Strata & Building Management
The sinking fund explained
The sinking fund is a statutory capital reserve set at a minimum of 10% of the maintenance charge under ss.12(4), 25(4), 52(3), 61(3) and 68(3) of Act 757. It may only be spent on capital items — painting, replacing fixtures, upgrading common property — and a general meeting may raise the rate but never drop it below 10%.
Quick summary
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Best for
Risk level
Buyer action
| Best for | Owners questioning what they pay, and buyers modelling the holding cost of a high-rise before they commit. |
|---|---|
| Risk level | Medium |
| Buyer action | Send Lewis your building name, the charge you pay and what you are trying to decide, and he will tell you what to check first. |
Start with the money
This post works through a building with a healthy sinking fund and one without look identical on viewing day — and cost you very differently in year eight. Every figure below traces to Act 757 or the 2015 Regulations, because on charges the Act is unusually specific.
Two accounts, two jobs
Act 757 requires a strata scheme to run a maintenance account and a sinking fund account separately. The maintenance account pays for the building's running costs — security wages, cleaning, electricity for common areas, minor repairs. The sinking fund exists solely to meet actual or expected capital expenditure. The separation is not bookkeeping neatness: it stops this year's committee from spending next decade's lift replacement on this month's shortfall. When you read a building's accounts, the two balances tell you two different things — whether the building can pay its bills, and whether it can survive its own ageing.
Ten per cent is the floor, and it applies at every stage
The Act sets the contribution at a sum equivalent to 10% of the maintenance charges, and it repeats that figure through every management period: s.12(4) during the developer's management period, s.25(4) under a joint management body, s.52(3) during the developer's preliminary management period, s.61(3) under a management corporation, and s.68(3) under a subsidiary management corporation. The consistency is the point — no stage of a building's life is exempt from funding its own future capital works.
Raising it takes an ordinary resolution, not a special one
The rate can be determined otherwise from time to time at a general meeting, provided it is never less than 10% (ss.25(4), 61(3), 68(3)). What the Act asks for is an ordinary resolution — a simple majority of the votes cast by those present in person or by proxy, on a show of hands or a poll under the Second Schedule. That is a much lower bar than most owners assume, and it means a well-prepared committee with a costed capital plan can lift the reserve at one AGM. It also means a badly-attended AGM can leave the fund at the floor for years by default.
What the money may lawfully be spent on
Sinking fund money must be used solely for capital expenditure, and the Act lists the purposes. During the developer's management period s.11(4) allows three: painting or repainting any part of the common property, acquiring movable property for use in relation to the common property, and renewing or replacing any fixture or fitting comprised in the common property. Under a joint management body s.24(2) adds two more: upgrading and refurbishment of the common property, and any other capital expenditure the JMB deems necessary. A management corporation works from the same five under s.51(2) read with ss.61(2) and 67(2). Routine repairs and running costs are not on that list — if you see them charged to the sinking fund, that is a finding, not a matter of opinion.
Verify this against your own building
Ask management for the latest audited accounts, the current charge rate per share unit and the sinking fund balance before you rely on anything here. Rates and building costs differ; the statutory framework does not.
Buyer checklist
10% of your maintenance charge is the statutory floor, not the target. It is a separate account from maintenance, it may only fund capital expenditure, and an ordinary resolution at a general meeting can raise it. A building with an ageing lift and a 10% sinking fund is a building heading for a special levy.
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| 1 | Ask for the sinking fund balance as a figure, and as a ratio to one year's total maintenance collection. |
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| 2 | Ask when the lifts, roof waterproofing and external paint were last done, and what the next cycle will cost. |
| 3 | Check the audited accounts for routine repairs charged to the sinking fund — that is outside ss.11(4), 24(2) and 51(2). |
| 4 | Check whether the contribution is still at the 10% statutory floor or has been raised by resolution. |
| 5 | If the fund is thin and major works are due, budget for a special levy before you commit to the purchase. |
Common questions
How much must go into the sinking fund?
A sum equivalent to 10% of the maintenance charges. Act 757 repeats this at every management stage — s.12(4), s.25(4), s.52(3), s.61(3) and s.68(3).
Can the sinking fund contribution be increased?
Yes. It can be determined otherwise from time to time at a general meeting by ordinary resolution — a simple majority of votes cast — provided it never falls below 10%.
Can the sinking fund be used for routine repairs?
No. It must be used solely for capital expenditure. The permitted purposes are listed in s.11(4) for the developer's period, s.24(2) for a JMB, and s.51(2) read with ss.61(2) and 67(2) for a management corporation.
Can the sinking fund pay to repaint the building?
Yes — painting or repainting any part of the common property is expressly a permitted capital purpose in all three provisions.
Lewis Chong
REN 69566 · IQI GlobalProperty advisor helping KL, JB, and Penang buyers make data-backed property decisions.
Related reading
Use one buyer framework across different news.
Sinking fund spent on the wrong things
Spending sinking fund money outside ss.24(2), 51(2) and 61(2) is a breach, not a judgement call. Owners have inspection rights and a s.31 certificate (s.73 for an MC), refusal to permit inspection is an offence carrying up to RM250,000 or three years under ss.26(5) and 62(5), and the tribunal can compel documents under Fourth Schedule Part 1 Item 12.
Lewis Conclusion
Start with a written request to inspect and a request for the s.31 or s.73 certificate. Most sinking fund disputes end there, because a committee that has to certify the balance in writing tends to correct the accounting before it does. If the request is stonewalled, the refusal is the stronger case anyway.
How your maintenance charge is actually calculated — share units, not floor area
Malaysian maintenance charges are apportioned by allocated share units under the Strata Management Act 2013, not by floor area — s.8(1) sends the computation to the First Schedule, and s.12(3), s.25(3) and s.60(3) apply it through the developer, JMB and MC periods. Here is how to read your own bill and when a different rate is lawful.
Lewis Conclusion
If you only remember one thing: ask for your share unit figure, not your square footage. It is the number that sets your bill and your vote for as long as you own the unit, and it is printed on documents you are entitled to see.
What actually happens if you stop paying maintenance charges
Stopping payment of maintenance charges triggers a statutory sequence, not a negotiation: a Form 11 notice from a JMB (s.34(1)) or Form 20 from a management corporation (s.78(1)) giving not less than 14 days, interest capped at 10% per annum, then a debt claim, a warrant of attachment over your movable property, or criminal prosecution.
Lewis Conclusion
Withholding charges is the one protest that cannot work, because arrears also disqualify you from the committee and from voting — the exact levers you would need to fix whatever you are protesting about. Pay under protest, then fight it at the tribunal or the AGM where you still have standing.
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Ask for the sinking fund balance as a figure, and as a ratio to one year's total maintenance collection.
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Ask when the lifts, roof waterproofing and external paint were last done, and what the next cycle will cost.
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Check the audited accounts for routine repairs charged to the sinking fund — that is outside ss.11(4), 24(2) and 51(2).
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Check whether the contribution is still at the 10% statutory floor or has been raised by resolution.