Sinking fund necessary for buildings with strata titles
NST 24/09/2003

IT is compulsory for the companies that manage apartment buildings which have strata titles to establish a sinking fund, and only they and not the developers can collect the fees for the fund, Land and Cooperative Development Deputy Minister Dr Tan Kee Kwong said.

He said the ministry was aware that there were developers who collected the sinking fund fees for buildings still in the process of obtaining their strata titles.

Asked by Lee Kah Choon (BN-Jelutong) whether the ministry would make it illegal for developers to collect the sinking fund fees for buildings with strata titles, Tan said: "This special account (sinking fund) is important for the purpose of building maintenance, such as painting and ensuring that the lifts work properly. These can incur high costs. Therefore we cannot make the collection for the account illegal for buildings that have strata titles," he said.

Lee then asked Tan if it was possible for the ministry to manage the sinking fund for buildings without strata titles, explaining: "The problem is that the sinking fund fees are collected by the
developers when they hand the keys of the units to the housebuyers and not when the management corporation is established.

"To protect housebuyers' interests, can we not hold on to the fees or, if this is not suitable, why not arrange to collect the fees only when the corporation is established?" he asked.

Tan said the ministry was aware of the abuse of sinking fund fees. It had proposed that housebuyers elect two representatives to discuss matters related to the maintenance of the apartment building with the developers before the management corporation was set up.

To another question on housebuyers being asked by some developers to deposit an amount to start the sinking fund, Tan said there was confusion under the laws as payments differed from developer to developer.

"Our suggestion is that a developer can only ask for two or three months deposit to manage the building. This is because there have also been cases of housebuyers refusing to pay service charges towards maintenance of the building," he said.