The service charge, also commonly referred to as the condo maintenance fee, goes into two financial pools managed by a condo: a maintenance fund, and a sinking fund. If you’re a condo owner, you need to pay a monthly maintenance fee to your condo’s management for the condo’s upkeep.
In this article, we’ll be guiding you through these terms to help you better understand what you’re paying for.
Condo Maintenance Fee (aka Service Charge): Maintenance Fund + Sinking Fund
|Service Charge:||Most commonly known as the condo maintenance fee and can be divided into maintenance fund and sinking fund|
|Maintenance fund:||The short-term expenses to keep the condo facilities in good working condition|
|Sinking fund:||Non-recurring and larger expenditures needed to keep the condo in good working order|
|How much to pay?||The amount is determined during your condo’s annual Annual General Meeting (AGM)|
|How is the amount determined?||Based on the number of units, facilities of the condo and share value|
What’s a Service Charge?
The service charge is the fee that you’ll have to pay as a unit owner to the company managing your condo every month. The Management Corporation Strata Title (MCST) of a condo is in charge of managing and maintaining the apartment.
If you were an HDB flat owner, think of it as something similar to HDB’s Service & Conservancy Charges (S&CC) that HDB flat owners pay every month to maintain the overall health of the HDB block.
Both the service charge and the S&CC serve the same purpose of covering the costs of maintaining the housing estate. This includes the cleaning and repairing of the shared facilities, as well as landscaping and horticultural works.
A portion of the monthly service charge goes into the condo’s maintenance fund. It’s intended to pay for the day-to-day, short-term expenses to keep the facilities of your apartment in good working condition.
This includes paying for the cleaning contractors to maintain the cleanliness of the apartment facilities, as well as the 24-hour security.
Other areas covered by the maintenance fund include the following:
- Other services needed to maintain the condo facilities in good condition
- Cost of repair, renew, and maintain fittings and fixtures (such as lifts) in the condo
- Any insurance premiums to protect the condo against damage by fire and other risks
- Payment for rent and rates (if any)
- Any fee for the auditing of the maintenance fund
- Charges incurred in managing the maintenance fund and the condo
- Other recurrent expenses besides the amounts covered by the sinking fund
To ensure the proper spending of the maintenance fund, the MCST is required to keep a proper record of the accounts.
Every year, the accounts will be audited, in which the certified true copy of the audited accounts will be sent to the Commissioner of Buildings (COB).
After that, the condo owners will get the chance to inspect the audited accounts for 2 weeks. If you’ve found any issues with regard to the expenditure, you can bring it up during the Annual General Meeting (AGM).
On top of the monthly maintenance costs, there’s also the long-term, non-recurring, and larger expenditures needed to keep the condo in good working order.
This is where the sinking fund comes in. It pays for expenditures that are large scale in nature and occurs once every few years. This includes the costs of replacing leaky roofs, refurbishing the interiors of the shared facilities, and providing a fresh paint job to maintain the appearance of the private condo.
In addition, the sinking fund serves as a reserve fund for unexpected and hefty expenses. This includes the costs of replacing a lift, as well as removing rotten or termite-infested wood.
As the condo gets older, unexpected scenarios, such as the CCTV malfunctioning, are more likely to occur. These situations can incur a huge cost for the MCST, so the sinking fund acts a buffer to cover these sudden expenses.
Essentially, the sinking fund is used to cover the expenses of the following:
- Painting the condo or any other structural works necessary to preserve or enhance the appearance of the shared facilities or the condo itself
- Renewing or replacing any fixtures of the condo
- Purchase of movable property (e.g. equipment and vehicles)
- Replacing, repairing, or making good the common property
- Any debts other than the amounts covered by the maintenance fund
- Other capital expenses
What Determines the Sinking Fund and Maintenance Fund Amount?
The service charge that you’ll have to contribute to both the maintenance fund and the sinking fund will be determined during the AGM every year. Usually, private condo owners or the elected managing committee members come together at the AGM to decide on this amount.
Ideally, you should participate in these meetings, so that at least if there’s a rise in the fees, you’ll know why you’re paying more.
In general, the service charge of a private condo can range from $300 to $700 per month.
The amount that each owner has to pay is based on different factors. This includes the total number of units, type, and current status of the condo, prevailing market cost for security and cleaning contractors, as well as the probability of a major expenditure happening in the future.
Number of Units in the Condo
If you’re living in an apartment with a higher number of unit owners, your service charge is likely to be more affordable. As there are more unit owners to shoulder the burden of the maintenance and sinking funds, the service charge for each household will be lower.
On the other hand, you’ll have to fork out a larger amount for the service charge if you live in a smaller condo. For instance, if there are only 8 units in your condo, you may be required to pay a service charge as high as $600 per month.
Facilities Available in the Condo
The service charge may also depend on the number and variety of shared facilities available in the private condo. With more facilities available, more funds are needed to cover their maintenance costs.
For instance, you’ll need to pay a higher service charge if your condo has a lot of swimming pools, as compared to that of a condo without a swimming pool.
Another key factor that goes into determining the amount of the service charge is the share value of the unit.
In the case of most private condos, the share value of a unit is based on its floor area. A unit with a larger floor area is more likely to be occupied by a higher number of people. This also means that there’s a higher likelihood that this unit has a higher usage of the facilities, and hence, has to pay more for the service charge.
Essentially, the service charge is proportional to the share value of the unit.
Here’s a table of the floor area groupings and their corresponding share value.
Floor area (sqm)
50 and below
51 to 100
101 to 150
151 to 200
Let’s say the service charge of your condo is $60 per share per month. If your condo has a total size of 80 sqm, the share value of your unit will be 6. This means that you’ll need to pay a service charge of $360 every month.
A lower monthly service charge may be more appealing, especially if you’re more budget-conscious. But there’s a chance that it’s not enough to cover the expenses of the condo as the development ages.
On the other hand, a higher monthly service charge might mean that you’re paying too much for the maintenance of your condo.
If you’re looking to purchase a condo, it’s good to check the monthly service charge, as well as the condition of the common facilities.
What Happens if I Don’t Pay the Service Charge?
There’s usually a grace period of 30 days for the payment of the service charge, so you should be fine if you pay it within this period.
However, if you fail to pay your service charge after the grace period, your MCST might charge you an interest, and even serve you a written demand.
Unless you pay the service charge within 14 days after the written demand is issued, you may be liable for an offence and fined up to $10,000. The MCST may also recover any unpaid service charge contribution through the Small Claims Tribunal or the courts.
In a worst-case scenario, the MCST may register a charge against your unit and may have the power to sell your unit after the following:
- A special resolution is passed by the MCST
- A notice of intended sale is published once in approved newspapers
- There is still no payment for the unpaid contribution and interest for 6 weeks after the date of the publication, and
- There is no legal action pending in court to restrain the MCST from selling the unit
Before buying a condo, be sure to check on its monthly service charge and the condition of its facilities. If you’re upgrading from a HDB flat to a condo, keep in mind that given the facilities available in the apartment, its service charge will be higher than the S&CC.
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