Q I just bought a new condominium unit and paid the sinking fund and common fees in advance. What exactly is the sinking fund? If I ever sell my unit do I charge for the sinking fund?
Ralf, 31 years old Condo Owner from Belgium
A The sinking fund is a one-time payment by the first owner of a condominium unit. It is an emergency fund for unforeseen expenses such as the replacement of the building transformer or costly swimming pool repairs etc. Some expenses like the two aforementioned may or may not be covered by building insurance but the money still usually has to be found first. Also painting the building, depending on size, will cost several million baht and depending upon location will have to be undertaken at least once every ten years. These are the types of expenses that a sinking fund was designed to cover. If the sinking fund is used at anytime then the co-ownership should bring it back up to its original level as soon as possible by a ‘contribution’ method or by raising common fees to replenish the fund; both methods need general meeting approval When selling a condominium unit the original cost of the sinking fund is usually included within the selling price. Prospective buyers of second hand condominium units should note that some of the more important questions you should be asking are; µ Is there a sinking fund? µ How much money should there be in the fund? µ How much money is actually in the sinking fund? As opposed to ‘is there internet facility?’ And ‘does it have cable TV?’ Buyer beware!
Paul Rogers - MD Optima Management Services Ltd