Maintenance Fee and Sinking Fund in Malaysia

The short answer

If you buy a condominium, apartment or other strata home in Peninsular Malaysia, you pay two monthly sums on top of your loan:

• Maintenance fee (Charges): pays for the regular running of the common property, such as cleaning, security, lifts, lighting, landscaping, management and building insurance.
• Sinking fund: a savings pot for big, occasional items such as repainting the building or replacing worn-out fittings.

Under the Strata Management Act 2013:

• Charges are shared in proportion to each unit's allocated share units.
• The sinking fund contribution is 10% of the charges. Owners at a general meeting may set more, but not less.
• Neither can be collected until vacant possession has been delivered and the proper accounts are opened.

Example only: if a unit's charges are RM 300 a month, the sinking fund is at least RM 30, so RM 330 a month in total. To see the loan side, use the loan calculator.

What each one pays for, in plain words

Think of a strata building as a small town that the owners share. The maintenance fee is the town's monthly running cost. The sinking fund is the town's savings for the day the roads need resurfacing.

The maintenance fee usually covers:

• Security guards and the access system.
• Cleaning of common areas and rubbish collection.
• Lift servicing and repairs.
• Electricity and water for common areas.
• Gardening and pool upkeep.
• Insurance of the building.
• The management office and the managing agent's fee.
• Routine repairs to the common property.

The sinking fund may only be used for capital spending. The Act limits it to:

• Painting or repainting the common property.
• Buying movable property for the common property.
• Renewing or replacing fixtures and fittings.
• Upgrading and refurbishing the common property.
• Other capital spending the management body decides is necessary.

The two are kept in separate accounts. Money paid in is held in trust for the owners, not as the developer's or the managing agent's income.

Who sets and collects the charges

There are three stages in the life of a strata building:

During the developer's period, the developer collects charges and the sinking fund into separate accounts. Once the JMB is set up, it decides the charges and the sinking fund going forward, at general meetings. Owners have a vote, so going to the meetings matters.

Share units: why two units pay different amounts

Charges are not split equally. They are split by allocated share units, a number given to each unit that reflects its size and type. A larger unit has more share units and pays more. A unit with an accessory parcel, such as a car park bay or a store, may also have more share units.

In practice, many buildings quote the charges as a rate per square foot per month. That is the same idea expressed in a simpler way. When you compare buildings, compare like with like: the rate, what it covers, and the facilities.

Worked example: a RM 500,000 condominium

Same assumptions as the DSR guide: a RM 500,000 home, a 90% loan of RM 450,000, 30 years, an assumed 4.2% a year. The rate is for illustration only. The maintenance figures below are examples, not quotes for any building.

Monthly charges (example)

Next to the loan

The maintenance fee does not count in your DSR, because it is not a debt. But you still pay it every month. On a take-home pay of RM 5,000, the instalment alone is about 44%; adding the example charges brings what you actually spend on the home to about 51%.

If the owners vote for a higher sinking fund (example). If a general meeting set the sinking fund at 15% of charges, the unit above would pay RM 47.25 instead of RM 31.50. The Act allows a higher figure, but not lower than 10%.

Late payment (example). If RM 346.50 is paid late, interest is capped at 10% a year in the Act. On one month's sum, that is very little in money, about RM 2.90 a month, but repeated late payment leads to formal notices and, in the end, legal action or a claim before the Strata Management Tribunal.

Late payment and what can happen

Under the Act:

• Charges and sinking fund contributions are due within 14 days of the notice.
• Late payment carries interest, capped at 10% a year.
• The management body may send a written notice giving at least 14 days to pay.
• If still unpaid, it can claim the sum as a debt through the courts or the Strata Management Tribunal.
• Failing to comply with the notice without a reasonable excuse is an offence, with a fine, imprisonment, or both, as set out in the Act.

A buyer of a subsale unit should ask the management for a statement before completion, so arrears are settled by the seller.

What to check before you buy

For a new home

• The estimated charges per square foot, and what the developer says they include.
• The share units for your unit, shown in the schedule of parcels.
• When VP is expected, since charges start then. See VP.
• Facilities: more facilities usually mean higher running costs.

For a subsale home

• A statement from the management showing no arrears on the unit.
• The latest audited accounts and the size of the sinking fund. A small fund in an old building may mean a special levy later.
• Minutes of recent general meetings: planned works, disputes, rate changes.
• The building's condition: lifts, roof, facade, car park.
• House rules, for example on renovation, pets or short stays.

Mistakes buyers make

• Budgeting for the loan and forgetting the monthly charges.
• Comparing charges without comparing what they cover.
• Thinking a low maintenance fee is always good. It can mean a thin sinking fund and a levy later.
• Skipping general meetings, then being surprised by a rate increase.
• Buying a subsale unit without checking for arrears.

Related terms

• VP (vacant possession)
• SPA (sale and purchase agreement)
• CCC (certificate of completion and compliance)
• DSR (debt service ratio)

Check before you sign

This page explains how charges and the sinking fund generally work under the Strata Management Act 2013, which applies in Peninsular Malaysia and Labuan. It is not legal advice, and each building sets its own rates and rules. Ask for the latest charge statement and accounts before you sign. For help with a specific property, WhatsApp Shyan Yee (REN 46305, IQI Realty) at +60 17-279 8932.