A sinking fund is a contingency fund established by owners management companies to provide for future capital improvements such as lift replacement, painting, or for any other unexpected remedial works outside the normal scope of the annual maintenance budget. At Residential Estates Services as part of our management fee our surveying department will provide Owners Management Companies or OMC directors with a detailed report of forecasted investment costs.
Why Pay into a Sinking Fund?
The Multi-Unit Development Act 2011 outlines guidelines on how a sinking fund should be calculated by an Owners Management Company. Effectively it is a ‘Rainy Day’ fund for when major works are required in your development and by having it in place it will reduce each member’s liability in the event that remedial works may be required.
Benefits of a Sinking Fund.
When new homes are built it is important to compile a detailed analysis of the life expectancy of plant and equipment as well as structures within a building. Our suitably qualified surveyors will compile a detailed report for the management company assuring that the level of the annual sinking fund provision is adequate. A review of each buildings sinking fund payable by leaseholders will be undertaken by our surveying department every two years.
The amount of the accumulated funds for the management company is clearly shown in the companies audited accounts. If you are disposing of your property the level of the sinking fund should be brought to your solicitors or selling agent’s attention. The larger the sinking fund provision the more appealing it may look to a prospective purchaser and it may be a major decision making factor for potential purchasers.
All monies paid into the sinking fund are held in a high interest deposit account. The money can only be used on the consent of the management company directors. Should you choose to sell your property all annual contributions that you have made remain in the management company’s account and are non-refundable.
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