a separate account from maintenance fees. Typically, it is calculated as 10% of the maintenance fee and is allocated for anticipated future expenses, such as extensive repairs or significant improvements to the property. These funds serve as a reserve for emergencies as well as for major works like repainting the exterior of the building or repairing the damage caused by flood.

What are the consequences if the owners fail to make any payment charged by the Management Body including the Charges and Contribution to Sinking Fund?

Failure to settle the outstanding sum due and payable to the management body after 14 days from the date of receiving the notice requesting said outstanding sum from the management body will give the management body the right:-

i. to charge an interest on outstanding sum;
ii. to include the owner’s name, parcel and total outstanding amount in a defaulters’ list and display the said list on the notice board;
iii. to deactivate any electromagnetic access card, tag or transponder;
iv. to stop you and/or your occupiers)/visitors) from using any common facilities or common services; and
v. to take action against you before the court or Strata Management Tribunal

But the one who defaulted is my landlord. I’m just the tenant. Will I also be affected?

The Third Schedule of Strata Management (Maintenance and Management) Regulations 2015, specifically regulation 6, outlines the definition of a defaulter and the potential consequences that may ensue.

a. a defaulter is a proprietor who has not fully paid the Charges or contribution to the sinking fund in respect of his parcel or any other money imposed by or due and payable to the management corporation under the Act at the expiry of the period of fourteen days of receiving a notice from the management corporation; and

b. any restriction or action imposed against a defaulter shall include his family or any chargee, assignee, successor-in-title, lessee, tenant or occupier of his parcel.

Regulation 6 clearly specifies that the defaulter may be subject to restrictions or legal action, including ‘his family, charge, assignee, successor-in-title, lessee, tenant or occupier of his parcel’.

Therefore, it is clear that if your landlord fails to pay the maintenance costs, the management body may take specific measures against you as a tenant. Nevertheless, even though they have the right to deactivate your access card, as tenant, you cannot be prevented from entering your unit.

Conclusion

In conclusion, residing (be it owning or renting) in a strata property such as condominium entails being part of a community. It comes with its own set of rights and responsibilities that every landlords and tenants should understand. The payment of maintenance fees is crucial to maintaining harmony and ensuring the upkeep of the property.

As a tenant, it’s imperative to remain vigilant and inquire about the tenancy agreement and determining whether your landlord has fulfilled their obligation to pay these fees, thereby avoiding potential hassles down the line.

About the author

Nur Anis Amani binti Mohd Razali
Associate
Real Estate
Halim Hong & Quek
nur.anis@hhq.com.my