7 days ago
Forum: Well-managed sinking funds fulfil critical role
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Sinking funds are key financial safeguards for Singapore's strata-titled properties, ensuring long-term structural sustainability and value preservation (
Some ageing condos in Singapore struggle with failing infrastructure, inadequate sinking funds , Aug 7).
The Building Maintenance and Strata Management Act (BMSMA) mandates that all management corporations (MCSTs) must establish and maintain sinking funds for major repairs and budget for long-term sustainability. These funds are legally segregated from management funds used for regular maintenance and cannot be used without the approval of a general meeting.
Sinking funds cover capital expenditures beyond routine maintenance, including lift replacements and major upgrades, structural repairs and mandatory seven-year cyclical repairs and repainting programmes, replacement of electrical systems, sanitary/plumbing systems and waterproofing.
By funding cyclical maintenance, sinking funds prevent the deterioration seen in ageing condos, thereby protecting owners' asset values in a sustainable manner.
After the MCST constitution and the new management council taking over maintenance from the owner/developer at the first annual general meeting, one of the key agendas is to decide on the appropriate amount of sinking fund, alongside the computed management fund, to be collected quarterly.
There are about 3,700 active MCSTs constituted in Singapore today, with more new condos in the pipeline. The proper computation and collection of sinking funds cannot be treated lightly.
Many older MCSTs set contributions decades ago without inflation adjustments. Repair/replacement costs outpace reserves when emergency repair on major items or replacement is needed, and owners/subsidiary proprietors will face a big special levy to be paid up within a short term.
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After taking over the management of the MCST, the management council, at the first repair and repainting programme approximately seven years from when the building obtained its Temporary Occupation Permit, should conduct a technical audit and check if sinking funds collected thus far can achieve the desired objectives. This technical audit should be done cyclically, and the proper amount of sinking fund to be collected should be adjusted accordingly.
MCSTs should also work with industry professional associations and conduct workshops on life-cycle costing, BMSMA compliance, and long-term value preservation strategies to educate the subsidiary proprietors periodically.
The management councils should also include finance-savvy residents.
Sinking fund systems represent a practical balance between statutory requirement and MCST autonomy. While the BMSMA deliberately avoids one-size-fits-all contribution percentages, this flexibility demands greater owner engagement.
Well-managed sinking funds transform ageing liabilities into value-preservation tools, ensuring that condominiums remain safe, functional, and financially viable across generations. As Singapore's property landscape matures, proactive fund management will increasingly separate thriving communities from those facing infrastructural obsolescence.
Dennis Tan
President
MCST Association of Singapore
